The 11th UASA South African Employment Report, presented by economist.co.za director Mike Schüssler, provides frank insight into the domestic jobs market. Titled South Africa cannot afford South Africans, Schüssler’s stark conclusion is that it is time fo
The employed are living like kings
Regardless of the statistical measure, South Africa has an endemic unemployment problem. Official unemployment has pegged near 25% for more than two decades and critical sectors such as manufacturing employ less people today than in 1972! “The fact is that the most productive sectors in South Africa have struggled to create employment for decades,” observed Schüssler. He side-stepped the frivolous debate over what constitutes a jobseeker by defining employment as the number of formal sector employees as a percentage of the adult population. This measure confirms a shocking decline in employment from around 50% in 1990 (already a dismal level) to just 41% today.
All stakeholders agree unemployment is a critical domestic issue, but few agree on how to address the problem. Government believes its expanded public works program is the answer, while the unions believe private sector firms will hire more workers if labour brokers are outlawed. In each case the logic is flawed. A more sensible solution might be to reduce wages in the market for unskilled and semi-skilled labour… This was among the radical proposals contained in the 2012 UASA study, in which the trade union suggested lower-paid “training” jobs and starting wage subsidies as possible solutions to unemployment. Their proposals were informed by the fact South Africa’s formal sector employees are reasonably remunerated compared to their developed world peers.
The study found that South Africa’s average gross annual formal sector wages, measured in US dollars and adjusted for purchasing power parity (PPP), compared favourably with a number of developed world economies. Those employed in the private sector are on a par with countries such as Portugal and New Zealand and earn around $27 500 per year, while government employees are on par with workers in Canada and France, where the average gross salary tops $37 000 per annum. This trend exhibits in an analysis of net wages after all taxes (again measured in US dollars and adjusted for PPP) too. The country’s formal sector salaries are in the top 20% of countries around the world!
The wage inequality myth
Inequality is a buzzword of 21st Century economic debate, with most stakeholders adopting the phrase to suit their narrow agendas. Local trade unions scream wage inequality and use phrases such as “work poor” and “poor working class” to back up their inflation plus wage demands. Schüssler dismissed their arguments as blatant propaganda and declared that there was no evidence of excessive income inequality in the formal sector… “Unemployed poor” or “poor jobless class” would be more applicable!
The study assigns an income inequality number of 5.9 times to the South African formal sector, which compares favourably with Ireland and Switzerland. And the situation improves markedly when remuneration at State Owned Enterprises (SOEs) such as Eskom and Transnet is considered. Here the income inequality measure drops to a mere 3.9 times, on par with countries such as Sweden and Norway. (Income inequality is the number of times the 10th percentile of earners receives in excess of the 90th percentile. The study used base data from human resources consultancy Aon Hewitt and Africa remuneration specialist 21st Century Pay Solutions). “The working wage gap numbers for South Africa are much closer to those of the more developed countries than most of us thought,” observed Schüssler.
Inequality is most severe when comparing the employed to the unemployed. The wage gap between someone who receives a child grant (and is therefore unemployed) and the average unskilled employee is around 19 times. The study based its findings on an average monthly remuneration of R4 569 for the Patterson “A” Level (unskilled) employee. Someone receiving a pension or disability grant would have a 4.5 times wage gap when compared to this wage.
Reining in the public sector...
The UASA 2012 SA Employment Report finds that lower level civil servants in South Africa are among the best paid unskilled and semi-skilled employees in the world today. To sustain jobs at such high remuneration levels government has to limit the number of individuals it employs. The expanding public sector wage bill – some R382 billion in 2011, excluding SOEs – must also be viewed in light of government workers, on average, being paid 35% more than their private sector peers.
The alarming increase in public sector wages has not been lost on finance minister Pravin Gordhan, who warned in the his 2012 National Budget speech that above-inflation wage settlements were a thing of the past. “The public sector has grown from 11% of total formal employment in 1970 to 22.8% today, with the result South Africa has more civil servants than employees in the mining and manufacturing sectors combined,” said Schüssler. He noted that it was unlikely Gordhan’s promise to rein in the public sector salary bill would materialise.
Schüssler believes that SOEs have, over time, destroyed more jobs than the private sector. “While almost every SOE has been bailed out over the last two decades they employ less than a third of the employees they had in the early 1980s,” he said. These organisations have created elitist jobs that are 43% dearer than the equivalent private sector jobs. He also fired a warning shot at government regarding its handling of the contentious labour broker issue, reminding them that both government and SOEs relied heavily on temporary employees and contract workers… Taking these workers on in a full time capacity would bankrupt the state.
Editor’s thoughts: The 11th UASA South African Employment Report reveals that the lowest paid 10% of civil servants earn an average annual salary of some R60 000. And economists warn these employees will have to take below inflation increases over the next 20 years for the situation to normalise… Should government reduce the wages paid to unskilled and semi-skilled civil servants in order to employ more people, or should it cut its salary bill by reducing headcount? Please add your comment below, or send it to gareth@fanews.co.za
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Added by Bidnis Man, 28 May 2012