Labour markets

Reservation wages found in surveys can be very misleading

Rulof Burger, University of Stellenbosch on 12 September 2017
Reads 439

The responses of unemployed workers to the typical survey question about their ‘lowest acceptable wages’ are susceptible to error and overestimation – particularly for people in persistent joblessness. Studies using only the responses to the standard question may incorrectly conclude that vulnerable workers are unemployed because they tend to price themselves out of employment – while in fact their responses are just unreliable and distorted indications of their true reservation wages. Alternative questions would give more reliable results.

Technology and minimum wages are likely to change the mix of capital and labour in industry

Friedrich Kreuser, Department of Economics, Stellenbosch University on 20 June 2017
Reads 1,193

While technology is making capital cheaper, policies like the national minimum wage will make labour more expensive. What does this mean for the choices firms make in terms of labour and capital inputs? This research shows that higher prices for labour will result in lower demand for labour, making job creation more difficult. Low-skilled and high-skilled labour are substitutes – higher wages for low-skilled workers will encourage firms to employ more high-skilled workers and become more skill intensive.

Day labourers and the role of foreign migrants: for better or for worse?

Derick Blaauw, North-West University on 17 May 2016
Reads 2,612

Foreign migrants often enter informal employment as day labourers. They compete with South Africans for jobs in this curb-side labour market. Three surveys of day labourers working in Tshwane between 2004 and 2015 reveal two important tendencies. First, the foreign-migrant component has increased from 12% to just over 55% in 11 years. Secondly, the wages and the level of poverty of both foreign and South African day labourers have worsened in the same period.

Have real wages fallen behind or increased out of line with productivity? A macroeconomic perspective

Philippe Burger, University of the Free State on 20 January 2016
Reads 3,458

Macroeconomic data on wages and productivity suggest that there has not been any constant tendency for real wages either to fall behind or increase out of line with increases in productivity. Upward shifts have affected real wages sporadically, but have subsequently been offset by downward shifts, leaving a one-to-one long-run relationship between real wages and productivity. This is contrary to the conventional wisdom in both the labour union and business worlds.

Tax(i)ing the poor? Implications of our high commuting costs

Andrew Kerr, University of Cape Town on 20 October 2015
Reads 5,069

The time and monetary costs of commuting are extremely high and have increased over the last 20 years. They imply a substantial ‘tax’ on the wages of those who commute to work, notably on the users of public transport. Commuters increasingly use private vehicles and minibus taxis today compared to 1993. The government’s public transport subsidies seem to benefit those in the (lower) middle of the income distribution rather than low-income workers.

A foot in the door: are NGOs effective as workplace intermediaries in the youth labour market?

Veerle Dieltiens, Centre for Education Policy Development on 28 September 2015
Reads 3,214

It has been argued that properly focused workplace intermediaries can reshape the labour market to become more youth friendly. Case studies of NGO intermediaries in South Africa offer some optimism but also caution in this regard. Although the intermediaries were able to match unemployed youth to jobs, smooth the transition to work and even positively influence employers’ reticence, they are small in scale and costs are high – and they have yet to broker larger pacts to add more jobs.

Youth unemployment: can labour-market intermediaries help?

Andre Kraak, Wits School of Education on 17 September 2015
Reads 3,638

Labour-market intermediaries can make a significant contribution to the reduction of youth unemployment.They recognise that the demand for labour is not fixed. By reshaping the attributes and broader workplace skills of the young jobseeker, labour market intermediaries can help overcome employers’ reticence to employing first-time workers. Such interventions, although small in scale, may be more successful than larger public works schemes of government. The potential positive impact of such intermediaries is demonstrated with international examples.

How flexible is the South African labour market in the short and long run?

Dieter von Fintel, University of Stellenbosch on 31 August 2015
Reads 8,747

The inflexibility of the labour market is commonly used as a scapegoat to explain high unemployment. Yet new evidence shows that only in specific contexts (unionized workers in the short run) does wage rigidity restrain the ability of the labour market to absorb workers. In the long run, wages are much more flexible and structural factors explain more of the unemployment puzzle. The policy debate on unemployment and wage flexibility needs to take these subtleties into account.

The matric certificate is still valuable in the labour market

Clare Hofmeyr, University of Cape Town on 14 October 2013
Reads 16,164

Increasing levels of youth unemployment and learners’ poor performance at school have led to claims that the matric certificate no longer has much value in the labour market. However, the evidence does not support this claim. While the labour market conditions facing secondary school graduates have indeed worsened with time, the value of a matric certificate relative to that of grade 10 and 11 has remained positive both in terms of earnings and the likelihood of finding employment.

How much do unions and bargaining councils elevate wages?

Carlene van der Westhuizen, University of Cape Town on 28 May 2013
Reads 17,399

Past studies have found that trade union members earn substantially higher wages than non-union workers. New results suggest a much lower union wage premium (6-7%) when the impact of the size of the firm, the type of employment and non-wage benefits are properly taken into account. On the other hand, bargaining council agreements have a higher impact on wages than unions do, so that the cumulative wage premium of unions and bargaining councils averages more than 16%. For the public sector this can be as high as 22%.