ECS2604 SUMMARY NOTES.

CHAPTER 1 1.1 WHY STUDY THE LABOUR MARKET? Any reasonably serious observer of South African society is constantly bombarded by policy questions that have their origin in the labour market. These policy questions may, for example, be raised in the newspapers, and discussed in union meetings or at company board level. Or companies may have to decide about their reaction to some of these issues, and to what extent the company needs to adjust to face the possible long-term consequences of some labour policy issues. As is apparent from the examples mentioned below, such questions may assume various guises, but they are nevertheless often essentially rooted in the labour market. Most individuals are in some way affected by various economic and social problems being experienced in the country, such as poverty, inequality, undernutrition, crime as well as physical and social isolation. Some people say unemployment is the root cause of these problems. But is unemployment actually that serious, and what can be done about this problem? Should the country accept fewer immigrants because they appear to be taking the jobs of local workers, provide a transport subsidy to the unemployed to encourage them to seek work more actively, or launch a national minimum wage policy to ensure the employed do not end up as working poor despite having a job? In pursuit of its policy to correct past imbalances, the government published the draft Broad-Based Black Economic Empowerment (BBBEE) Codes for comment in March 2003, and in January 2004 the BBBEE Act 53 of 2003 was assented to. The primary aim of this act is economic empowerment of all black people (including women, the youth, people with disabilities and those living in rural areas) by, among others, achieving an equitable representation in all levels and occupational categories in the workforce as well as increasing the proportion of black ownership and management control. But does the country have sufficient skilled black people to appoint? What about the white people currently in these positions? Has affirmative action worked in other countries? There have been a number of strikes about wages, and employers complain that increased wages have a negative impact on employment and their competitiveness. To what extent do unions affect wage levels? Do sharply increased wages always have a significant impact on employment? What if the wage increase is complemented by a productivity increase? Minimum wages have been introduced by means of sectoral determination in numerous relatively more vulnerable, lowly-paid sectors such as wholesale and retail, contract cleaning as well as for farm and domestic workers. Is this not interference in the operation of the market? Will it not lead to a sharp increase in unemployment (for example, unskilled workers whose minimum wages make them too expensive for prospective employers)? A number of small businesses have taken the Minister of Labour to court, arguing that the imposition of bargaining council agreements has an unfair impact on their right to conduct business. What is the impact of bargaining councils? Do they fairly protect workers against exploitation or do they unfairly damage small-business interests? Many of these questions do not relate to facts only (e.g. what is the impact of higher wages on employment?), but also to normative questions (e.g. what should the government do about the very low wages in the agricultural sector?). This requires value judgments from those involved, and many such questions cannot simply be answered by looking at “the facts”. However, to make a good value judgment, one needs as much information about the facts as possible in order to make an informed decision. Addressing such normative questions often involves trade-offs, and the facts help to crystallise the various trade-offs. Positive economics versus normative economics: In economics, positive questions address the relatively narrow “What is?” while normative questions look at the much broader “What should be?” questions. Focusing on labour economics, examples of positive questions include “What is the total number of unemployed in 2016?” , “What is the youth unemployment rate in 2017?” and “What is the impact of the imposition of a minimum hourly wage of R100 on employment in the hospitality sector?” In contrast, examples of normative questions are as follows: “Should the government launch a job search subsidy programme to finance the job-seeking transport cost of the unemployed?” , “Should the eligible age of the youth wage subsidy be extended to 35 years?” and “Should the small firms in the construction industry with fewer than 100 workers be granted exemption from the minimum wage determined at collective bargaining?” A study of the issues in this book will thus greatly assist the reader to acquire an informed opinion about these issues. It matters not whether the reader is a policy maker, a current or future leader of business or labour, or simply a citizen of the country. South Africa is a democratic country, with a custom of wide involvement and interest in policy decisions. Citizens need to be involved in the formulation of policies and to be responsible voters with knowledge of what the long-term effects of policy decisions are likely to be. Too often policy makers are inclined to say that they did not foresee the “unintended consequences” of some or other policy decision, and that the decision thus needs to be revised (after the damage has already been done). When it comes to labour matters, there is very little reason why the possible consequences could not have been foreseen or intended. A proper study of the operation of labour markets will help to eliminate the need for such revisions of policies only a few years after the policies have been introduced. 1.2 UNIQUE CHARACTERISTICS OF THE LABOUR MARKET: