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Unemployment

As below, the unemployment rate of South Africa is relatively higher than many countries, about a quarter of the
people in South Africa cannot find job in the market..
However, the unemployment rate seems to improve recently. According to the Timeslive, in Q4 2010, of 32.193
million people aged between 15 and 64 years in South Africa, 17.269 million were economically active (down 102
000 relative to Q3 2010), 13.132 million were employed (up 157 000 relative to Q3 2010), 4.137 million were
unemployed (down 259 000 relative to Q3 2010. However, the number of discouraged workers increased by a
further 117 000 in the quarter).

Increasing employment
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7/23/2014 Analysis Of The Emerging Country South Africa Economics Essay
http://www.ukessays.com/essays/economics/analysis-of-the-emerging-country-south-africa-economics-essay.php 7/11
South Africas unemployment rate is 23.3% (2010 est.). The costs of unemployment can be very destructive to
countrys economy since the production decreases, GDP dropping and inflation rises. South Africas fundamental
difficulty is fast population growth and the measures that can be taken to limit population growth can be a part of the
strategy to decrease unemployment. The control over migration must be enforced in the country since it limits the
amount of jobs for local people, especially for unskilled workers which form the largest group of unemployed citizens
(Department of home Affairs, n.d.). There is a shortage in skilled workers, therefore certain measures should be
taken in education and training programs. Government of South Africa initiated special employment programs in
order to employ as many people as possible to build roads, dams and clean the environment. Another possible way
to increase employment is to offer tax incentives for employers such as tax benefits or subsidies if they hire more
people. However, a policy like this must be highly monitored since there is a high possibility of its abuse.
Unemployment represents the total number of able men and women of working age seeking paid work. It is a
"tragedy to the individual" (Beveridge, 1931, p.10) and is usually calculated by using the unemployment rate which
is described as the majority of those in the work force who are without paid work
Keynes (1936) claimed that insufficient effective demand for products and services in the economy is the primary
cause of unemployment. Others such as Jackman and Roper (1987) argued that structural problems such as
inflation inherent in labour markets (structural unemployment) create output losses and hence result in
unemployment. In fact, Harold Wilson, the former British Prime Minister, argued that "Inflation is the mother and the
father of unemployment" (Dawson, 1992, p. 57).
The prospect that high labour taxes may cause unemployment appears to be reasonable in the current climate.
Evidence suggests that unemployment in the EU rose around 4 percentage points from 1965 to 1995 while the
investment share of outputs decreased about 3 percentage points - with a gradual decrease in growth of 4
percentage points a year according to research (Daveri, Tabellini, Bentolila and Huizinga 2000). Others such as
Lucas argued differently that people are not in employment because they voluntarily choose to do so (frictional
unemployment) (Hayes, 2006) and not because of the taxes imposed to them
Some of the most famous economists in the world demonstrated that misguided policies are one of the most
important causes of high unemployment (Modigliani et al., 1998). Mistakes in demand management, incorrect supply
policies and other policies such as minimum wage and job security legislation, work division and early retirement
have a significant role in accounting for unemployment (ibid).
In a non command economy, a significant cause of unemployment is that the rule of supply and demand is not
properly applied to the amount of money to be paid for the employees. This can be seen during the periods of
decreasing demand for products and services; that the earnings of all people in employment are not immediately
reduced by the real percentage in order for firms to become sustainable. Existing legal frameworks, labour unions
and governments are to blame for such unemployment phenomenon

Suitable remedies
Focus has been made on three regulations to combat unemployment (ibid). The first regulation is to increase public
sector investment. Private sector investment would then be increased in order to stimulate employment. The second
regulation refers to urging the central bank to decrease the rate of interest and thus attracting private sector
investment to increase the demand for labour. The third policy works its way to increase work motives (to firms and
workers) as a mean to improve employment.
With regard to the second proposal, it should be recognized that if firms are currently operating with considerable
excess capacity, increasing employment by the way of private sector investment may not be the greatest short-run
strategy. Suppose that most of the firms are operating with overcapacity, and that encourage of a new investment
will require larger profits in the short-term, the best strategy is the one that increase deficit spending and thus real
profits. The proposal to improve public sector investment seems to be (through its effect on short-run profits) a
motive for further hiring in the short-term. Thus, more workers will be hired by firms as their short-run profits
anticipations increase. Nevertheless, lowering interest rates will not encourage them to commit a new investment - at
least until some optimism has been created. The last will take place only after short-run profits cause an upward
change of long-run profit anticipations resulting in the time lag problem and policy becomes ineffective.
Another efficient way for government to resolve the high level of unemployment would be to either increase the
number of jobs for individuals or offer early retirement to older individuals who are close to retirement. With regard

to the first option, creating new jobs seems to be a reliable remedy. In fact, a program of straight job creation in the
form of public jobs would achieve actual full employment (i.e. zero involuntary unemployment). However, government
needs time to create new jobs and this might take many years. Considering the second remedy, there is an extra
cost involved in paying the retirement expenditures. However, it may be counterbalance by the savings from not
having to pay benefits for unemployed people and the additional tax revenues hired workers will pay; resulting in the
greater multiple effects their money would have on the total economy.