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State wage bill 'unsustainable'

Lisa Steyn

Economists are raising alarm over losses in the private sector and growth in government jobs.

Ninety-one thousand jobs have been lost in the private sector, while 133 000 have been created by the government, which has led economists to warn that the government’s wage bill is unsustainable.

The Quarterly Labour Force Survey released on Tuesday by Statistics South Africa shows a growth of 42 000 jobs in the past year and indicates that the biggest job gain has been in the public sector. But economists say this figure masks the fact that, in the same period, 91 000 jobs have been shed in the private sector.

“Some sectors are suffering and continue to suffer—and the government is employing,” said Kevin Lings, a Stanlib economist.

The loss of jobs in the private sector is continuing in spite of the fact that the economy has recorded six quarters of economic growth. This jobless growth is undermining the government’s plans to create five million jobs, according to economists.

The loss, said Lings, would largely have come from the private sector (construction, finance, agriculture and transport) but would include a significant reduction in the number of people employed as domestic workers.

Kgotso Radira, an Investec group economist, warned that this kind of employment growth meant the wage bill would rise to unsustainable levels. “Currently the government wage bill is around 40% of non-interest consolidated expenditure, which is worryingly high, leaving only 60% left for providing other services. “It is good that the government is filling all vacant positions but it also has consequences for the wage Bill and government spending.”

Radira said the private sector had not recovered fully and was likely to lag behind for a while, which made the government’s role critical. “During the recession the government tried to support the economy and tried to cushion it from the effects. And it is that which we now see in employment in the public sector.” But the private sector was lagging behind, Radira said, because employment growth depended on the investment that companies made, which only happened if they expected a sudden increase in demand. “At this stage, the prospects of a sharp increase in demand or running at full capacity are still moderately gloomy.”

Dennis Dykes, a Nedbank economist, agreed that the business sector was hesitant to go ahead with aggressive job creation while economic growth was moderate and capacity remained adequate. “Once the economy grows, companies are forced ultimately to absorb more in the way of labour. It doesn’t happen the other way round. Many people are holding back to see if things improve.”

Missing out on opportunities
Lings warned that companies that focused on the short term and didn’t plan ahead might miss out on opportunities. “And local businesses, where they are expanding,” he said “are expanding into the rest of Africa, which is helpful for the region, but not South Africa specifically.”

Despite the economy having grown for six successive quarters since the recession, the survey shows the unemployment rate increased to 25% in the first quarter of 2011 from 24% in the final quarter of last year, and the number of discouraged work seekers also increased. “In total, South Africa has 223 000 discouraged work seekers,” Radira said.

The reasons for the high figure could be the unavailability of resources to enable people to go out and look for a job, a loss of hope, the unavailability of jobs in a particular area, or the inability to find work requiring specific skills.

The figures also show that 56 000 jobs were created this quarter in the formal sector but 46 000 were lost in the informal sector and 24 000 in agriculture. The largest number of job losses was in the transport (34 000) and construction (25 000) sectors. But employment in the manufacturing and mining sectors increased by 20 000 and 15 000 respectively and the financial sector steadied, with 37 000 jobs created.

Lings said the first quarter was typically not a great quarter for hiring and many of the jobs gained in the last quarter of 2010 seem to have fallen away as they were temporary—“more than we thought”.

The last quarter saw more employment because there was more activity in areas such as security, retail and transport at the end of the year. “Temporary work fluctuates in seasonal patterns,” he said, “but underneath it all it seems that employment has stabilised and there are modest signs of improvement. At least there are no more losses in the formal sector.”

An increase in unemployment had dealt a blow to the government’s ambitious plan to create five million jobs by 2020 and current conditions made it “unlikely in the short term”, said Dykes.

Policy issues, he said, were also a key deterrent and sectors were waiting for guidance on a number of fronts. “Policy issues need to be resolved in sectors such as mining and agriculture and clarification on recent changes to labour legislation also needs to happen.” He said some targeted measures, such as the quick implementation of the youth labour subsidy, would help ease the situation and provide needed stimulus.

Radira said: “The high unemployment rate remains South Africa’s major economic challenge and there are no immediate or short-term solutions to the problem.” The department of economic development did not respond to a request for comment.


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