Bleak outlook for private sector workers in latest earnings survey
31 March 2023
Stats SA’s latest report reflecting a loss of 94 000 jobs through 2022 is alarming, while the average wage increase of just 4.7% for private sector workers over the same period stands in damning contrast to the unbudgeted 7.5% increase that has just been granted to government workers.
This week Stats SA released its Quarterly Earnings Survey (QES), which indicated that at the end of 2022 there were 9 968 000 people employed in the non-agricultural formal sector, which was 94 000 fewer jobs than the year before. This contrasted with Stats SA’s Quarterly Labour Force Survey (QLFS) a few weeks earlier that showed an increase of roughly 800 000 formal jobs in the same period.
The QLFS and QES have different methodologies: the latter is based on surveys of 20 000 business units and the former on surveys of 30 000 private households. This does not mean, however, that the QLFS always indicates more jobs. At the end of 2021, the QLFS recorded 400 000 fewer formal jobs than the QES. Now the QES indicates roughly 850 000 fewer formal jobs than the QLFS, and a net loss of almost 100 000 jobs in 2022.
Where both the QLFS and QES data agree, however, is that the domestic labour market is far from recovering from lockdown-era job losses, in contrast to peer competitors, and that South Africa continues to have the highest recorded unemployment rate on the planet.
Furthermore, the QES indicated that for those fortunate enough to still have a job, overall worker compensation has increased slower than inflation. According to Stats SA, average annual consumer price inflation was 6.9% in 2022, but total worker compensation increased by only 4.7% in the same period. That means the formal workforce suffered a loss of 2.2 percent points in real income.
By contrast Treasury’s February budget already allocated R45.6 billion for compensation of employees over the next three years to provide for the carry-through costs of the 2022/23 public-service wage increase. For context, the Budget indicated a total allocation of R42.8 billion over the next three years to improve infrastructure.
In other words, public workers were already going to get a raise that would cost more than all new public infrastructure investment when the average annual increase was pencilled in at 3.3%. According to news reports a deal was struck on 17 March, three days before the threatened “shutdown”, setting a 7.5% increase. This amounts to roughly a further R35 billion per annum. It also means government workers are set to get wage increases that are almost double the total new public infrastructure bill.
Furthermore, it is worth noting that when comparing the last quarter of 2022 with the third quarter, government employee compensation went up by 9.4%, significantly higher than the private sector in bonus season. The QES indicates that government employees earn 25.5% of all worker income.
Treasury, the South African Reserve Bank and leading international banks all expect below-population growth in GDP in 2023, meaning less wealth per person, which places heavy constraints on where the 7.5% government wage increase can come from. If the paper value of all formal worker income increases by 4.7% again next year, that would mean only a 3.7% increase in the private sector. If inflation continues apace, that means a real loss of 3.2 percentage points for private workers. At that rate, real private income would halve in a generation (20 years).
Matters are even more dire for the unemployed.
To reverse the decline with cosmetic changes is impossible. South Africa’s labour market must be liberalised, its property rights system must be strengthened (starting with a mass title-deed roll-out), and the Zondo Report recommendation to prioritise value for money over race and “localisation” must be implemented across the almost R1 trillion worth of public procurement spending, starting at Eskom.
Issued by Gabriel Crouse, IRR Head of Campaigns, 31 March 2023
