Schussler: Attempt to discredit me deploys some dodgy data

Economist Mike Schussler. (Gallo)

Economist Mike Schussler. (Gallo)

A piece by Brian Ashley and Dick Forslund of the ­Alternative ­Information and Development Centre in the Mail & Guardian ("Facts belie the hype about labour costs", July 13) represents another attempt by the centre to discredit my work. They say my economic figures are bizarre and lack credibility and imply that economists like me are anti-union.

Without getting embroiled in a ­battle with them I feel that I, as an economist doing work for trade unions (like them), should point out some facts. Their motives for belittling me presumably spring from their eagerness for monetary gain.
Most numbers the centre uses are wrong and, in some cases, even untruthful.

First there is the unit labour-cost data. The centre suggests it shows a drop of 10% in real terms. My data shows an increase of 16%. This "sensational difference" between my data and their "unpublished South African Reserve Bank" figures is described as stunning.

I have only their "unpublished SARB" data going back to 1998 (from Politicsweb), so I have to start the comparison in 1998. My figures show a real increase of 7% since 1998 after inflation and show that workers are a bit better off than 12 years ago. The centre's figures show that the average worker is 2% worse off.

I agree that the currently published Reserve Bank figures have structural breaks and using them over this period does not make sense. But the Organisation of Economic Co-operation and Development also publishes unit labour-cost numbers, this time showing that workers are 19% better off. The centre's "unpublished SARB" figures are therefore outside of the trend shown by another set of official figures, not only mine. The really "sensational" data is the data from the centre: my data is closer to the published  Reserve Bank data and OECD data.

Highly disappointed
Moreover, the graph supplied with the opinion piece shows that the best period for workers' income was in the early 1990s. Then, under National Party rule, workers actually received higher wages after taking inflation and productivity into account. Bizarre as it may sound, the centre's "official unpublished" figures show a 10% real wage decline since 1994, which means the democratic government and its union partners have in effect enslaved workers, whereas the previous regime enriched them. Many a Nat leader of old would have been overjoyed were these "official unpublished" figures true.

On the other hand, union members would be highly disappointed to learn that, despite paying fees and working harder, they are taking home less than in 1994. This is simply too bizarre to contemplate.

The second number Ashley and Forslund get wrong is the tax figure. The correct South African Revenue Service registration number is not 10.3-million people, but 5.92-million, according to the treasury. This number reflects all South Africans who earned more than R5 000 a month by March 2010 (taxable income excludes pension, some medical aid and UIF contributions).

Taxpayers likely to fill in tax forms are fewer than those who have to be registered. Some taxpayers have only a salary and a pension fund and do not earn a taxable income of more than R120 000 a year. These taxpayers generally do not have to fill in tax forms. Also, about 10% of South Africans have other incomes such as rents, or have businesses where certain tax write-offs can occur. Some people have a salary of, say, R6 000 a month, but could have losses on rents and therefore end up paying no taxes (those losses being tax-deductible).

The self-employed can also make losses and they are also part of these statistics. It is important to note that the March 2010 data is from 18 months earlier than the data sets I used and we generally find about a 7% growth a year in tax registrations. So, at the end of 2011, about 6.5-million people are estimated to have earned a taxable income of at least R5 000 a month or more, which translates into a normal income of at least R5 500 a month.  

Third error
Ashley and Forslund say "SARS data does not take samples", so about two-thirds of the 9.6-million people who have formal sector jobs earn more than R5 500 a month. This makes the often quoted Monthly Earnings of South Africans report, published by Statistics South Africa in 2010, seem out of sync because it relies on samples.

The third error is the statement that the Quarterly Employment Survey "includes the salaries of people who are employers themselves". In fact, the opposite is true. The survey's average salary does not include employers at all. Forslund persists with this statement despite attending a Stats SA presentation at a Nedlac labour caucus two days before the article was published.

Fourth, the statement that "it would mean more than 100% inflation between average salaries" between 2010 and 2011 possibly points to a lack of comprehension of economic concepts. If one salary is constant in, say, 2005 terms and the 2010 salary is one number and the nominal 2011 salary a different number, this does not show 100% inflation between 2010 and 2011, but a combination of cumulative inflation from 2005 (in this example) and the actual increase after inflation between 2011 and 2010.  

Fifth, the report by Haroon Bhorat et al on wages did not refer to "all workers", but only to workers in eight sectors (out of about 100 standard industry-classified sectors) covered by bargaining councils. Some of these sectors are outside the formal economy – domestic and taxi workers, for instance. The violations are disturbingly high. Most of them do not have active union participation.

One has to wonder about the motives of the centre's writers. They earn money advising unions and others and it seems they are willing to distort the facts to suit their case.

Mike Schüssler is an economist

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