Economic Growth, Employment, Labour Productivity and Remuneration in South Africa: Evidence from Published Financial Data

Abstract

This paper examines the changes which took place in a population of companies within the formal sector of the South African economy vis-à-vis economic growth, employment, labour productivity and remuneration and also compares these changes with projections put forward in the Growth, Employment and Redistribution (GEAR) policy. GEAR projected that an economic growth rate of 6% per annum would give rise to the creation of 400 000 additional jobs per year in the formal sector over the period 1996 to 2000.

The data used in the study was gathered from the annual financial statements of 62 industrial companies listed on the JSE Securities Exchange over the period 1994 to 2000.

Although it appeared as though labour productivity had increased, the increase was partly due to an overall decrease in employment, rather than a greater than expected increase in value added. It emerged that the majority of companies, which decreased employment, contributed negatively to economic growth. These companies were also shown to have increased salaries on a per employee basis, which meant that these companies did not reduce their overall salary expenses substantially. By decreasing employee numbers and increasing per capita remuneration, the companies in question only acted to further increase an already wide income differential in South Africa. It thus appeared that in reality few of the projections put forward in GEAR were achieved by these companies.