Abstract
Something must be structurally wrong in a labour market when a well developed economy like that of South Africa is not able to absorb and allocate an accumulating surplus of labour over a period of 20 years or longer but has instead moved to the use of more capital-intensive technology. The objective of this paper is to analyse the role labour conflict plays in the persistence of macro underemployment in South Africa. For the analysis two models identified from the literature were used. In these models labour conflict originates from an over-regulated labour market where labour appropriates capital and bad or hostile labour relations. In both models the switch to technology leads to underemployment. It was found that bad labour relations contribute to the persistence of underemployment in South Africa.