ECS2604: LABOUR ECONOMICS
ASSIGNMENT 02
S1 & S2 YEAR 2021
Question 1
Why is productivity improvement important? [10]
Productivity describes various measures of the efficiency of production. Often,
a productivity measure is expressed as the ratio of an aggregate output to a
single input or an aggregate input used in a production process, i.e. output per
unit of input, typically over a specific period of time(Autor, David H., et al 2005)
Productivity is essentially the efficiency in which a company or economy can
transform resources into goods, potentially creating more from less. Increased
productivity means greater output from the same amount of input. This is a
value-added process that can effectively raise living standards through
decreasing the required monetary investment in everyday necessities (and
luxuries), making consumers wealthier (in a relative sense) and businesses
more profitable.
From a broader perspective, increased productivity increases the power of an
economy through driving economic growth and satisfying more human needs
with the same resources. Increased gross domestic product (GDP) and
overall economic outputs will drive economic growth, improving the economy
and the participants within the economy (Corak, Miles 2012). As a result,
economies will benefit from a deeper pool of tax revenue to draw on in
generating necessary social services such as health care, education, welfare,
1
, public transportation and funding for critical research. The benefits of
increasing productivity are extremely far-reaching, benefiting participants
within the system alongside the system itself.
Businesses that can derive higher productivity from a system also benefit from
creating more outputs with the same or fewer inputs. Simply put, higher
efficiency equates to better margins through lower costs. This allows for better
compensation for employees, more working capital and an improved
competitive capacity.
Higher economic growth will also generate larger tax payments for
governments. This allows governments to invest more towards infrastructure
and social services.
Question 2
Discuss the main cause of unemployment in South Africa [10]
The high unemployment that is prevalent in South Africa can be ascribed to
factors on both the supply side of labour, as well as the demand for labour.
An influx of unskilled, illegal immigrant labour who are prepared to work for
low salaries and as such are employed above our own nationals which
impacts negatively on unemployment
Poor education levels thus a mismatch of too much unskilled labour and
insufficient skilled labour. OR Failure of education system to deliver the skills
that the nation requires.
Overly protective Labour Laws (for employees) making it less attractive to
hire new staff
Minimum wages that prevent employers from employing staff at a rate that
both parties would be prepared to work for/pay. This reflects the strong
political and bargaining power of organised labour.
2
ASSIGNMENT 02
S1 & S2 YEAR 2021
Question 1
Why is productivity improvement important? [10]
Productivity describes various measures of the efficiency of production. Often,
a productivity measure is expressed as the ratio of an aggregate output to a
single input or an aggregate input used in a production process, i.e. output per
unit of input, typically over a specific period of time(Autor, David H., et al 2005)
Productivity is essentially the efficiency in which a company or economy can
transform resources into goods, potentially creating more from less. Increased
productivity means greater output from the same amount of input. This is a
value-added process that can effectively raise living standards through
decreasing the required monetary investment in everyday necessities (and
luxuries), making consumers wealthier (in a relative sense) and businesses
more profitable.
From a broader perspective, increased productivity increases the power of an
economy through driving economic growth and satisfying more human needs
with the same resources. Increased gross domestic product (GDP) and
overall economic outputs will drive economic growth, improving the economy
and the participants within the economy (Corak, Miles 2012). As a result,
economies will benefit from a deeper pool of tax revenue to draw on in
generating necessary social services such as health care, education, welfare,
1
, public transportation and funding for critical research. The benefits of
increasing productivity are extremely far-reaching, benefiting participants
within the system alongside the system itself.
Businesses that can derive higher productivity from a system also benefit from
creating more outputs with the same or fewer inputs. Simply put, higher
efficiency equates to better margins through lower costs. This allows for better
compensation for employees, more working capital and an improved
competitive capacity.
Higher economic growth will also generate larger tax payments for
governments. This allows governments to invest more towards infrastructure
and social services.
Question 2
Discuss the main cause of unemployment in South Africa [10]
The high unemployment that is prevalent in South Africa can be ascribed to
factors on both the supply side of labour, as well as the demand for labour.
An influx of unskilled, illegal immigrant labour who are prepared to work for
low salaries and as such are employed above our own nationals which
impacts negatively on unemployment
Poor education levels thus a mismatch of too much unskilled labour and
insufficient skilled labour. OR Failure of education system to deliver the skills
that the nation requires.
Overly protective Labour Laws (for employees) making it less attractive to
hire new staff
Minimum wages that prevent employers from employing staff at a rate that
both parties would be prepared to work for/pay. This reflects the strong
political and bargaining power of organised labour.
2
