LABOUR ECONOMICS

(LBE36M2)
The Supply of Labour
Presented by: Mr Qoko
Office #: T165 Email:
aqoko@wsu.ac.za
Learning Outcomes
After covering this presentation, one will be familiar with:
•Labour force as the supply of labour.
•Labour force participation rate.
•The economic Impact of HIV/AIDS.
•Immigration, emigration and migrant labour.
•

Introduction
• The basis of labour supply are that an individual can decide to work or
not to work, or can decide to work more hours or enjoy more leisure
hours.
• These decisions are influenced by various factors, for instance the
personal preferences of an individual, the amount of money he or she
needs, the wage rate and so on.
• When adding up all the decisions by individuals, one gets the market
supply of labour.
• Regardless of whether a person is working or simply wants to work or
which type of work (informal or employ other people), they all form
part of the labour force and therefore the supply of labour.
•

The Labour Force as the Supply of Labour.

• The total supply of labour is all those people who are working, whether for
themselves or for someone else, as well as those who want to work and are
looking for work, i.e. the unemployed people.
• The total labour force, or the economically active population (EAP) as it is
also known, is thus defined as the total number of people over the age of
fifteen years who present labour for the production of economic goods and
services, whether employed or not.
• The following equation can be used for further illustration:
The labour force as the supply of labour
Cont’.
• The supply of labour is determined by a number of factors, namely:
• The individuals’ decision to work or not to work, and how many hours to
work. The wage rate is the most important determinant of this decision.
• These various decisions by individuals to work o9r not to work are
measured by the labour force participation rate (the percentage of the
working age population that is working or wanting to work).
• The size of the population also has a bearing (impact) on the size of the
labour force.
• The size of the population is, in turn, determined by factors such as fertility
rates, mortality rates and net migration flows.
• Labour supply is not only a matter of quantity but also quality. Therefore,
the skills level of the labour force is also relevant.

Labour force participation rate

• Only a proportion of the total working age population (also called EAP) is really available for work
or wants to work with the rest being housewives, students, too sick to work, and so on.
• The proportion that works or wants to work is called the labour force participation rate (LFPR).

• Labour force participation rate (LFPR) is therefore the percentage of the population of the working
age that furnishes its labour for the production of economic goods and services, whether employed
or not.

• Stated otherwise; LFPR is thus the percentage of the total working age that is economically active
that can be represented by the following equation:

Or:
Labour Force Participation Rate Cont’d
Female LFPR
The LFPR of women has increased quite sharply overtime and is probably the most
important change in the labour supply in South Africa that has taken place in recent
years.
While there are contrasting arguments on the reasons, the following are notable.
• It is possible that the coverage of various social grants, especially child grants,
could have contributed to more women participating or wanting to participate in
the labour market.
• The rising relative wages for women as a result of reduced discrimination and a
greater demand for female workers have brought about their increased
participation in the labour force.
Labour Force Participation Rate Cont’d
• The rising levels of education among women have increased employment
opportunities and earnings, and thus would thus theoretically have increased the
supply of female workers.
• The declining birth rates have enabled more women (of all education levels)
to participate actively in the labour market for longer periods of time.
• There have been changes in the household: firstly, a decreasing proportion
of women live with employed men and a decreasing proportion of women
who have married men.
• Social conventions about a woman’s role in the society have changed.
• Rising productivity in the household because of advancing technology has
made it possible for women to participate more actively in the labour
market.
Labour Force Participation Rate Cont’d
• Rising divorce rates may have also contributed to more women having to
spend more years in the labour market.
Male LFPR
• The LFPR among men has declined rapidly over the years since the year
2001.
• The first notable reason would be the rise in the number of the
discouraged work-seekers and would therefore not be counted as
economically active.
Labour Force Participation Rate Cont’d
• Other reasons could include longer years spent in educational
institutions and earlier retirement (especially among the white male
workers)
The impact of HIV and AIDS.
HIV and AIDS has an impact on a number of elements of the labour
market, such as the size of the population and of the labour force,
inequalities and productivity.
The incidence of the HIV is much higher in Africa than elsewhere and is
most virulent in southern and eastern Africa.

The incidence and causes of HIV and AIDS.

In South Africa, the most important facts regarding the incidence of HIV and AIDS are the following:

• There were about 5.38 million people with HIV in 2011, which represents a prevalence rate of 10.6 (the
percentage of total population living with HIV).
• Compared to the overall rate of 10.6%, the infection rate among adults (age 15-49 years) was higher at
16.6%, and even higher among adult women (19.4).

• It was found that people living in informal urban areas were significantly more likely to be HIV positive.
• There were no discernable differences in HIV prevalence among the unemployed and the employed. The same
was true even in the case of disposable income.

• The prevalence rates were highest in the mining, transport, construction, government, accommodation, and
catering sectors. While the lowest incidences were in the financial, insurance, business and communication
services. • The prevalence of HIV increased with increasing levels of schooling, with the highest incidences
occurring with those with matric. Thereafter the rate dropped quite sharply with for persons with tertiary
qualifications. • Demographic projections estimate the life span between infection and death at 8 to 10 years in
the absence of antiretroviral treatment (ARTs/ARVs).
The incidence and causes of HIV and AIDS
Cont’d.
However, in the case of the factors that contribute to the high levels of
HIV include but not limited to:
High prevalence of untreated sexually transmitted diseases; multiple
concurrent sexual partners; relatively high levels of unregulated
commercial sex; low rates of condom use; low rates of male circumcision;
rapid rates of urbanisation; disrupted family and communal life owing to
apartheid and migration; massive refugee movements driven by war, civil
conflicts and economic distress of neighbouring countries; good transport
systems and mobility, which allow for the rapid spread of the decease;
low status of women, resulting in situations that place them at high risk
of HIV infection; and poor health, hence low resistance levels.

Consequences of HIV and AIDS.

The following possible consequences of HIV and AIDS can be identified:
• Demographic impact.
• Dependency ratio.
• Supply of labour.
• Employment.
• Depletion of human capital.
• Poverty and inequality.
• Insurance industry and benefit schemes.
• Direct health costs.
• Other consequences for government.
• Impact on the workplace.
• Other macroeconomic effects.
•

Immigration, Emigration and Migrant Labour

There is much speculation about the causes of emigration and
immigration, but relatively little empirical research.
The most notable factors are usually crime and violence, affirmative
action and racism.
However, according to empirical evidence presented by Myburgh (2004),
the most important factors causing emigration from South Africa
are:
• Real wage differentials between SA and the destination country.
• Immigration restrictions in the destination country.
• Political uncertainty in South Africa.

Key Concepts
• Economically active population
• Fertility rate
• Labour force
• Dependency ratio
• Labour force participation rate (LFPR)
• HIV and AIDS.
• Antiretroviral treatment (ART)
• Immigration and emigration
• Migrant labour

The End
• Use this space for your own summative view of the supply of labour.