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									8.3- Chapter 2: The supply of labour in SA

Individual supply vs. market supply of
labour (Revisited)

Indifference curves
   Shows the preference of an individual to
    various combinations of income and
   Negatively slope, indicating that as
    leisure time increases, income reduces
    due to fewer working hours.
   Convex to origin due to MRS, see FIG
   Trade off b/n work and leisure will not
    be the same for different individuals,
    see FIG 2.8

Budget constraint
  Indicates various combinations of
   income and leisure hours that an
   individual can enjoy, given a specific
   wage rate.

  Higher wages will swivel the budget
   line outwards along the vertical axis, see
   FIG 2.9.

Utility maximization
     Achieved where indifference curve is
      tangent to the budget line, at point C
      in FIG 2.10.

Individual labour supply curve
     Is backward bending due to:
  Substitution      effect-     as     wages
  increases, the individual substitute more
  work for leisure.
  Income effect- as the wage rate
  increases, the individual is able to afford
  more leisure.
     See FIG 2.11 and 2.12

Market supply of labour
    As wage rate increases, more people
     enter the labour market.
    Thus upward sloping,

   Shifts due to external factors, i.e
    immigration… See FIG 2.13

The size of SA’s EAP (labour force)
 EAP is the total number of people over
 the age of 15 available to participate in
 the production of g&s whether
 employed or not.
 EAP= Informal sector workers + self-
  employed people + formal sector
  workers + unemployed people….also
  regarded as labour supply.
 Supply of labour determined by:
        The wage rate
        LFPR
        Size of the population
        Fertility rates, mortality rates,
     net migration flows
        Skills of the labour force

 About ¾ of labour force is African,
 sharp drop in proportion of whites.

  App 400 000 persons enter the labour
   mkt annually; most of them do not find
  Participation of women in the labour
   market has increased significantly, is
   estimated to be app 45%.
  The ratio of young people depending on
   other age groups for a living
   (dependency ratio is very high).
  HIV/AIDS scenario leads to child headed
   households, increasing unemployment.

Determinants of labour supply
1. Population size and population
   Information on the size of the
    population is sourced from the
    population census.
   SA’s population size is estimated at app
    47 million people.
   The increase in African population is
    relatively high compared to the White
    (2,6% vs. 1.3%).

  Growth rate of all population groups has
   declined over decades, that of Africans
   are still highest at 2%.
  Population growth is a function of
   fertility, mortality and migration=
   total fertility rate-mortality rate +
   net migration.
  The difference between fertility and
   mortality rates is the natural rate of
   population increase.
  SA’s population is currently progressing
   through      various   stages   of    the
   demographic cycle…illustrated in fig 2.4

Factors affecting the population
 A. Total Fertility rate
  Average number of children born alive
 to a woman in her reproductive years.
  Fertility rates tend to increase because
   of rural residency, poverty, low status of
   women, low educational status etc.
  Fertility rates can be reduced by
   increased employment opportunities for

   women, improved education and
   training, reduction in poverty, family
   planning and birth control.

B. HIV/Aids
  About 4, 8 mill people in SA are HIV
   positive at present causing the supply of
   labour in future to be much smaller than
   it would otherwise be.
  Other consequences of HIV/AIDS are
   poverty, increase in mortality, increased
   health      costs    (ito    government
   expenditure), loss of skilled workers,
   reduced productivity etc.
  Strategies to address HIV/AIDS should
   include prevention, mitigation in the
   workplace, care and support, elimination
   of discrimination.

2. Labour Force participation rate
   % of working age population that
   furnishes its labour for the production of
   economic goods, whether employed or

 Calculated as: actual EAP/total
  population of working age *100
 LFPR of women increased sharply over
  time due to:
          Reduced discrimination
          Rising levels of education among
          Declining birth rates
          Decreasing proportion of women
      living with employed men
          More women embarking on
      professional     careers    for   self-
          Rising divorce rates

   Declining male participation rates
  among all races due to longer years
  spent in educational institutions and
  earlier retirement.

Forms of migration (Immigration,
emigration and urbanization)
  Since 1994 SA is experiencing a net loss
   of migrants and hence an outflow of
   skilled workers.
  In recent years there is an influx of
   illegal migrants from neighboring
   countries, given rise to an increase in
  There has been a sharp increase in
   urbanization levels since the scrapping
   of influx control and group area
   restrictions in the 80s.
  SA’s labour market characterized by
   large number of migrant workers from
   rural      areas     and   neigbouring
  Temporary migrant workers- workers
   who live in rural areas and neigbouring
   countries and who work and live in
   urban areas on a temporary basis.
  Commuters- workers who live in rural
   areas and commute to work in urban


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