SA's unskilled workers 'paid too much'

(Image: Marcello Casal Jr/ABr, via Wikimedia Commons)

The ugly truth in South Africa is that unskilled and semiskilled workers are being overpaid, which contributes to keeping other people out of the job market, economist Mike Schussler said on Friday.

Speaking at the release of his annual South African Employment Report, which is sponsored by the trade union Uasa, Schussler said that if thousands of people who lacked skills received smaller pay rises at the entry level, South Africa could slash its "embarrassing" unemployment rate.

The official unemployment measured in the fourth quarter of last year was 23,9% - the highest of the 60-plus countries tracked by the Bloomberg news service. Tomorrow, Statistics SA is due to release 2012's first-quarter employment figures. South Africa was the only country with an unemployment rate of 20%-plus for the past 15 years, Schussler said.

The government's New Growth Path was supposed to cut the unemployment rate to 15% from 2010 to 2020. The plan argued that South Africa needed to upskill its citizens and Schussler said the government needed to make it cheaper for the private sector to do this. Otherwise, South Africa would continue to compete poorly with other developing countries.

Real unit labour cost outstrips the norm

In the past 40 years, the real unit labour cost in South Africa has increased twice as quickly as the average cost of labour in the 30 -odd mostly wealthy nations of the Organisation for Economic Co-operation and Development.

Schussler said the promised youth wage subsidy would quickly help South Africa to benefit from new, affordable employment. The subsidy is a R5bn tax credit over three years. Through the subsidy, if a company employs a worker aged 18-29, it would receive 50% of the worker's salary back from the taxman, provided the worker earned less than the personal income tax threshold, raised from R57 000 a year to R59 750.

It was meant to be introduced on 1 April, but Finance Minister Pravin Gordhan announced in his budget speech it would remain before the National Economic Development and Labour Council.

The Congress of South African Trade Unions (Cosatu) has vehemently attacked the measure, arguing employers would retrench older workers with the sole objective of accessing the subsidy.

Cosatu general secretary Zwelinzima Vavi on Saturday said he did not want more people, including youths, to be employed as temporary workers either. He was speaking at an election rally in Vanderbijlpark, Gauteng, for the National Union of Metalworkers of South Africa. "Temporary workers sometimes work longer hours but only for a quarter of what others are earning. Temporary work must be outlawed," he said.

Labour-broking in the spotlight

Cosatu has campaigned over the past two years against temporary work, and more specifically labour broking, claiming companies that place workers abuse them and offer them no benefits. However, pending amendments to South Africa's labour laws do not ban the practice. Cosatu claims that "decent work" is better than employment that exploits people and that temporary work is exploitative.

Schussler's research showed net wages after taxes in the South African government were higher than net wages in Germany, Austria and Sweden, on a dollar purchasing-power-parity basis.

"The cost of producing things in the rest of the world is falling, whereas in South Africa the cost of producing things is rising, and that makes us less and less competitive," Schussler said.

"Overpaid, unskilled workers are keeping other people out of employment. Lower-level civil servants in South Africa, like cleaners, earn more than teachers in India or Brazil," he said.

Source: Business Day via I-Net Bridge