Unemployment has been a crisis in South Africa for more than two decades.
No other country in the biggest 100 economies in the world has had more than two decades of unemployment above 20% constantly, says economist Mike Schussler.
Schussler presented the 16th UASA South African Employmenet Report in Johannesburg today.
Five countries in Southern Africa have higher unemployment rates than countries at war such as Iraq, Yemen and Libya. All five SACU member countries are in the world top 20 countries for their high unemployment rate.
The expanded definition of unemployment is near its record high with 9,4 million people who want a job. This is up from 5,2 million in the early 2000’s. This rate has been mostly over 30% and is now close to 36,8%.
“Last year the unemployment rate for the whole of Southern Africa was estimated to be 25,6%, but that included Zimbabwe which claims to have an unemployment rate of only 5,1% and Zambia at 7,6%. If unemployment in Zimbabwe were measured correctly, I am sure the number would be well over 28%. Even war zones have had lower unemployment rates! For example, current estimates of unemployment for Iraq is lower than for SA,” said Schussler.
Unemployment, and not low formal sector wages are the biggest cause of inequality, he said.
This is what really impacts the Gini coefficient. This is further enhanced by the by the Palma Index which measures the ratio of what the top 10% of the population earn compared to the bottom 40%.
In South Africa that ratio was the highest by far, namely 7,1 times the income of the bottom 40%.
What is frightening is that the bottom 40% of households receive more income from other sources than from work. On average the bottom 40% of South African households receive less than 40% of the total income from work. They get more income from social grants, rent and family than they do from work.
Only 30% of adults are employed in the formal sector and when compared with households it is clear how much the formal sector helps SA households out of poverty.
The top 30% of all SA households take 83% of all income from work in SA. Assuming that there is one formal sector employee per household – that shows how worried one must be about the huge unemployment ratio in SA.
A further 13% of South Africans work in the informal sector or on farms and as domestic workers.
Say these employees make up the next 10%, that means that the top 40% of households earn 90% of the income from work.
This perhaps helps to explain the real crisis the unemployment numbers in South Africa!
But how big is the inequality in the work place?
Next year South Africa will implement a minimum wage of R3 500 per month. This is to help close the wage gaps in South Africa and to help reduce inequality in the workplace.
“Wage settlements in South Africa have over a long period of time increased wages above the rate of inflation. Field surveys have not always reflected this and surveys such as the Quarterly Labour Force Survey seem to indicate that the typical wage is around R3 000pm.
“Also, there seems to be very little evidence in the QLFS data that minimum and typical wages have increased while a host of other data such as Andrew Levy wage settlements and SARS tax data show a very different trend. There are many questions about the accuracy of salary information in the QLFS and the UASA Employment Report was initially rolled out because the data was questioned by unions in the early 2000’s already,” said Schussler.
According to Schussler, these questions need answers:
- It may be that CEO’s get higher increases than workers but how do the different employees compare with each other? How big is the inequality in the work place?
- What do the negotiated wage agreements across many sectors in South Africa indicate?
- Has the income gap between the skilled and the unskilled narrowed or increased?
- Has inequality increased between the different levels of workers or have wage agreements reduced the difference?
South Africa’s first long-term wage agreement wage trends
South Africa needs to look at the facts. Wage agreements represent the one area of which no longer term trends are available in the public domain. We hope to unpack some interest facts that will add to the wage debate in the country.
If inequality and poverty are to be beaten, we need all the facts that we can get. Many wage agreements are implemented and policed by unions, bargaining councils, the Department of Labour and competitor firms as well as workers themselves.
The 16th UASA South African Employment Report took some very old data not recently reported on and together with data from the Labour Research Service AWARD, Department of Labour, bargaining councils, unions and business chambers we have created a very rare and interesting historical view of salaries and income gaps in the workplace.
This may also help the country go forward when deciding on future wage rates as we may be able to learn a little more from our history.
For the first time some big sector wage settlements have been researched looking back over several decades. Six bargaining councils’ data going back to the early 1980’s and late seventies provide an interesting perspective of the way wages on the shop floor have changed.
Furthermore, four large sectors with wage agreements or determinations data going back at least two decades were researched as well as several other sectors for which data of at least a decade exists, providing insight into the wage trends in agreements in the South African labour market.
The 16th UASA South African Employment Report collected data not only about the minimum wages but also from semi-skilled and skilled wages. Wage settlement agreements revealed interesting trends in most sectors from which we could find continuous information regarding the agreements.
Some of the sectors covered for the report are the mining, metal, vehicle, trade, road freight, motor trade, clothing as well as government sectors.
We found that generally inequality in these sectors decreased in the workplace between the different levels of employees. We also look at the minimum wages over the last 20 years across on average of 650 wage agreements and sectoral determinations per year since 1997.
These findings may explain some of the reason why general inequality is not decreasing in South Africa.
“Labour surveys often point to wide wage gaps between the bottom and top earners and frequently the middle, too. We found historical wage agreements in some cases going back to before 1980.
“We looked at four sectors from the late 1970s and early 1980s and several other big sectors from the middle 1990s and can now reveal what these agreements generally have in common, namely that wage agreements and sector determinations reveal a totally different picture over the long term,” said Schussler.
The first trend is that the wage gap between the skilled and the unskilled closed in most cases. For example, the lowest skilled grades in the motor trade went from less than a fifth of the wage of a skilled grade to over a third between 1979 and 2017.
The semi-skilled grade improved from just below a third of the skilled grade to 44% of the skilled trade in the motor Industry. In effect this means that the unskilled person now has less of a wage gap in relative terms than the semi-skilled grade had in 1979.
“This trend is similar across the board of all six sectors for which we have more than 30 years of history except for the road freight industry. (The road freight industry had a similar trend until the early 2000’s when HIV/AIDs may have played a role in heavy vehicle drivers gaining from a shortage of drivers.)
“In the metal industry, for example, the lowest minimum for an unskilled grade increased from less than a third of the skilled artisan to well over half the rate of an artisan.
“The same trends are evident in bilateral and multi-lateral agreements in the mining industry over the last 25 years. In gold mining, for example, the lowest paid grade went from a fifth that of a junior manager to half that of a junior manager,” said Schussler.
Moreover, the lowest grade went from 40% of grade 8 to 76% of grade 8. This again reflects a narrowing of the gap between the unskilled and the semi-skilled. Although the actual salary levels of the different mining groups differ, the trends and increases by grade are very much the same.
The wholesale and retail trade sector sectoral and ministerial determinations show the same trend over the last two decades.
In the case of the domestic trade sector the evidence shows that clerks got the best relative wage adjustments between 1995 and 2017.
The unskilled wage has increased from about a fifth of the skilled wage to a third of the skilled wage in the motor trade industry between 1979 and 2017.
Surveys are known to be unreliable indicators of actual wages and recent tax data showed that there is a 40% difference between survey wage data and tax wage data, he said.
Schussler said it is important to note that in many of the sectoral determinations some of the lower paid areas have fallen away. This often means changing from five different geographical areas to one or two and leaving out the lowest paid areas. This therefore further increases the lowest paid geographical areas salaries as they get a once-off upward adjustment. (In some cases, this could have happened twice.)
Income increased not only via wages
In total 14 very different sector agreements and determinations (plus two confidential sectors agreements not counted here) covering at least 40% of the formal workforce was researched. These sectors provided at least a decade of wage settlements or determinations.
Almost all show a trend of the lowest earners closing the wage gap with the skilled grades and junior management and supervisor levels.
Agreements were also analysed for other income and benefits where possible. In many of the agreements the percentage that the employer paid into pension funds was increased.
Agreements further show that the number of holidays employees can take increased as did other time-off events. These events include family time during events such as births and deaths as well as unspecified family days. Time for union activities increased as did break times in some cases.
In a few cases the hours worked per week were reduced, according to records kept by the Department of Labour.
In government particularly and in some other bilateral agreements employees are promoted by default and they therefore also receive “notch increases” even if their work does not change.
Many allowances were created, from tool allowance to meal and living out allowances. Subsistence, travel and bonuses are all part of wage settlements and rarely get included in the percentage increase by which wages increase.
In many cases the allowance makes up more than 20% of the pay package.
A 20-year history of minimum wages across sectors
The broadest measure of wage increases is, however, the changes in the minimum wages for elementary workers.
The Labour Research Service keeps records of wage settlements which often number well over 600 per year.
These wage settlements are classed in three main categories and show substantial increases for the lower end workers in South Africa.
Schussler said looking at the minimum wages for elementary workers the different agreement types indicate very different levels of wages. Using the national minimum wage as an example the different agreement types have surpassed the R3 500 level at very different times.
- The Public-Sector Bargaining Council wages surpassed the R3500 level in 2008. This covers 1,5 million employees in the three levels of government.
- Union negotiated settlements in industry and firm levels surpassed the R3500 level in 2007. It is estimated that about 1,8 million adults work in the firms were these agreements are implemented.
- Private bargain councils surpassed the R3500 level on average in 2011. This covers over 1 million employees and probably more by extension of the bargaining councils’ coverage.
- Sectoral determinations are not yet there mainly due to domestic, farm, forestry, security and taxi workers. Leaving out domestic and farm workers as well as taxi workers, it looks like the average wage settlement would have been just around R3500 p.m. in 2017. There are over 4 million adults covered by sectoral determinations.
“Wage agreements overall do much better than sectoral determinations, which is to be expected as SD’s are implemented for more vulnerable sectors and workers, said Schussler.
Contact Mike Schussler: 082 417 5542