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The Cost of Rigidity: The Case of the South African Labor Market

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  • Johannes Fedderke

    (1] Pennsylvania State University, 237 Katz, State College, PA 16802, USA.
    [2] University of the Witwatersrand, Johannesburg, South Africa.
    [3] Economic Research Southern Africa, Cape Town, South Africa.)

Abstract

The South African labor market has been characterized by high and persistent levels of unemployment, and a poor capacity to create jobs. This paper examines existing evidence on what rigidities have generated this outcome. Pricing power in output markets, as well as labor supply and demand side rigidities are all found to have contributed, resulting in excessive increases in real wage costs which under conditions of relatively low economic growth, has produced a stagnant labor market. Policy requirements are the pursuit of stonger economic growth and reductions in real labor costs.

Suggested Citation

  • Johannes Fedderke, 2012. "The Cost of Rigidity: The Case of the South African Labor Market," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 54(4), pages 809-842, December.
    • Handle: RePEc:pal:compes:v:54:y:2012:i:4:p:809-842
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