The productivity–wage relationship in South Africa: an empirical investigation

Abstract

This article investigates the relationship between labour productivity, average real wages and the unemployment rate in South Africa at the macroeconomic level, using time-series econometric techniques. There is strong evidence of a structural break in 1990, after which time all three variables rose rapidly. The break appears to have negatively affected the level of employment in the first instance, and subsequently fed through into per worker wages and productivity. A long-term equilibrium (cointegrating) relationship was found between real wages and productivity, but unemployment was apparently unconnected to the system, which lends support to the insider-outsider theory. A long-term wage-productivity elasticity of 0,58 indicates that productivity has grown more rapidly than wages, which is consistent with the finding that labour's share of gross output has been shrinking over the past decade. These trends may be explained plausibly by the adoption of job-shedding technology and capital intensification.

Real wages, inflation, and labor productivity: Evidences from Bulgaria and Romania

“…In a macroeconomic level, a rise of real wages will raise the unit of labor cost, thus causing substitution from labor to capital. The labor substitution from capital could increase the marginal labor productivity (see Wakeford, 2004). On the other hand, we can say that a positive relationship between real wages and labor productivity show that higher real wages increase the opportunity cost of job loss and strengthens the labor effort in order to avoid dismissal.…”

“…They ascertained that profit margins are influenced by real wage costs and price inflation positively and in a significant level. Wakeford (2004) examining the relationship among labor productivity, unemployment and wages for South Africa, found a long-term equilibrium between real wages and productivity.…”

Real wages, inflation and labour productivity in Australia

“…This positive relationship is also hypothesised because higher real wages put upward pressure on labour costs and cause firms to substitute capital for labour, thereby increasing the marginal productivity of labour (Wakeford, 2004). The relationship between real wage and productivity is also based on the concept that greater capital stocks increase the demand for labour, thereby increasing the real wage, and stimulating productivity.…”

“…Some posit that real wages and productivity are positively related (Wakeford, 2004). Two main arguments are relevant here.…”

An Analysis of the Relationship between Remuneration (Real Wage) and Labour Productivity in South Africa

“…Unemployment is a measure of the number of people in the workforce who are out of work or are without jobs. Numerous economic theories have been put forward justifying a relationship between the above mentioned variables, including bargaining, efficiency wage, search and contract theories (Wakeford, 2004).…”