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

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  • Jeremy Wakeford

    (University of Cape Town)

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.

Suggested Citation

  • Jeremy Wakeford, 2004. "Productivity, Wages and Employment in South Africa’s Manufacturing Sector, 1970-2002," Working Papers 04085, University of Cape Town, Development Policy Research Unit.
    • Handle: RePEc:ctw:wpaper:04085
    as

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    File URL: http://hdl.handle.net/11427/7379
    File Function: First version, 2004
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    References listed on IDEAS

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    5. Jeremy Wakeford, 2004. "The productivity-wage relationship in South Africa: an empirical investigation," Development Southern Africa, Taylor & Francis Journals, vol. 21(1), pages 109-132.
    6. Alexander, Carol O, 1993. "The Changing Relationship between Productivity, Wages and Unemployment in the UK," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(1), pages 87-102, February.
    7. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
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    Cited by:

    1. Paul-Francois Muzindutsi, 2014. "Manufacturing Production and Non-Agricultural Employment rate in South Africa: Time Series Analysis," Journal of Economics and Behavioral Studies, AMH International, vol. 6(10), pages 779-786.

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    More about this item

    Keywords

    South Africa: labour productivity; real wages and employment; VAR and VECM econometric techniques;
    All these keywords.

    JEL classification:

    • A1 - General Economics and Teaching - - General Economics

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