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Pay wars sideline job creation

Lynley Donnelly

The issue of how we can grow the economy in a way that creates jobs and includes the poor has been lost in the jostle for monetary gains.

As strike season takes off and pay talks between business and labour deadlock in several sectors, the real conversation—envisaged as a social pact on wages, prices and executive bonuses in the new growth path—has yet to happen. The issue of how we can grow the economy in a way that creates jobs and includes the poor, the unemployed and small enterprise has been lost in the jostle for monetary gains.

Zubeida Jaffer, the spokesperson for the economic development department, which is responsible for formulating the growth path, said that talks on a social pact had not begun and that it was not clear when they would.

But the department had been working on policy accords relating to other elements of the plan, such as skills acquisition, procurement and the green economy, Jaffer said. These were designed to “increase the economic cake” before the social compact on wages could be broached.

South Africa needs to create five million jobs in the years ahead if it is going to make any headway in addressing rampant inequality.

Of all the proposals in the growth path, those on pay are the most unpalatable to all parties. Business has baulked at the restrictions envisaged for the bonuses paid to top management but the plan also requires unions to consider lower wage hikes for workers, who are well protected, well paid and ensconced in well-organised sectors.

But pay is only part of the conversation that must happen and the government’s broader policy position is beginning to take this on board.

The National Planning Com­mission’s diagnostic overview points to the segmented nature of the local labour market and the problems beneficial labour regulation has created by giving employers an incentive to hire young, unskilled workers. The overview underlines the need to change the economic incentives for the private sector to boost the creation of labour absorbing industry.

A discussion paper released last month by the Centre for Development and Enterprise (CDE) said that a “fundamental re-examination of the labour market regime” was required to “facilitate the emergence of lower-wage industries and businesses” and to tackle the “gap between the poor productivity of young, unskilled, inexperienced workers and their employment costs”.

“Without the development of low-wage companies, South Africa will not be able to create the millions of jobs we need or achieve higher rates of economic growth,” the report said. Wage negotiations were a normal, “healthy” aspect of a working democracy, Standard Bank chief economist Goolam Ballim said, as they formed “part of the price discovery process and — focus society and businesses’ minds on workers’ share of national income”.

But worker productivity and the way it related to wage increases did not play a sufficiently important role in negotiations. “It is somewhat disingenuous to tie remuneration growth to the cost of living without attempting to forge a bargain in real value added by labour,” he said. “In recent years the real gains compensation for labour has outpaced productivity gains and this is eroding South Africa’s competitiveness.”

Productivity had grown by about 3% a year in recent years, while nominal wage gains had run at about 9% annually.

Despite this, there are concerns that labours’ share of GDP is falling. In a press statement this week Dick Forslund, economist at the Alternative Information Development Centre, said that workers’ wages were falling in relation to profits. “The wage share of GDP in the economy has dropped every year since 1998, but GDP has grown every year, except for 2008,” he said.

The new growth path also pointed to the increasing disparity between what labour received as a share of national income and what capital or business received. It said that the share of wages in the national income dropped from 50% in 1994 to just over 45% in 2009, while the share of profits climbed from 40% to 45%.

Forslund also said that claims of very low worker productivity were more the result of changes in the way the Reserve Bank compiled statistical data than real falls in productivity since 2000.

Economist Dawie Roodt of the Efficient Group said that labour’s share of national income had declined in recent years but that was the inevitable consequence of technological advancement.

“In the past a significant portion of production went to labour but, because of technology, that has changed,” Roodt said.

The CDE research made the point that increased economic, legislative and regulatory pressure had driven employers towards industries and production techniques that relied on fewer, highly skilled people and towards less labour-intensive production methods.

Strike fever has once again hit South Africa with fuel employees, metal and chemical workers among others promising to cripple the country’s economy if their demands are not met. For more news click here.

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