State’s courage fails wage test

The government’s handling of the self-created mess that is the bloated public sector wage bill has been nothing short of disgraceful. While no-one argues that the country’s more than 1-million public servants have to be paid a pittance, their wage increases have been disproportionately high in comparison with other workers, and have been growing in an unsustainable manner that has crowded out investment in service delivery and growth-enhancing infrastructure.

The medium-term budget policy statement in October detailed that over the past 15 years, public service compensation spending had grown at an unsustainable rate that was nearly 1.5 percentage points faster than GDP growth, largely because of increases in remuneration. That’s an important point. The bill wasn’t growing because the government was hiring more urgently needed doctors, nurses or teachers, but because it was diverting more of the nation’s resources to those lucky enough to already have jobs in the public service.

With average annual public sector remuneration having more than tripled between 2007 and 2020, wages now eat up about a third of the budget, with the obvious impact on service delivery and investment. Wits University professor and former budget head at the Treasury, Michael Sachs, has described this as “austerity without consolidation”, where the government is cutting its primary spending and at the same time agreeing to above-inflation wage increases for public servants.

It’s bad economics and morally cannot be justified, though the latter point has been lost on trade union leaders who see their role in the narrowest of senses. There is obviously a problem here and the Treasury cannot be faulted for trying to deal with it after years in which the government either lacked the backbone or more likely was, in the case of the Jacob Zuma administration, a willing participant.

For years, the Treasury was ignored and the unions were able to get stellar deals despite a stagnant economy, the last one being the 2018 agreement now in its final year.

In February, even before the Covid-19 outbreak, finance minister Tito Mboweni said enough and the state simply refused to pay the increases.

It seemed the state would stick to its guns this time around but as it became clear that the increases were not forthcoming, the department of public service & administration told the Public Servants Association that it was committed to implementing the deal. That April letter was in retrospect a weather vane to how disjointed the government would be in dealing with an issue that can tank SA’s fiscal credibility.

This week, a day before the government was set to face off against public sector unions in the labour appeal court, the department of public service & administration attempted to have the hearing postponed to reach a settlement. Unions predictably refused after months of litigation processes.

And on Wednesday, during the hearing, the state split in a spectacular way as the department and the Treasury ended up on different pages on the legality of the deal. It would be funny if it was not so tragic.

The outcome of the case will be critical for SA and its public sector unions because it cuts to the heart of a number of critical issues, not least the sanctity of collective bargaining. For workers in the private sector, who have had to take painful pay cuts during the Covid-19 crisis, it may just be a sign that they shouldn’t take their public sector peers seriously when they talk of the national interest or patriotism. But what the unions can’t be blamed for is the government’s inability to sing from the same hymn sheet.

The last-minute manoeuvres don’t only demonstrate a government that still has to grow a backbone but also one that has shown itself to be a negotiating partner whose word you should take with a few bags of salt. This spells even more trouble as SA heads into the next round of wage negotiations.

THE STATE CUTS PRIMARY SPENDING AND AT THE SAME TIME AGREES TO ABOVE-INFLATION WAGE INCREASES