South Africa’s labour productivity reached a 46-year low in July, recruitment group Adcorp said on Monday.
“Since 1967, labour productivity has fallen from R7297 to R4924
a year, which is a decline of 32.5 percent,” Adcorp said.
Since its peak in 1993, labour productivity had fallen by 41.2 percent.
Employment stalled in July, growing at an annualised rate of just 0.23 percent, according to the Adcorp Employment Index.
“Job gains in July amounted to 3773, which is statistically insignificant,” Adcorp said.
Declines in construction (-11.7 percent), manufacturing (-3.6
percent), and financial services (-4.4 percent) offset almost all employment growth in other sectors.
Mining jobs grew by 8.1 percent, transport and communication by 4.3 percent, and wholesale and retail trade by 3.5 percent.
Informal sector employment rose for the 13th consecutive month, with a 1.9 percent gain in July.
Productivity, defined as making the most of limited resources, is a paramount economic goal, whereas labour productivity - the contribution that labour makes to overall productivity - is a central force in the labour market.
“If you combine higher labour productivity with competition between employers, this will result in real wages rising,” said Adcorp economist Loane Sharp.
Rising living standards were linked to improved methods of recruiting, training, equipping, and managing workers, he said.
The most common definition of labour productivity was output per worker, but this excluded factors, such as land, capital, and entrepreneurship, he said.
Real output per worker in South Africa had risen consistently since the 1960s, when official records began to be kept.
In 1967, the average worker produced R63,162 of real output a year.
In 2012, this had risen to R143,412 a year, a 127.1 percent growth rate, but if productivity was measured on the basis of output per worker, per unit of capital, a different picture emerged.
Since 1967, output per worker per unit of capital had fallen from R7297 to R4924 a year - a decline of 32.5 percent.
“This measure at least explains why the South African economy's labour intensity is falling and returns on capital are rising and why labour's share of national income is at an all-time low while capital's share is at an all-time high,” Sharp said.
Two factors had played a significant role in driving down labour productivity.
Increased worker protection from dismissal contained in the Labour Relations Act (1995) had made it harder for employers to manage poor performance from workers.
Secondly, the rise of bargaining councils had de-coupled wage increases from productivity gains, so that wages were no longer an incentive for improved productivity.
Prospects for labour productivity growth - and consequently higher employment - were exceedingly poor, said Adcorp.
Restrictive labour regulations and a poor work ethic were among the most problematic factors for doing business in South Africa, according to the World Economic Forum’s Global Competitiveness Report 2012.
South Africa was the fifth-worst in the world for co-operation in labour-employer relations and flexibility of wage determination.
It was fourth-worst in the world for hiring and firing practices, and 13th worst for pay and productivity linkages, said Adcorp. - Sapa