Labour productivity at 46-year low

By Drum Digital
11 March 2013

Employment in South Africa remained static in February, according to the Adcorp Employment Index released on Monday.

Adcorp's labour market analyst Loane Sharp said a total of 11,207 jobs were created in the informal sector. The formal sector recorded a decline in job creation.

Job losses were largely in the mining and construction sectors, while improvements were mostly in transport and manufacturing.

In January, employment fell at an annualised rate of 3.2 percent.

The latest index revealed that high-skilled jobs remained the overwhelming source of employment creation, with 12,000 new posts in the management and professional categories.

The government created 8000 new jobs.

Sharp said a more in-depth analysis found the wage share -- labour's participation in national income -- fell to the lowest level in 50 years.

The wage share is the proportion of national income attributable to workers and an indicator of the distribution of income between capital and labour.

"The implication of the dropped wage share was that South Africa's profit share rose to a 50-year high," Sharp said.

Reasons for this trend could be South African companies being in exceptionally good shape, as reflected by profits.

"A recent study showed that the real risk-adjusted return on capital of South African listed businesses is currently 10 percent, the highest in the world."

Sharp said in terms of corporate transparency, board effectiveness and financial management, the country ranked number one in the world. In business sophistication in the private sector, it ranked 34th internationally.

"Of course, another reason for wages' declining share of national income is declining labour productivity. Since records were first started in 1967, South Africa's labour productivity had fallen to a 46-year low with most of the decline occurring since 1995."

The Labour Relations Act of 1995 was a radical change in labour laws in that it provided for dismissal protection and wage escalation, he said.

"It doesn't seem possible that the wage share could fall substantially further. The decline from 60 percent of national income in the early 1980s to 50 percent in the early 2010s is already a significant drop," Sharp said.


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