Productivity, Wages and Employment in South Africa’s Manufacturing Sector, 1970-2002
AbstractThis paper investigates the relationship between labour productivity, average real wages and employment in South Africa’s manufacturing sector, using cointegrating VAR and VECM econometric techniques. A long-run equilibrium relationship was found between real wages and productivity, with an elasticity of 0,38 indicating that productivity has grown more rapidly than wages. However, the econometric tests proved to be highly sensitive to specification and sample period. Nevertheless, the main result is consistent with the finding that labour’s share of gross output has been shrinking over the past three decades, which has negative implications for income distribution. These trends may plausibly be explained by capital intensification and possibly the adoption of labour-saving technology. The implication is that growth in the manufacturing sector cannot realistically be relied upon to create significantly more jobs for South Africa’s millions of unemployed. Policy-makers are urged to consider alternative strategies which promote local economy and protect key labour-intensive sectors.
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Bibliographic InfoPaper provided by University of Cape Town, Development Policy Research Unit in its series Working Papers with number 04085.
Length: 35 pages
Date of creation: Mar 2004
Date of revision:
Publication status: Published in Working Paper Series by the Development Policy Research Unit, March 2004, pages 1-35
South Africa: labour productivity; real wages and employment; VAR and VECM econometric techniques;
Find related papers by JEL classification:
- A1 - General Economics and Teaching - - General Economics
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