ECS2604 Study Notes

ECS2604 Study Notes 2015 Written By Class of 2015 Together We Pass Tel: WELCOME If you are reading these notes you are studying (ECS2604) with UNISA. These notes are aimed at being a guide to assist you in passing this module, and aim to extract the essence of what you need to pass this module with ease at your exam. Please remember to use them IN CONJUNCTION with all our other features. The most important of which is WORKING TOGETHER with the lecturers and other students. Teaching is the best way to learn, so make sure you answer other students’ questions as often as you post your own questions on areas where you are struggling. What else do you get to assist you in passing when you join a Together We Pass study group? 1. A lecturer to answer questions, facilitate discussions, and ensure you remain on track and motivated in your studies 2. A discussion forum where you can ask for help with difficult questions, from other students as well as your dedicated lecturer 3. The chance to teach others when they are stuck 4. Compare and discuss assignments (cheat free) 5. Great additional resources, such as past papers and tutorial letters 6. Exam revision packs Good luck this term, and we look forward to working with you! Our contact details should you need help: Together We Pass TELEPHONE EMAIL WEB FB GOOGLE+ Together We Pass on Google Plus TWITTER @togetherwepass © 2015Together We Pass. All rights reserved. pg. STUDY UNIT 1 – INTRODUCTION LEARNING OUTCOMES: i. Understand the necessity of studying the labour market ii. Be able to describe the unique characteristics of the labour market iii. Understand why unrealistic assumptions are sometimes made in theory iv. Be able to describe the important characteristics of the South African labour market 1. INTRODUCTION 1.1 LABOUR MARKET LO1: Understand the necessity of studying the labour market NECESSITY OF STUDYING THE LABOUR MARKET o Help us understand the economic questions or issues that we encounter on a daily basis such as unemployment, strikes, skills shortage, affirmative action etc o All stakeholders would benefit from an in-depth knowledge of the labour market in SA as well as a theoretical analysis of the labour market in general. o Employers as well as employees have to deal on a daily basis with concepts that we see and hear about in the media. 1.2 UNIQUE CHARACTERISTICS OF THE LABOUR MARKET LO2: Be able to describe the unique characteristics of the labour market THE SEVEN UNIQUE CHARACTERISTICS OF THE LABOUR MARKET o A product is not being bought but services of a person, a human being. o Principles of fairness, equity and humanness must be applied. o The services of the worker are being bought and not the worker therefore a contractual agreement is important in that relationship. o The market is characterized by great diversity o The individual worker changes over time o There is not one single market or clearing house e.g. JSE o The price of labour is complex 1.3 UNREALISTIC ASSUMPTIONS ON THEORY (IES) LO3: Understand why unrealistic assumptions are sometimes made in theory o Although at times these assumptions might appear to be rather unrealistic, they help us to better understand the key issue under discussion. © 2015Together We Pass. All rights reserved. pg. DISTINCTION BETWEEN A MOVEMENT ALONG a CURVE and a SHIFT of the CURVE o Movement along a laour demand/supply curve reflects what will happen to the number of workers demanded/supplied if the price of labour (wages rate) changes, ceteris paribus. o Otherwise only changes in wage rate will lead to movement along the supply/demand curve o A shift of laour demand/supply curve reflects what will happen to the whole labour demand/supply curve if one of the other determinants of workers demanded/supplied at each wage rate changes Some of Possible reasons for a change in supply: o New workers entering the market will shift the supply curve to the right o Impact of HIV/AIDS on labour force will shift the supply curve to the left o Non-monetary aspects e.g fringe benefits, job security etc will shift the supply curve to the right Some of Possible reasons for a change in demand: o a new substitute for labour becomes available e.g new technology- the introduction of ATMs resulted in a decrease in the demand for bank tellers (demand curve will shift to the left) o if the price of a substitute factor of production changes e.g if the price of machinery (capital) decreases, more workers will be replaced with machines (demand curve will shift to the left) © 2015Together We Pass. All rights reserved. pg. o a sharp increase in export orders (the demand curve will shift to the right) o if the demand for a certain product produced by the labourers decreases, labour demand will also decrease (demand curve will shift to the left) 1.4 IMPORTANT CHARACTERISTICS of the SOUTH AFRICAN LABOUR MARKET LO4: Be able to describe the important characteristics of the South African labour market o One of the main characteristics of the South African labour market is a chronic skills mismatch.  Where at prevailing wage rates, there is excess demand for skilled labour and an oversupply of unskilled labour.  The skills mismatch has its origins in the apartheid era. The education system for the non-white population, particularly blacks, constrained the acquisition of skills among the majority of the population  Unemployment is particularly concentrated among historically disadvantaged groups and is higher among the rural, female, uneducated, and young segments of the population o Several authors have argued that South Africa’s labour laws impose rigidities in the labour market that contribute to unemployment (Barker, 1999; Black and Rankin, 1998).  The argument is that the labour laws lead to higher wages than would otherwise prevail.  They also involve statutes to regulate working conditions that, while protecting worker rights, create a disincentive for firms to hire and fire workers THE TWO IMPORTANT FUNCTIONS OF LABOUR MARKET