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Real Wage, Labor Productivity, and Employment Trends in South Africa: A Closer Look

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  • Nir Klein

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.

Suggested Citation

  • Nir Klein, 2012. "Real Wage, Labor Productivity, and Employment Trends in South Africa: A Closer Look," IMF Working Papers 2012/092, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2012/092
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    2. Thomas Habanabakize & Daniel Francois Meyer & Judit Oláh, 2019. "The Impact of Productivity, Investment and Real Wages on Employment Absorption Rate in South Africa," Social Sciences, MDPI, vol. 8(12), pages 1-15, December.
    3. Dieter von Fintel, 2016. "Wage flexibility in a high unemployment regime: spatial heterogeneity and the size of local labour markets," Working Papers 09/2016, Stellenbosch University, Department of Economics.
    4. Dieter von Fintel, 2017. "Institutional wage-setting, labour demand and labour supply: Causal estimates from a South African pseudo-panel," Development Southern Africa, Taylor & Francis Journals, vol. 34(1), pages 1-16, January.
    5. Saini, Shweta & Gulati, Ashok & von Braun, Joachim & Kornher, Lukas, 2020. "Indian Farm Wages: Trends, growth drivers and linkages with food prices," Discussion Papers 307268, University of Bonn, Center for Development Research (ZEF).
    6. Vincent Dadam & Nicola Viegi, 2021. "Estimating a New Keynesian Wage Phillips Curve," Working Papers 202107, University of Pretoria, Department of Economics.
    7. Nicola Viegi, 2015. "Labour Market and Monetary Policy in South Africa," Working Papers 6607, South African Reserve Bank.
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    9. Mohammad Zulfan Tadjoeddin, 2016. "Earnings, productivity and inequality in Indonesia," The Economic and Labour Relations Review, , vol. 27(2), pages 248-271, June.
    10. Manuel David Cruz, 2022. "Labor productivity, real wages, and employment: evidence from a panel of OECD economies over 1960-2019," Working Papers PKWP2203, Post Keynesian Economics Society (PKES).
    11. Wittenberg, Martin., 2014. "Analysis of employment, real wage, and productivity trends in South Africa since 1994," ILO Working Papers 994847703402676, International Labour Organization.
    12. Gurvich, Evsey & Vakulenko, Elena, 2017. "Macroeconomic and structural properties of the Russian labor market: A cross-country comparison," Russian Journal of Economics, Elsevier, vol. 3(4), pages 411-424.
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    14. International Monetary Fund, 2013. "South Africa: 2013 Article IV Consultation," IMF Staff Country Reports 2013/303, International Monetary Fund.

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