Returns to Education in
South Africa: A
KESWELL and POSWELL
Analysis of the Available
New Approaches to
Labour Workshop #3
Disability Screening and
Reading 3 : Week 4
A few things to note
Rethinking SAs Labour
Reading from Brazil, India &
Market Regulation and Reform in
Employment and Unemployment
Employment and skills
Remuneration and Productivity
Labour Supply Responses
to Large Social Transfers:
from South Africa
ANNE CASE and
Sebastian Galiani, Jim
Zo McLaren and Ingrid
Unemployment Risen in
the New SA?
Unemployment in 1994 = 13%, end of
decade = 30%
WHAT CAUSED THIS?
WHY HAS IT REMAINED SO HIGH?
Uses nationally re
The Labour Market
Labor Force Status of the U.S. Adult Civilian Population, April 2007
SAs Economic Performance
1995-2011 GDP growth has averaged 3%, even peaked
at 5%-6% but employment growth has not kept pace.
Theres been a shift from the
The Demand for
Profit maximisation is assumed
Prices and factor costs are assumed given
Firms are then concerned with adjusting output
This introduces marginal productivity theory
MP, MR & MRP
MP of labour (holding cap
Response to wages, prices, profits, etc.
Labour market is a unique market.
Employer versus individual worker balance of power
Help from legislation.
Diversity of labour market
Labour market diversity makes thin
and Labour Markets
In this section we analyse choice of which
industry, occupation, or firm to work in
Factors that influence this choice?
work environment, risk of injury, constancy of
Frictions in the labour market
Previously we assumed wages to be given
Implication: horizontal supply
Also assumed all labour costs are variable
Implication: firms can instantaneously adjust
New consideration: how demand for
labour is affec
Labour Demand Elasticities
Focus extent of labour demand
response to wage changes.
Lack of consensus on this issue
How is this responsiveness measured?
Own-wage elasticity of demand
% DL induced by 1% WL
eii = %Ei / %Wi - Positive or negative?
Worker Mobility: Migration,
Immigration, and Turnover
Assume voluntary worker mobility is a human capital
Present value of net benefits of mobility:
[(Bjt Bot )/ (1+r)t ] C
Empirical findings - mobility is m
Pay and Productivity
(Chapter 11 of Ehrenberg and Smith)
Employers designing a compensationpolicy
taking into account workerproductivity
Workers differ in their productivity (which
can be difficult to observe)
level of effort