Does Employing Workers or Accepting Work Pay? Analyzing Labor Costs in South Africa
For more than a decade, South Africa has experienced falling labor force participation rates while maintaining relatively high unemployment rates, particularly among its youth. This paper examines the role of labor costs from the perspectives of em...
| Main Authors: | , |
|---|---|
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/245291531921398385/Does-employing-workers-or-accepting-work-pay-Analyzing-labor-costs-in-South-Africa http://hdl.handle.net/10986/30194 |
| Summary: | For more than a decade, South Africa has
experienced falling labor force participation rates while
maintaining relatively high unemployment rates, particularly
among its youth. This paper examines the role of labor costs
from the perspectives of employers and workers by combining
information from national accounts and household surveys. To
better understand the employer’s perspective, we calculate
the labor costs and set them in relation to productivity,
thereby deriving unit labor costs. To analyze the worker’s
perspective, we disentangle the tax-wedge and further
work-related costs borne by workers. The results show that
labor costs in the South African economy increased
disproportionally relative to productivity. This is largely
due to labor cost growth in the manufacturing and industry
sector. An international comparison of unit labor costs
shows that other countries with similar unit labor cost
levels have not registered such a strong increase over the
same period. To identify causes for the increase in labor
costs, we decompose the determinants using household data
and follow the development of work-related costs over time.
We compare the results for South Africa to a set of
comparator countries and identify unionization, specific
sectors and skill mismatch as particularly influential for
South Africa. The results show that stagnating productivity
may be associated with a lack of highly qualified workers,
also in comparison with benchmark countries. This note was
prepared as a background note to the South Africa Systematic
Country Diagnostic. |
|---|