Productivity, Wages and Employment in South Africa’s Manufacturing Sector, 1970-2002

Jeremy Wakeford ()
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Jeremy Wakeford: University of Cape Town

Working Papers from University of Cape Town, Development Policy Research Unit

Abstract: This paper investigates the relationship between labour productivity, average real wages and employment in South Africa’s manufacturing sector, using cointegrating VAR and VECM econometric techniques. A long-run equilibrium relationship was found between real wages and productivity, with an elasticity of 0,38 indicating that productivity has grown more rapidly than wages. However, the econometric tests proved to be highly sensitive to specification and sample period. Nevertheless, the main result is consistent with the finding that labour’s share of gross output has been shrinking over the past three decades, which has negative implications for income distribution. These trends may plausibly be explained by capital intensification and possibly the adoption of labour-saving technology. The implication is that growth in the manufacturing sector cannot realistically be relied upon to create significantly more jobs for South Africa’s millions of unemployed. Policy-makers are urged to consider alternative strategies which promote local economy and protect key labour-intensive sectors.

Keywords: South Africa: labour productivity; real wages and employment; VAR and VECM econometric techniques (search for similar items in EconPapers)
JEL-codes: A1 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2004-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Working Paper Series by the Development Policy Research Unit, March 2004, pages 1-35

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http://hdl.handle.net/11427/7379 First version, 2004 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ctw:wpaper:04085

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