The average salary in South Africa is rising – here’s why it might not be a good thing

While the broader economic recovery from the Covid-19 pandemic has been robust, some sectors remain limited and labor market improvements are very partial, according to the South African Reserve Bank.

Of the more than two million jobs lost during the depth of the Covid-19 crisis in the second quarter of 2020, only around 793,000 had been recovered in the second quarter of 2021, the central bank said in its biannual monetary policy review .

“Recovering lost jobs was always going to take time, and although there were jobs added in some areas, overall the shocks to the economy suggest that the distribution of jobs in the economy may be affected. Permanently.”

More striking in the rebound in the economy is the strong recovery in profits to date, the Reserve Bank said.

“While employment tended to move sideways, average nominal wages in the non-farm sector were 5.4 percentage points above their pre-pandemic level in the first quarter of 2021. Real wages rose are also recovering well, being only 0.2 percentage point below their 2019 level.

Why average wages are increasing

Higher wage growth usually indicates stronger conditions in the labor market, as it means increasing demand for labor. However, the Reserve Bank noted that the sharp recovery in average wages has occurred even though the unemployment rate has reached record levels.

South Africa’s unemployment rate was 34.4% in the second quarter of 2021, up from 32.6% in the first quarter of 2021. “The compounding effect and overtime may explain this apparent puzzle,” the Bank said. reserve.

“When low-wage workers disproportionately lose their jobs, average wages rise, with the wage bill more fully reflecting the incomes of the highest-paid workers who remain employed and create the illusion of strong wage growth. “

Employment of low-skilled workers fell 13.1 percent year-on-year in the first quarter of 2021 and remained 12.4 percentage points below pre-pandemic level. Job losses among highly skilled workers (0.5%) were less severe, and employment also recovered relatively faster for this group.

The rise in average wages may also be explained by companies’ reliance on overtime to meet growing demand, the Reserve Bank said.

“Overtime payment in the formal non-farm sector rose 8.6% in the first quarter of 2021. The increased use of overtime – a short-term response to growing demand – allows businesses to produce more and support higher incomes for workers, without committing to the expansion of permanent jobs.

Hiring new employees comes at a cost, and the higher those costs relative to the overtime rate of pay, the more willing employers are to delay hiring, which contributes to low labor utilization. work, said the SARB.

“Addressing low labor utilization in South Africa requires policy efforts to improve the school-to-work transition, strengthen product market reforms for increased competition, create public (and private) institutions to improve job matching and increase labor market flexibility. “

The Monetary Institute predicts that total non-farm employment – public and private – will grow 1.9 percent year-on-year in the third quarter of 2021, after falling 5.4 percent in the first.

In the medium term, employment is expected to decline by 1.4% in 2021, before picking up again by 0.8% and 1.4% respectively in 2022 and 2023, he said.

SA salary data

Statistics South Africa released wage data at the end of September, showing that basic wages / salaries paid to employees in South Africa increased by 7.3 billion rand or (1.1%), rising from R646.7 billion in March 2021 to R653.9 billion. in June 2021. On a year-over-year basis, salary / base wages increased by R55.2 billion or (9.2%) between June 2020 and June 2021.

On a year-over-year basis, premiums and overtime increased by R15.1 billion or (32.9%) between June 2020 and June 2021.

Average monthly wages increased 1.7% quarter-on-quarter, compared to 23 127 R in February 2021 at R23 526 in May 2021. Over one year, the average monthly salary increased by 9.7%.

Total employment, meanwhile, fell 86,000 or (-0.9%) quarter-on-quarter, from 9.652 million in March 2021, to 9.566 million in June 2021.

To read: The fuel crisis looms in South Africa, warns an economist

About Andrew Estofan

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