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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:A decomposition of growth of the real wage rate for South Africa: 1970-2000
Authors:Mazumdar, DipakISNI
Van Seventer, Dirk ErnstISNI
Periodical:South African Journal of Economics
Geographic term:South Africa
External link:https://onlinelibrary.wiley.com/doi/10.1111/j.1813-6982.2002.tb00057.x/pdf
Abstract:Recent experience with economic liberalization and globalization in South Africa has contributed to the phenomenon of 'jobless growth'. While several different explanations have been advanced, a central issue is the potential trade-off between growth in employment and growth in wages. In order to asses this trade-off, this paper uses a simple decomposition model in which real wage growth is determined by growth in real value added, employment growth, a trend in the wage share of value added and a relative price effect. The focus is on the period 1970-2000. The results show that, in the 1970s, the process of wage determination differed between the tradable and nontradable subsectors of South Africa's formal economy. In the nontradable sector, real wages remained stagnant and all of the increase in output and the wage bill was taken in the form of employment increases. By contrast, the manufacturing component of the tradable sector divided the increase in output almost equally between real wage growth and employment growth. The trade-off between wage growth and employment growth began to shift towards wage growth in all sectors in the 1980s and became strongly biased towards wage growth as the 1990s progressed. The difference between the tradable and nontradable sectors also disappeared. The pervasiveness of the bias towards wage increases suggests that the underlying forces causing this type of development in the labour market are economy-wide. Bibliogr. [ASC Leiden abstract]