SA's sizeable and costly public sector
The government employs more than a fifth of formal sector workers in South Africa and pays its employees an average 34% more than the private sector does.
According to trade union Uasa's 2012 Employment Report, the average gross wages of government employees are higher than the average gross wages across all sectors in the Organisation for Economic Cooperation and Development (OECD), a group of mostly rich countries.
Net wages after taxes in the South African government are higher than net wages in Germany, Sweden and Finland, on a dollar purchasing power parity basis.
The report showed government salaries account for more than 12.8% of GDP and, when the salaries paid by state-owned enterprises are added, it increases to more than 14.3% of GDP.
Mike Schüssler, economist at Economists.co.za, who compiled the report for Uasa, a multi-sector union with 73,000 members, said the public sector has grown from 11% of total employment in 1970 to 22.8% today.
"This means SA has more civil servants than the total number of people employed in mining and manufacturing combined. We cannot have more people in the government than we have people producing things. This is apart from the fact that more people get an income from welfare than from employment," he said.
The state salary bill was about R382-billion last year, which could have paid for 19 Gauteng Freeway Improvement Projects.
Finance Minister Pravin Gordhan said in his February budget the public sector wage bill was the largest component of current expenditure. He allowed for only a 5% cost of living adjustment for public servants, excluding pay progression, in the 2012-13 budget.
The report states it is specifically the wages of unskilled and semi-skilled workers which are too high - in the government and private sectors.
In the last 40 years the real unit labour cost in SA has increased twice as fast as the OECD's average.
"The cost of producing things in the rest of the world is falling, whereas in SA the cost of producing things is rising and that makes us less and less competitive," Schüssler said.
"Overpaid, unskilled workers are keeping other people out of employment. Lower level civil servants in SA, like cleaners, earn more than teachers in India or Brazil," said Schüssler.
'SA's formal sector overpays low-skilled workers'
South Africa's formal sector often overpays those with relatively few skills, while those with skills are often underpaid in relative terms, the 2012 South African Employment Report shows.
This, the report said, was not conducive for development or further employment creation if nearly 60% of the unemployed were unskilled.
"This, more than anything else, helps to explain SA's lack of job creation over the last two or three decades," said Mike Schussler, economist with economists.co.za, who participated in the compilation of the report.
Unskilled wage rates had rocketed about twice as quickly as in the rich world, after inflation, while management and specialised skills were often underpaid, the report showed.
These factors, the report added, explained why people could not find work as the price of certain labour had become unaffordable.
"SA's unskilled earn too much in both relative and in absolute terms," said Schussler.
SA's salaries seemed to be on par with rich countries rather than with developing countries, he said.
The report suggested that SA should employ people in "training" jobs at lower salaries for a period of time to enable them to gear up their employability.
UASA believed that a starting wage subsidy might help lower the effective salaries of unskilled and semi-skilled people and could make a difference in the unemployment rate.
Published in Business LIVE