Answer to Question #204427 in Macroeconomics for nonjabulo

Question

according to the theory of labor market mechanisms of supply and demand will naturally move towards equilibrium, where unemployment will be at its natural rate. however, for more than 25 years, South Africa's unemployment rates have been among the highest in the world. using your knowledge of the South African labor market as well as the theory of firm examine why South Africa is faced with such high levels of unemployment. ( 80 marks)

Answer 1

The latest employment statistics in South Africa still reflect a shockingly high unemployment rate, which will require some effort to change the situation. More worryingly, annual unemployment growth of 4.8% is twice as high as employment growth (2.4%).

If these trends continue, achieving the ambitious goal set out in the National Development Plan to reduce the unemployment rate to 6% by 2030 is highly questionable.

Causes of high unemployment:

• insufficient efforts to address the youth unemployment crisis by the Government
• poor hiring and firing practices, poor cooperation between employers and employees, and poor pay-performance relationships.
• Employers replace the labor force (especially the less skilled and experienced) with capital and discourage the hiring of new workers
• high level of transportation costs (getting to work)
• low self-employment rate

The situation with the unemployment rate is depressing and only effective government intervention can solve this problem.