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Real Wage, Labor Productivity, and Employment Trends in South Africa

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  • Nir Klein
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    Abstract

    The paper looks at the dynamics of employment in South Africa and examines the factors that contributed to the job-shedding observed during the recent financial crisis. The paper finds that the rapid growth of the real wage, which outpaced the labor productivity growth in most sectors, played an important role in suppressing employment creation. The paper also finds that while there is a co-integrating link between the real wage and labor productivity, the deviations from equilibrium are persistent and thus contribute to a weak link between real wage growth and labor productivity growth in the short term. This finding is also supported by a cross-country analysis, which shows that in South Africa the link between the real wage and labor productivity is substantially weaker than in other emerging markets, even after controlling for labor market tightness indicators.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/92.

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    Length: 28
    Date of creation: 01 Apr 2012
    Date of revision:
    Handle: RePEc:imf:imfwpa:12/92

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    Related research

    Keywords: Labor productivity; Employment; Labor markets; Unemployment; wage; wages; informal employment; formal employment; employment creation; unemployment rate; overall employment; employment protection; sectoral employment; employment loss; employment growth; total employment; wage equation; wage increases; worker; employment outlook; composition of employment; compensation; wage indices; loss of employment; employment data; labor force survey; employment equations; full employment; employment statistics; employment dynamics; employment levels; wage policies; labor force surveys; wage index; employment protection legislation; employment trends; labor compensation;

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    References

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    1. JW Fedderke & Martine Mariotti, 2002. "Changing Labour Market Conditions In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 70(5), pages 830-864, 06.
    2. Saten Kumar & Don J. Webber & Geoff Perry, 2012. "Real wages, inflation and labour productivity in Australia," Applied Economics, Taylor & Francis Journals, vol. 44(23), pages 2945-2954, August.
    3. Soo Khoon Goh & Koi Nyen Wong, 2010. "Analyzing the Productivity-Wage-Unemployment Nexus in Malaysia: Evidence from the Macroeconomic Perspective," Development Research Unit Working Paper Series 12-10, Monash University, Department of Economics.
    4. Love, Inessa & Zicchino, Lea, 2006. "Financial development and dynamic investment behavior: Evidence from panel VAR," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(2), pages 190-210, May.
    5. Bentollia, S. & Saint-Paul, G., 1999. "Explaining Movements in the Labor Share," Papers 9905, Centro de Estudios Monetarios Y Financieros-.
    6. Junankar, P.N. & Madsen, J.B., 1996. "Unemployment in the OECD: models and mysteries," Discussion Paper Series In Economics And Econometrics 9648, Economics Division, School of Social Sciences, University of Southampton.
    7. Michael Bruno & Jeffrey D. Sachs, 1985. "Economics of Worldwide Stagflation," NBER Books, National Bureau of Economic Research, Inc, number brun85-1, June.
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