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UASA concludes irrelevant debate around its 2012 Employment Report

Award winning economist Mike Schüssler presented this year’s UASA Employment Report (11th) to the media and the public on 4 May 2012.

We are highly disappointed that AIDC and a few other individuals chose to discredit UASA and Schussler by making certain inaccurate assumptions and statements about the report which, as usual, has been consistent with the aim of UASA – namely that we wish to stimulate debate towards finding solutions to poverty and unemployment in the country.

 

Because of the persistent negative perceptions created by the disgruntled few, we felt that we should now provide perspective on the report, especially since UASA is the sponsor of the SAER.

Firstly, it is clear to us that this debate was caused and driven by inaccurate newspaper articles misrepresenting the contents of Mr Schüssler’s presentation. Anyone who attended the presentation got the clear message that South Africa needs a wage subsidy for the youth as companies are not able to afford the minimum wages (if a choice has to be made between employing more workers and simultaneously remaining competitive, or paying more and not growing jobs). A wage subsidy has the potential of making the former happen simultaneously causing the country to be more equal as it will promote job creation – and not the other way around as AIDC’s Mr. Forslund states.

The point was also made that higher cost makes us internationally less competitive. As we all know the cost of labour is an input cost. Whilst other countries against whom we are competing are slashing wages (just to keep the jobs), South African wages including minimum wages increase by more than the CPI.

This message of Mr. Schussler has been confirmed numerous times by other research studies from various renowned labour academics as well as international organisations. In fact data other than unit labour cost (ULC) can be used to prove the point. For instance, a comparison of GDP-statistics shows that in 2010 some 63% other countries registered faster economic growth rates than South Africa, whilst the percentage was 58% in 2011. One of the main reasons for this unfortunate “phenomenon” is because South Africa is importing more compared to other countries – only 35% of countries imported more than South Africa.

In other words, we rather import than produce ourselves as it has in main become cheaper to import than to produce locally.

The cause of this can be attributed to many reasons, but recent attendance of seminars hosted by government in order to determine why South Africans are losing contracts to international competitors yielded the same observations forthcoming from other research. Compared to our competitors, our cost of labour is too high – for instance and as already mentioned, international companies in other parts of the world are reducing wages just to win contracts and keep the jobs going. Furthermore, the number of South African companies relocating to other countries is picking up speed. We are now in the same position as the USA, Europe and other countries who already lost millions of jobs to Asia. This is a fact, not an assumption. More proof of this can be found in the capital labour ratios published by the Reserve Bank. They clearly show more use of capital compared to labour. This makes the country more unequal as it reduces the chance of the labour force to earn an income.

As for the research done by Mr. Schussler, the method applied regarding ULC is an internationally acceptable method. It is also not the defunct series as claimed by AIDC. In this respect it is always safe to first obtain the actual source before writing, as wrong articles in the past have lead to the closure of companies causing workers to lose their jobs, making the country even more unequal.

Furthermore, quibbling about sources (incidentally the ULC-data is published on page S152 of the Quarterly Bulletin and not on S150 as Mr. Forslund states in his article) and method detracts from the cause of the problem, namely the state of South Africa’s labour statistics. Had this been on par with the rest of the world, we need not revert to alternative methods to gauge our cost of labour and number of workers. The majority of analysts in South Africa do not believe the labour numbers (produced by both Stats SA and the Reserve Bank) as they do not tally with the rest of the economic aggregates and especially micro-economic data gathered from other sources. In fact, Stats SA recently admitted (in writing) that some of their labour statistics are not robust and that alternative sources should be used. This is a real shame as policy decisions are made based on those same statistics. In addition, just a little more digging into Reserve Bank figures shows that it is best to rather not use official labour statistics at all.

Therefore, the attacks launched by AIDC stem from a lack of credible labour data produced by Stats SA. Their attack should therefore be directed at Stats SA. However, it appears that this has turned into a personal issue rather than debating the issues at hand. From Mr. Forslund’s article and his communication with Mr. Schussler it is safe to conclude that the issue has evolved into an argument to be “right” by shooting down some numbers, sources and methodology (which incidentally was not used to compile the research) rather than addressing the real problems making South Africa more unequal. The fact that he wanted to prove Mr. Schussler and others wrong clearly shows that he was trying to play the man and not the ball. It is for this reason that he continues to attribute the use of so-called “defunct” Reserve bank data despite Mr. Schussler clearly refuting this by providing him with the data series which he developed over the past twenty years.

Be that as it may, if our labour costs are indeed not too high, it begs a few questions. First, why is the government proposing a youth wage subsidy? Second, why is the unemployment rate remaining ` high in low cost labour intensive industries? Third, why is the capital labour ratio increasing in the favour of capital? Fourth, why are companies relocating as a result of high labour costs?

Lastly, it must be mentioned that high labour costs are not our only problem. High profit margins of companies, a growing tax burden on individuals and very high service delivery costs are but a few other factors making the country more unequal.

With the above, UASA is concluding the irrelevant debate.  We rather focus on issues that matter, namely to find solutions to the huge inequality and unemployment facing our country. That is what we should all be worried about.