FACULTY OF MANAGEMENT SCIENCES

DEPARTMENT OF HUMAN RESOURCES MANAGEMENT

Subject : Labour Relations 1

Module Code : BHERZ2A

Examiners : Dr. AK Isabirye/ Mr T. Mlaza/ Mrs B. Fundira

Moderator : Ms Sandra Barbosa

Year : 2024

Submission Date : 18th of September 2024

Submission Mode : Online submission via VUTela Platform

CASE STUDY: The South African Labour Market (50 marks)

GROUP ASSIGNMENT: CASE STUDY

STUDENTS CONTACTS DETAILS

Initials and Surname Student Number Student email address Group

M.S Ngobeni 223082716 223082716@edu.vut.ac.za
1

A.Demand for Labour

The demand for labour is a derived demand, meaning it is derived from the demand for the
goods and services produced by workers.

The demand for labour in South Africa is influenced by factors such as the state of the
economy, the level of economic activity, the cost of labour compared to the cost of capital,
and the productivity of workers.

As the demand for goods and services increases, the demand for labour to produce those
goods and services also increases, leading to an increase in the demand for labour.

Conversely, a decline in economic activity and demand for goods and services will lead to a
decrease in the demand for labour.

Supply of Labour

The supply of labour in South Africa is influenced by the size of the working-age population,
the participation rate (the proportion of the working-age population that is actively seeking
employment), and the skills and qualifications of the labour force.

Factors such as education, training, and access to healthcare can affect the supply of labour
by enhancing the skills and productivity of workers.

The supply of labour is also influenced by demographic factors, such as the age distribution
of the population, and socioeconomic factors, such as the level of unemployment benefits and
the cost of living.
2Frictional Unemployment

Frictional unemployment arises due to the time it takes for workers to find new

Jobs, even when there are job openings available.

This can happen when workers are between jobs, either by choice or due to factors like
relocation, changing careers, or entering the workforce for the first time.

Example in South Africa: Newly graduated students searching for their first job, or workers
who have voluntarily left their previous job to pursue better opportunities.

Structural Unemployment

Structural unemployment occurs when there is a mismatch between the skills and
qualifications of the workforce and the skills and qualifications required by

Employers. This can happen due to technological changes, changes in the structure of the
economy, or regional economic shifts.

Example in South Africa: The decline of the mining industry, leading to unemployment
among workers with skills specific to that sector, who may struggle to find jobs in other
industries.

Cyclical Unemployment:
Cyclical unemployment is associated with the business cycle and fluctuations in

Economic activity. During economic downturns or recessions, businesses may reduce their

Workforce, leading to higher unemployment levels.

Example in South Africa: The impact of the global financial crisis in 2008-2009, led to a rise
in unemployment as businesses reduced their workforce in response to the economic
slowdown.

Seasonal Unemployment

Seasonal unemployment is related to the fluctuations in demand for labour due to seasonal
variations in economic activity.

This type of unemployment is common in industries like agriculture, tourism, and

Retail, where the demand for workers varies significantly throughout the year. Example in
South Africa: The tourism industry, where employment levels tend to be higher during the
peak holiday seasons and lower during the off-season.

It is important to note that these types of unemployment are not mutually exclusive, and in
many cases, the South African labour market may experience a combination of these types of
unemployment at any given time. Understanding the different types of unemployment and
their causes is crucial for policymakers and labour market practitioners to develop effective
strategies to address the unemployment challenges in the country.

3.Historical Factors
The legacy of apartheid: The apartheid system in South Africa resulted in the systematic
exclusion and marginalization of the majority of the population from economic opportunities
and the labour market.

Lack of access to education and skills development: During the apartheid era, the education
system was segregated and underfunded for the non-white population, leading to a skills gap
and limited access to higher education.

Spatial inequalities: The apartheid-era policies of forced removals and the creation of
segregated residential areas have led to persistent spatial inequalities, with many
disadvantaged communities located far from economic centres and job opportunities.

Economic Factors

Slow economic growth: South Africa has experienced relatively low and uneven economic
growth, which has constrained the creation of new job opportunities.

Structural changes in the economy: The shift from a predominantly mining and
manufacturing-based economy to a more service-oriented economy has led to a mismatch
between the skills of the workforce and the skills required by employers.

Capital-intensive industries: Many industries in South Africa, such as mining and

manufacturing, have become increasingly capital-intensive, reducing the demand for labour.

High labour costs and rigid labour market regulations: The high cost of labour and the
complexity of labour market regulations can make it challenging for employers to hire and
retain workers.

Social Factors

High levels of inequality and poverty: South Africa has one of the highest levels of income
inequality in the world, which can limit social mobility and access to economic opportunities.
Limited access to quality education and training: The unequal access to quality education and
skills development programs perpetuates the skills gap and limits the employability of many
job seekers.

Lack of work experience and job-readiness: Many young people, especially those from
disadvantaged backgrounds, lack the necessary work experience and job- readiness skills to
effectively compete in the labour market.

4.Economic Growth

Mechanism: Economic growth, as measured by the Gross Domestic Product (GDP), is a key
driver of employment levels. As the economy expands, businesses are more likely to increase
production, leading to a higher demand for labour.

Example: During periods of sustained economic growth in South Africa, such as the mid-
2000s, employment levels increased as businesses expanded their operations to meet the
growing demand for goods and services.

Inflation

Mechanism: High inflation can hurt employment levels. As prices rise, businesses may be
reluctant to increase wages, leading to a decline in the real purchasing power of workers. This
can reduce consumer demand, forcing businesses to cut jobs or limit hiring.

Example: In the late 1980s and early 1990s, South Africa experienced high inflation, which
contributed to the country’s rising unemployment levels as businesses struggled to maintain
profitability.

Labor Market Regulations

Mechanism: Restrictive labour market regulations, such as strict

Hiring and firing procedures, minimum wage laws, and complex labour union negotiations,
can make it more difficult for businesses to adjust their workforce in response to changing
market conditions. This can lead to reduced hiring and higher unemployment.

Example: South Africa’s labour market is characterized by relatively rigid regulations, which
some argue have contributed to the high levels of structural unemployment in the country.
Particularly for younger and less experienced workers.

Education and Skills Development:

Mechanism: The skills and educational attainment of the labour force can significantly
impact employment levels. A well-educated and skilled workforce is more likely to be
employable and adaptable to the changing demands of the labour market.

Example: The legacy of apartheid-era education policies in South Africa has resulted in a
skills mismatch, where many job seekers lack the skills and qualifications required by
employers, leading to high levels of structural unemployment..