Hikes ‘will push up job losses’

Econ­omy too weak to han­dle strik­ers’ wage de­mands

Weekend Argus (Saturday Edition) - - BUSINESS - ZARA NI­CHOL­SON

ECONOMISTS warn that the job loss out­look for South Africa will worsen if strikes re­sult­ing in high wage in­creases con­tinue in the cur­rent weak econ­omy.

This comes af­ter Stats SA re­leased their quar­terly labour sur­vey re­sults show­ing high un­em­ploy­ment lev­els, ex­ac­er­bated by the in­creas­ing num­ber of “dis­cour­aged” work­ers who can­not find jobs.

Ade­naan Har­dien, chief econ­o­mist at Cadiz As­set Man­age­ment, said the al­ready weak econ­omy was not grow­ing enough to sup­port high wage in­creases of more than 10 per­cent, which work­ers have de­manded.

“Cur­rently South Africa is in the grip of a re­ces­sion and out­put is shrink­ing. Strike ac­tiv­ity clearly ex­ac­er­bates an al­ready poor out­come.

“…from a macroe­co­nomic per­spec­tive, high wage in­creases is not the prob­lem. Rather, the prob­lem is when wage in­creases are in ex­cess of pro­duc­tiv­ity gains, for then unit labour costs in­crease.

“In an econ­omy that is al­ready weak, this is prob­lem­atic and would typ­i­cally lead to job losses,” Har­dien said.

High inflation has hit the poor­est hard as their wages have not kept pace.

Har­dien said it was dif­fi­cult to say whether the wage de­mands had been fair but it had to be re­mem­bered that busi­nesses were also strug­gling.

“Ul­ti­mately, the re­sult would be higher wages for some and more job losses for oth­ers. Fig­ures re­cently re­leased by Stats SA showed that while the un­em­ploy­ment rate has barely changed in the sec­ond quar­ter (of 2009), the num­ber of dis­cour­aged work­ers in­creased sharply. What it means is that the sit­u­a­tion was much worse than the head­line num­ber sug­gests.

“Un­em­ploy­ment re­mains one of the big­gest chal­lenges…, about 24 out of ev­ery 100 peo­ple of work­ing age and who want to work are un­em­ployed. If one in­cludes in­di­vid­u­als who have given up find­ing a job, 32 out of ev­ery 100 are without jobs.

“Wage in­creases when the econ­omy is as weak as it cur­rently is, are likely to worsen an al­ready dis­as­trous sit­u­a­tion.”

Stats SA’s lat­est re­sults for the sec­ond quar­ter showed an un­em­ploy­ment rate of 23.6 per­cent, still sta­ble fol­low­ing the 23.5 per­cent rate in the first quar­ter.

The sur­vey stated: “Notably, dis­cour­aged work-seek­ers ac­counted for as many as 302 000 of the rise in the not eco­nom­i­cally ac­tive.”

Dis­cour­aged work­ers who can­not find work in their sec­tors also ac­counted for more than 400 000 in un­em­ploy­ment fig­ures in the in­crease from last year.

Pro­fes­sor Ben Smit, di­rec­tor of the Bureau for Eco­nomic Re­search at the Uni­ver­sity of Stel­len­bosch, said the work­force was likely to see “sub­stan­tial de­cline” in un­em­ploy­ment for the rest of the year.

Smit said job losses would be notably more than what has been ex­pe­ri­enced in the past year and more wage in­creases were an “ag­gra­vat­ing fac­tor”.

“To pro­vide high wage in­creases, em­ploy­ers would have to cut back on em­ploy­ment to keep the wage bill man­age­able.”

He said wage in­creases re­main­ing high with high inflation would lead to job losses. “Wage in­crease above 10 per­cent are go­ing to make things worse. If ad­justed down­wards with inflation, things will be bet­ter.

“The job cre­ation and em­ploy­ment sit­u­a­tion needs to be im­proved and that will take time but for the rest of the year, we will see fur­ther cuts in em­ploy­ment.”

In June, one of the big­gest pub­lic sec­tor strikes was held with 700 000 mem­bers de­mand­ing a 12 per­cent in­crease. Seven­teen trade unions with mem­ber­ships close to a mil­lion were in­volved.

Doc­tors and nurses also em­barked on strike action.

More re­cently Telkom, Eskom and work­ers from the Na­tional Union of Minework­ers (NUM) also em­barked on strike action.

Telkom work­ers de­manded 13 per­cent but were of­fered 7.5 per­cent.

The big­gest mineworker trade union, the NUM, de­manded a 14 per­cent in­crease, which is dou­ble the inflation rate. At the time Eskom, trade union Sol­i­dar­ity and NUM re­jected the eight per­cent of­fers they re­ceived but ne­go­ti­a­tions con­tinue.

Last month mu­nic­i­pal work­ers from the South African Mu­nic­i­pal Work­ers’ Union (Samwu) and the In­de­pen­dent Mu­nic­i­pal and Al­lied Work­ers’ Union (Imatu) went on strike, de­mand­ing an in­crease of 15 per­cent and a min­i­mum wage of R4 020.

They were of­fered 11.5 per­cent and an ad­di­tional 1.5 per­cent in Jan­uary, which they took.

PIC­TURE: MICHAEL WALKER

ON MOVE: A sea of strik­ers on the march in Cape Town to de­mand higher pay.

PIC­TURE: MATTHEW JOR­DAAN

BUSES IDLE: Bus driv­ers protest out­side the Philippi de­pot.

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