Hikes ‘will push up job losses’
Economy too weak to handle strikers’ wage demands
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.
ON MOVE: A sea of strikers on the march in Cape Town to demand higher pay.
BUSES IDLE: Bus drivers protest outside the Philippi depot.