LABOUR ECONOMICS (LBE36M2)

MR QOKO
aqoko@wsu.ac.za
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DEFINITION OF THE LABOUR
MARKET

• “Labour market is an imaginary marketplace where labour

is bought and sold. Although the labour market is
characterised by the same principles by the same
principles of supply and demand as the markets for other
goods, it is quite different from such markets.”

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 1.2 UNIQUE CHARACTERISTICS OF
THE LABOUR MARKET
• A worker is not a product but a person, a human being.
• The principles of fairness or equity and humaneness are
therefore intrinsic elements of the labour market.
• However the fairness is not always ensured because of
unequal of bargaining power.
• The employer is usually in a much stronger bargaining
position than the individual worker
• The reason why legislation acknowledges the right of
workers to form unions.
• The purchaser of labour (employer) does buy the services
of the worker but the employer does not buy the worker
• However, the services and the worker cannot be physically
separated
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• A contractual relationship which is an enduring one
• Continues until the relationship is ended by either the buyer
or seller of labour.
• Unlike goods market, in the labour market the “products”
are not at all standardised and it is characterised by great
diversity or multiplicity caused by different skills.
• Changes over time in respect of individual worker. Skills
level may improve with training and experience as well as
further education.
• There is a multiplicity of markets in terms of different
occupations, geographical areas and types of economic
activities.
• Complexity of the price of labour.

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• Labour markets have important functions:

They allocate human resources among alternative

users; i.e among sectors, enterprises, locations and
occupations.

They distribute incomes, either wages or salaries, as

incentives and rewards to workers.

Labour markets should, by their functioning, contribute to

the following objectives:
• Efficiency
• Equity
• Growth
• Social justice
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1.3 WHY A THEORY WITH UNREALISTIC
ASSUMPTIONS?

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 1.4 IMPORTANT CHARACTERISTICS OF
THE LABOUR MARKET IN SOUTH AFRICA

The following important characteristics have been identified

in the South African labour market:
• A sharp increase in the supply of labour in 1995–
1999
• Low increases in the demand for unskilled and semi-
skilled workers
• The demand for labour
• Unemployment
• High labour costs and low productivity
• Labour market segmentation
• Income inequality

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