Scribd Logo
Upload

Welcome to Scribd!

  • Unemployment Labou Economics

    Uploaded by

    Tsepang
    11 views35 pages
    Slide for labou economics unemployment topic

    Original Title

    Unemployment labou economics

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    Slide for labou economics unemployment topic

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    11 views35 pages

    Unemployment Labou Economics

    Uploaded by

    Tsepang
    Slide for labou economics unemployment topic

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 35
    Unemployment in South Africa’ Outline of this chapter 7.1. introduction 7.2 Definition, types and measurement of ‘unemployment 7.3. Unemployment in South Aftica 7-4 Reasons for high unemployment 7.5 strategy to create jobs 76 Special empoyment and income maintenance programmes Those with jobs and pro ery cannot afford a rebellion of the marginalized and cone tan tal guarantees the propery owners tharoreeen rights and comfortable. lives, while ‘condemning the excluded. ‘mnillions to lives of misery. 7.1 INTRODUCTION nemployment is probably the most severe prob. lem in South Africa and is conceivably the roce ‘ause of many other problems such as crime, violence, poverty and inequality. In the Souk: cin Africa Labour and Development Research Unie (SALDRU} Living Standards Survey. Afri can, coloured and Asian cespondents por jobs as the first priority (quoted in the ILO Review, 1996: 97). Prominent leaders inside and ouside Bovernment have also stated that South Alm cannot be governed effectively if this problem ie fot solved. These are only some of the reasons why employment creation should become the highest policy priority (see accompanying box), ‘As diseussed in Chapter 2, the supply of labour depends on a number of factors, such a the available wage rates, whether jobs are available, social circumstances (determining the Participation rates of women) and so forth Ie ig Tazo Maexi fxtimated that about 450 000 people enter the labour market every year on a net basis afiee allowing for retirements and deaths, Jobs thane fore need to be created for all these people: Fey ‘many years, the South Africa ‘unemployment problem, Levinsohn (2007: 67) details a few trends when considering unemployment in South Aft ca: firstly, employment rates in South Africa are low, and secondly, unemployment has risen over time. This is particularly an issue for these individuals who have Matric or less, and for those who are young, Thicdly, although labooe Participation rates arc low by international standards, they have shown an upward trend Peer ime. This increase is particularly striking for women, CHAPTER 7 UNEMPLOYMENT IN SOUTH AFRICA This chapter looks at the definition of unem- of an employment strategy are discussed in some ployment and related concepts. Various meth- depth. ‘ods for measuring unemployment are also dis- Chned, The exext of unemployment in South an wing to work, end wnabl to find ‘Africa, as measured by these various methods, ‘work, is perhaps the saddest sight that | is then dealt with. The most important elements Fortune's inequality exhibits under this Trouss canine | Policy issue: why job creation should be the highest policy priority (or should it?) | Job creatlon can be an explicit or implied policy priority. Itis expt if the government, for example, Incentivises the creation of jobs. Its implicit f the government focuses on, for instance, making it ‘easier to open and operate @ business and improves investor confidence, which in turn creates an environment that is conducive to job creation. Both policy avenues would ulimately seek to grow ‘employment. Although the difference may seem slight, the difleence in outcome can be significant. ‘A ow economic but high population growth economy that focuses overwhelmingly on job creation will find that, since the economy is not growing at the same rate asthe population, there Is simply less wealth of national income to spread. Conversely, a fast growing economy might require incen: tives to place interns and skills training to avoid the so called “jobless growth” phenomenon. ‘While the interection between fiscal, labour and several other sector policies ofa given economy right often contradict what the overarching policy priority i, itis best to seek consensus on what the priority should be in order to guide policy negotiations, To say job creation is a policy prlorty is not really sufficient; the question is how those jobs will be created. The need for precision when anuiculating a jobs policy is all the more pertinent precisely because the impact of unemployment i so severe: © Unemployment has grave consequences for any country. It not only affects an individual's dig nity and selfrespect and erodes his or her standard of living, but also affects society as a whole, because of high crime rates and frustration leading to unrest and lawlessness. Knowledge and sklls that are acquired at great cost are lost quickty through disuse, + Employment in the wider sense of the word (Le. including self-employment and employment in the informal sector) is the main bridge between economic growth and higher living standards It provides people with incomes that enable them to establish command over a whole range of ‘goods and services that may enhance their and theit dependants’ standard of living (NEDLAC, 1998; 43}, Employment helps empower women, leading to lower fertility rates and consequentiy higher living standards. «Higher job creation also addresses other important social protiies. A major reason for inequality in this country is the gap between employed and unemployed people. With South Aftica’s high ‘unemployment, generating jobs, even with low wages, will dramatically improve overall income distribution. + Affirmative action policies are much more dificult to implement successfully without employmen ‘gowth, An important reason for the success of these policies in countries such as Malaysia wa: that the number of jobs increased rapidly, making it easier to change the structure of employmen ‘without compromising the rights of existing workers and without losing thelr skills and experi ence. ‘+ Unemployment confines people to poverty, especally in rura areas (/LO Review, 1996: 67). NEC LAC (1998: 19} points out that poverty and employment status are closely linked, with half of a (ng 198 (oxziter) UNEMPLONMENT IN sourH AFRICA 7 poor people of working age being outside the labour market altogether. The South Aftica Founda: tion (1996) has estimated that 1.5 million new low-wage jobs (paying R2 550 per month in 2016 prices) could lift 4.5 million people out of poverty. The recent 2010/2011 Income and Expendi ture Survey data also found that two-thirds of poor households were headed by those who were not employed. Ifa free society cannot help the many who are poor, it cannot save the few who are rich. JOHN F. KENNEDY + In South Attica the consequences of unemployment could damage the prospects of a stable and successful democracy, one that is characterised by a peaceful, just, equitable, prosperous and rela- tively crime-ree society. «High unemployment is having a serious effect on perceptions in society of the success or failure of the market economy. There isa fairly widespread perception among disadvantaged communities thatthe market economy is at best not able to address the problem, or is at worst responsible for ‘unemployment. 7.2 DEFINITION, TYPES AND MEASUREMENT OF UNEMPLOYMENT 72.1 Definition of unemployment ‘An unemployed person is a person who is with- coat work, is currently available for work, and is secking work or wanting to work. Two defi- nitions are generally used to derive statistics on unemployment, namely the official, narrow (arce)and the broad (expanded) definition. ‘According to the narrow (strict) definition used in the OHS, LFS and QLFS, unemployed persons represented those in the labour force who: + did not work during the seven days prior to the interview + wanted work and were available to start work during the reference period (one week in the OHS and QLFS; two weeks in the LFS) «had taken active steps to look for work or to try to start a business in the four weeks prior to the interview. Inthe OHS and LFS, the broad (expanded) dei- nition of unemployment excluded the third crite tion above. That is, that the expanded definition only required a desire co find employment. The diflecence between the number of unemployed Uerived from the expanded definition and the number of unemployed derived from the strict definition is then equal to the number of dis- couraged work-seekers. However, the discouraged work-seekers are derived very differently in the QLFS. For some- cone who is not classified as employed, if his or her answer to the question “What was the main reason why you did not try to find work or start 1 business in the last four weeks?” is “no jobs available in the area” or “unable to find work requiring my skills” or “lost hope of finding any kind of work”, the person would be classified as a discouraged work-seeker (Yu, 2009: 14). The expanded unemployed in the QLFS is then equal to the sum of strictly defined unemployed and discouraged work-seekers. Since the discouraged work-seekers are defined more strictly in the QLFS by consider- ing why the person did not find work or start business in the past four weeks, the number of discouraged work-seekers (and subsequently the number of expanded unemployed) is lower in the QLES compared to the OHS and LFS. This will be shown later in Figure 7.1. There is a great difference between want- ing a job ard wanting work. Anonymous ‘The unemployment rate is expressed as the num- ber of unemployed persons as a proportion of the total labour force (LF) or the economically. CHAPTER 7 UNEMPLOYMENT IN SOUTH AFRICA active population (EAP), which includes both the employed and the unemployed. The unemploy- sent rae is thus: Unemployment rate = number of unemployed persons ‘total labour force au ‘Table 7.1 summarises the derivation of the labour force participation rate (LFPR) and the ‘unemployment rate (according to the striet and ‘expanded definitions respectively) as well as the ‘employment rate; it can be seen that discouraged work-seekers are included as part of both the labour force and unemployed according to the expanded definition, but are regarded as inac~ tive (not part of the labour force) under the strict definition. TABLE 7.1. Derivation of labour force par ticipation, unemployment and employment rates Tabour market status (2) Empioyed {2) Unempioyed (9) Discouraged workseeker (4) inactive ‘Narrow (tt) labour force participation rete -= Lavour force/Workingage population ___ (+2) (OOO) ‘Broad (expanded) lou force participation rate = Labour force/Working age population __O+@)+(3) “WHA OH ‘Narrow (aie) unemployment rate ‘Broad (expanded) unemployment ate Unemployed/Labour force _ +0) (HAE) Employment rate = Employed/ Working age population =) O20 oxsiez) 200 Work is a drug that dull people take 10 avoid the pangs of unmitigated boredom. W. Somerset MAUGHAM Natural rate of unemployment. Thete is such thing as full employment, even under the ‘most favourable economic conditions. At ap fone stage, some workers will be unemployed tither moving between jobs, or moving frou turside the labour market to inside (eg, org from being a fulltime student to trying 0 fal 2 job), or younger workers trying out differ job opportunities and s0 on. This constant rae ‘of unemployment is called the natural rat af ‘unemployment, and exists where thec sath fxcest demand nor exces supply inthe re | labour market. Borjas (2016: $30) as well as Ehrenberg and Smith (2012: 524) argue that the natural rate of unemployment could also be defined in te Bk towing ways: E ‘= the rate at which all unemployment is volun. tary (frictional and perhaps seasonal ~ to be discussed in section 7.2.2) the rate a¢ which the number of vacant jobs | ‘equal the number of unemployed t the rare at which any increases in aggregate demand causes no further reduction in uner | ployment i the rate that persists regardless of the inf: tion rate (this relates to the Phillips carve ~t0 be discussed in section 7.5.1). Some factors may cause the natural rate of unemployment to change, such as: changes inthe | number of young workers who are comforsable | to be between jobs; changes to the reservation | wage of workers (she wage at which they willke | prepared to accept a job}; changes in the aval ability of labour marker information and the | effectiveness of policies that being work-seek- | ers and employers together more quicklys and | ‘changes in the proportion of women in the | labour market (who may also wait longe: for the “right job” to enable them to balance fam- ily and work life). The concept of a natural rat cof unemployment is theoretical as far as South ‘Africa is concerned, and will remain so for the foreseeable future, because there is an inade- uate demand for labour. 7.2.2 Types of unemployment In order to address the problem of unemploy ‘ment successfully, a distinction should be drawn between different types of unemployment. This ives an indication of che possible reasons for ‘unemployment, and therefore also some idea of how the problem should be addressed (see McConnell et al., 2006: Chapter 18 for a full discustion): + Frictional unemployment atises as a result of the normal labour turnover that occurs in any dynamic economy and the time lags involved im the reemployment of labour. Since there are people moving between jobs and new entrants to the labour market at any given time, there are both unemployed persons and vacancies that can be filled by them, and it usually takes time for those seeking work to find and fill these vacancies. Frictional tunemployment is usually of relatively short duration and can be reduced even further by improving labour market information and placement services so that the employer and job-seeker can find each other sooner and tore effectively. Frictional unemployment is ‘one of the factors that determine the natural rate of unemployment. + Seasonal unemployment is due to normal and expected changes in economic activity during the course of a single year. It is found in many sectors, with agriculture and the retail trade probably the best examples. Persons working uring peak periods and unemployed in off: Peak periods are described as seasonal work: ers of seasonally unemployed. This type of unemployment occurs on a regular and pre dictable basis. + Cyclical unemployment (or demand-defi-

    You might also like