Reality is a low wage economy undermines South Africa’s Development | by Brian Ashley

by Jun 12, 2012All Articles

The Business Report is not a place to trade insults, as Mike Schussler does in his xenophobic piece “Putting data in someone else’s study is untruthful” (4/6).
As Alternative Information and Development Centre (AIDC) we are interested in stimulating a real debate on wage policy and broader issues facing the labour market.
At stake in this debate is overall economic policy. In fact, the same debate is playing out in Europe and the USA, regarding austerity and the critical question of aggregate consumer demand in the economy. That debate is also manifested in the “99% vs 1%” political movement, and Schussler clearly places himself at the services of the 1%, who seek more austerity, greater wage cuts and wider inequality. There is new increasing evidence that these policies lead to social, economic and – if we consider what is just now taking place in Europe − political disaster. Schussler proposes ten years of real wage decline for the poorest workers. 
Unemployment in South Africa is extremely high. This is perhaps the only point where we agree with Schussler. But, there are two major causes of the structural mass unemployment in South Africa and they have nothing to do with supposed high wages of workers. One is the restructuring of South African business, following the opening up of the economy to globalisation in the transition from apartheid. To be globally competitive, business went on a retooling and retrenchment binge.
The other structural cause is declining internal demand, rooted in extreme poverty and inequality, something which the export oriented economic policy of government has failed to offset. Schussler’s proposals in the report from Uasa would only follow and deepen the current long-term trend that has brought misery to millions of South Africans and constrained our economy. It is in this context that the question of wage statistics becomes important.
If the average wage among ordinary workers was indeed R13200 per month and if the typical worker was earning R11000 per month, then millions of South Africans would be able not to just put food on the table but also join their white middle class compatriots in purchasing houses, fridges, stoves and other durable and semi durable goods. The lack of demand in the South African economy is not just founded on the four million unemployed, but is based on the majority of the thirteen million workers recorded by Stats South Africa.
The average R13200 per month comes from the Quarterly Employment Survey (QES). While it includes the salaries of employers and top managers, it excludes millions of farm and domestic workers who receive the lowest wages. The R11000 is the median wage in the pay roll data collected from the clients of remuneration consultant, 21st Century Pay Solutions. It is no use for Schussler to deny using this data as he sent it to AIDC’s Dick Forslund when we enquired what data did he rely on in his original report. This wage is a far cry from the real wage paid to workers in South Africa.
According to official statistics, “Monthly Earnings of South Africans, 2010” (Stats South Africa) half of the formally employed earned R3,683 or less per month (the typical or median wage). This is the real median for formally employed workers. The study excludes employers with salaries, but it also excludes more than 1.2 million “own-account” workers who typically have extremely low wages.
Readers should note that the typical wage of the 46,000 “skilled agriculture” workers was R2,167 or less in 2010, for 1,069,000 plant and machine operators it was R2,817 or less, for the 882,000 domestic workers it was R1,000 or less, for 1,538,000 sales and services workers it was R2,420 or less, for  1 346 000 technicians R7500 or less, for 1,426,000 clerks it was R4,500 or less, for 622,000 professionals it was R10,000 or less.
Moreover, the bottom 5% in all occupations earned R570 or less per month, or almost 30 times less than the top 5% of all employees!
Schussler’s claim that we put data in his report is completely false. Schussler bases his labour costs calculations on an index series that is no longer used by the SA Reserve Bank.
It is downloadable, but it has been revised by Reserve Bank researchers back to 1990, as was explained in AIDC’s September press statement. Also Stats SA has their own internal revision of employment data available to researchers.
The debate on labour productivity that followed our disclosure is available on the PoliticsWeb or on the website The right column in Table 1 on this page is copied from Schussler’s excel sheet, which he sent to Forslund. Schussler’s impossible percentage points from 2002 follow the scrapped index series to the decimal. The revised series is replicated in the left column and is the series that underpins the Reserve Bank’s discussion on labour costs and productivity.
Schussler’s xenophobic reply to Dick Forslund avoids all debate about substance and generates more heat than light. We trust that Schussler in the future will stick to the facts. South Africa needs urgent solutions to the unemployment crisis, not ideology dressed up as economy.
Table 1: Left column are the changes in nominal unit labour costs (ULC) according to “Labour in the non-agricultural sectors” used by the SARB in policy discussions. Right column is defunct index series used by Schussler in the Uasa report, called “Labour: Labour costs in the non-agricultural sector”in the national accounts.
Brian Ashley, Director of Alternative Information and Development Centre in Cape Town.
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