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South Africa – Job creation slows, labour market static

12 March 2013

The job market in South Africa remained static during February, according to the latest employment index by local recruitment firm Adcorp. While this found an increase in the informal sector where 11,207 jobs were added in the month, job creation in the formal sector slowed down.

Losses were located largely in the mining and construction sectors while improvements were seen in transport and manufacturing.

The index also revealed that high-skilled jobs remained the main source of employment creation. 12,000 new jobs were seen in the management and professional categories combined. The government created 8,000 new posts.

Labour economist at Adcorp, Loane Sharp, said the “wage share” – the proportion of national income that is attributable to workers – fell to the lowest level in 50 years.

“Wages are the remuneration received by labour; profits and other owner income is the remuneration received by capital. The implication of the dropped wage share was that South Africa’s profit share rose to a 50-year high.”

Reasons for this trend, Mr Sharp said, could be attributed to South African companies, as reflected by profits, being in exceptionally good shape. “A recent study showed that the real risk-adjusted return on capital of South African listed businesses is currently 10% – the highest in the world.”

He said in terms of corporate transparency, board effectiveness and financial management the country ranked 1st in the world with the private sector, measured in terms of criteria like business sophistication, ranking 34th internationally.

“Of course, another reason for wages’ declining share of national income is declining labour productivity. Since records were first started in 1967, South Africa’s labour productivity had fallen to a 46-year low with most of the decline occurring since 1995.”

Mr Sharp said the Labour Relations Act of 1995 was a radical change in labour laws and, from the business perspective, presented enormous challenges in terms of dismissal protections and wage escalations. “It doesn’t seem possible that the wage share could fall substantially further. The decline from 60% of national income in the early 1980s to 50% in the early 2010s is already a significant drop,” he said.

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