Labour productivity at 40-year low

2011-11-10 12:44

South Africa’s labour productivity fell to its lowest level in 40 years in October, according to the Adcorp Employment Index released today.

“While no significant changes in all kinds of jobs – formal, informal, permanent and temporary – were seen during October, South Africa’s labour productivity fell to its lowest level in 40 years,” Adcorp said in a statement.

Labour productivity growth – a leading indicator of job creation – had been negative throughout 2011.

“This negative trend in labour productivity suggests that adding more workers does not necessarily translate into material increases in business output,” said Adcorp labour market analyst Loane Sharp.

The index for October shows employment dropped slightly in the mining (-7.8%), construction (-7.0%) and manufacturing (-4.5%) sectors on an annual basis.

These losses were countered by job increases in wholesale and retail trade (4.4%) and financial services (3%).

“Reflecting good underlying conditions in the consumer sectors, employment of clerks (+3.3%) and service workers (+2.7%) grew steadily, as did domestic work (+5.8%).”

For the first time this year, government job creation was essentially static, Sharp said.

Labour productivity was at its lowest level since the early 1970s.

“One of the problems with the assessment of labour productivity in South Africa is that it is measured according to ‘output per worker’, thus attributing all output to workers.”

Sharp said it would be more accurate to consider capital equipment, technology, land, and other production factors in determining productivity.

Labour productivity growth in 2011 was negative, at -1%.

“This may well explain why, when real GDP rose by 6.6% after the 2008/09 global financial crisis, employment rose a meagre 2.6%,” Sharp said.

“While GDP figures for the third quarter of 2011 are not yet available, we expect them to confirm the worrying declining labour productivity growth trend in this country.”

Sharp said labour productivity is a critical indicator of employment.

“When adding workers yields greater output (ie when labour’s value-added is positive), employers have an incentive to employ more workers,” he said.

Adcorp was not expecting a sustained increase in employment until at least the second half of next year.

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