Labour productivity is up, with real wages stagnant

by May 23, 2012All Articles

Two replies to Loane Sharp by Dick Forslund and Simon Eppel, originally published in Business Report, December 19, 2012:
The South African Reserve Bank (SARB) reported in its latest Quarterly Bulletin that labour productivity is going up, as it has since 1994. The increase was 1.1 percent to June 2010 to June 2011.
Real wages remained stagnant at 0.0 percent for the same period. If real wages grow slower than labour productivity, the wage share of the national income drops, and this has been the case since 1998. Labour broker economist Loane Sharp doesn’t accept that basis for a critical discussion about wages, profits and unemployment (Business Report December 14 2012). He makes guesses about my ideological values when he should be attacking the Reserve Bank.
I wrote (13/12) that Adcorp, the Centre of Development and Enterprise (CDE) and other conservative debaters have been using statistics that has three large breaks in the data series. They are not used by the SARB for productivity measurements. Mr Sharp remains silent on the issue.
Mr Sharp says that “per unit of productivity”, real wages have increased with “astonishing average rate of 7.6 percent a year” for 15 years. Yes, it would be truly astonishing if we could reconcile in the same proposition exorbitant real wage increases with a falling wage share of the national income. But the average yearly real wage increases the past decade are only 2%, according to SARB. The national income (GDP) grew much more. That the wage share is falling has indeed also been picked up in Adcorp’s last press statements. Mr Sharp believes he can use this for his falling labour productivity thesis, arguing that the South African workers only get what they deserve, namely a smaller and smaller share of the country’s ever growing produce, whilst profits brim over. This stands in total contradiction to all real wage fantasies. The Adcorp story is completely incoherent.
Mr Sharp slides to debate productivity in the most general sense, quoting the first sentence in the overview chapter of the 150 page manual of the Organisation for Economic Co-operation and Development (OECD). But labour productivity is about output per labour input. The Reserve Bank measures total value added per employee. OECD explains that “from a policy perspective, value-added based labour productivity is important as a reference statistic in wage bargaining”. That is what the Reserve Bank does and what I discussed in my article.
Adcorp’s media impact rests on the solid basis of non-investigative economic journalism. The concept “labour unique productivity” gets (1)  hit on internet, namely Adcorp’s bizarre press statement from November. What the US Bureau of Labour Statistics (BLS) prefers is multifactor productivity, not “marginal productivity” as Mr Sharp writes. Key words are “combined” and “joint”. Measures of multifactor productivity “do not measure the specific contributions of labor, capital, or any other factor of production”, but “the joint influences” of a range of factors “allowing for the effects of capital and labor” (BLS, May 2011, News Release). In contrast to this, it is the idiosyncratic measurement of labour productivity in complete isolation that the Adcorp research unit desires.
Finally, Mr Sharp repeats his attacks on labour laws. Adcorp’s propaganda-book The New Divide takes that campaign to its horrifying limit: “The most effective economic approach is to dismantle labour laws and rules”; “Exploitation is a function of the morality of the employer. It is not possible to legislate morality”. If that were true, we wouldn’t need laws against theft, rape or murder either, would we?
Dick Forslund
Originally published in Business Report, 19/12, 2011:
Labour ideas based on sloppy research
Adcorp’s Loane Sharp has positioned himself as the counterweight to those trying to defend workers’ rights and welfare. In his latest contribution he has weighed in on the debate about the share which workers’ wages constitute of national income (Business Report, December 14), writing a response to Dick Forslund of the Alternative Information and Development Centre (Business Report, December 13).
Sharp claims Forslund “has an ideological axe to grind”. Yet it seems Sharp does not live up to his name for this is a bizarrely ironic claim for a labour broking researcher to make.
A perfect example of the way in which ideology compromises Sharp’s research appears in his right-wing fiction, The New Divide. Referring to the clothing industry Sharp makes numerous factually inaccurate claims. For example, he claims that Newcastle workers were “content” with their sub-minimal wages, when actually the period to which Sharp refers – when the Clothing Bargaining Council threatened to close Newcastle companies in 2010 if they did not increase workers’ wages to the legal minimums – saw thousands of Newcastle workers join the Southern African Clothing and Textile Workers’ Union (Sactwu) precisely because they were not content with their wages.
Then there is Sharp’s claim that “the cost of labour in South Africa is holding the local clothing industry back”, when in fact wages are a comparatively lesser challenge faced by the local clothing industry. More significant challenges are posed by cheap imports caused by currency-pegging and heavy subsidisation of some major foreign industries, as well as by lower-than-optimal efficiencies as a result of low levels of local investment in machinery.
Sharp is well-opinioned, but his opinions are not well researched and appear to be agenda-driven rather than by rigour.
Simon Eppel
SA Labour Research Institute, research arm of the Southern African Clothing and Textile Workers’ Union (SACTWU).
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