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ECS2604EXAM
PACK 2023
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ECS2604: LABOUR ECONOMICS
MAY/JUNE 2020 EXAM MEMO
UNIQUE NUMBER: 477965
SUB SECTION A1 QUESTION 1
According to the theory of demand, discuss and illustrate by means of a
graph the implication of the amendment of Compensation for
Occupational Injuries and Diseases Act no 61 of 1997? (10)
COMPENSATION FOR OCCUPATIONAL INJURIES AND DISEASES ACT,
1993
AS AMENDED BY ACT 61 OF 1997
AIM OF THE BILL
The Act was promulgated with the objective of providing compensation for: -
1. Disablement caused by occupational injuries or
2. Diseases sustained or contracted by employees in the course of their
employment, or
3. Death resulting from such injuries or diseases.
The Act establishes a compensation fund which consists of penalties and
assessments paid by employers, interests on investments of the compensation
fund and moneys vested in the fund. This is to be used for payment of
compensation, the cost of medical aid and witness fees.
Chapter 6 of the Act deals with calculations that are to be taken into
consideration when compensating an employee for temporary total
disablement and permanent disablement. Permanent disablement of
employees in training or less than 26 years of age, compensation if an
employee dies, if an employee previously received compensation, pensions
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and increased compensation due to negligence of an employer is also dealt
with under this chapter.
Section 65 of the Act entitles an employee to the compensation if he or she
contracted a disease in the course of employment. Medical aid is provided in
case of temporary disablement
The employer is responsible for conveyance of injured employees and their
medical expenses in cases where they contract diseases.
An employer who demands or receives from an employee contribution towards
the cost of medical aid supplied shall be found guilty of offence.
The labor demand of an employer is the number of labor-hours that the
employer is willing to hire based on the various exogenous variables it is faced
with, such as the wage rate, the unit cost of capital, the market-determined
selling price of its output. According to the amendment of the Compensation
for Occupational Injuries and Diseases Act no 61 of 1997, it reduces the labour
demand by within the labour market as all employers conducting business in
the Republic are required to register with the commissioner and furnish him
with the prescribed particulars of his business, a health and safety
representative and a trade union representative shall have the right to inspect
and where appropriate bring to the attention of the commissioner, any register,
document or record which the employer must maintain which then increases
the costs of employing more workers therefore will result in an leftward shift of
the demand for labour as illustrated below.
From the diagram above the amendment of the COIDA (1997) increases the
cost of labour to the employer and therefore will shift the demand curve for
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labour to the left from DL1 to DL2 this will also cause a change in the quantity
of labour from L1 to L2 and W1 to W2.
QUESTION 2
The COVID 19 (Corona Virus Disease) is having a devastative effect on
wages and the cost of labour. In your opinion, what will be the effects of
this pandemic on the dual labour market? (10)
A labour market divided into two non-competing markets, i.e. a primary and
secondary labour market, with the primary market characterised by the choice
jobs, high earnings and security of tenure. The secondary market is
characterised by low-wage, unstable, dead-end jobs; workers in this market
have little hope of acquiring a job in the primary market.
The primary segment. This segment is characterised by high earnings, good
working conditions and employment stability. It often consists of large
enterprises or segments of the labour market where trade unions play a major
role. The primary market can also be divided into a number of internal labour
markets, which could refer to individual enterprises or occupations, for
example multinational corporations or the labour markets for lawyers or
medical doctors. These markets are characterised by the following:
• Access is usually severely restricted and is only possible at the bottom level.
• Skilled jobs are more often than not filled by promotion from within the
enterprise.
• Promotion is often determined by bureaucratic and rigid rules of the company
or occupation, which may have been established through collective bargaining.
The secondary segment. Workers “on the outside” often have little or no job
security, little prospect of promotion and generally poor conditions of
employment. This is the so-called “secondary segment”, which consists of jobs
that are low paying and have unstable patterns of employment. Secondary
segment enterprises are typically over-competitive, small in scale and labour
intensive with a low level of unionisation.
There are low levels of skills in this sector, which means employers have little
incentive to encourage stable employment patterns. Employers also have little
inclination to train workers properly wages are low enough for the employer not
to pay much attention to productivity.
Therefore, in the secondary segment, “bad” jobs produce “bad” workers, while
in the internal or primary market, “good” jobs make “good” workers. Examples
of secondary labour market jobs are domestic workers, dishwashers in
restaurants, cleaners, janitors and other menial jobs where a low level of skill is
required.
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