SA wage growth estimated at 7.7% in 2015 compared with an average inflation rate of 4.6%. The growth in real household income during 2015 supported retail sales, but this is likely to reverse in 2016

According to the latest Andrew Levy wage settlement survey the average wage increase in 2015 was 7.7% compared with an average rise of 8.1% in 2014. This compares with inflation of 4.6% in 2015 and 6.1% in 2014. Clearly, the consumer enjoyed a boost in real income growth during 2015, which helped to partly offset a rise in formal sector job losses and tepid growth in consumer credit. Consequently, retail sales proved to be relatively resilient in 2015, with real growth of around 3.0%, up from only 2.1% in 2014.

For 2016, most wage settlements are predicted to be in the range of 7.4% to 7.9%. This is likely to be only fractionally above the average inflation rate for 2016 of 6.4%, which will further dampen retail activity, especially if there are additional job losses, only modest growth in consumer credit and a further increase in interest rates. Consequently, retail sales are forecast to growth at an average of only 0.8% in 2016.

The average minimum wage across all sectors in 2015 was R6 352, up a surprisingly modest 5.2% from R6 040 in 2014. The minimum monthly wage ranged from R2 690 in the Food/Agriculture sector to R14 220 in the mining sector. Equally, wage settlements ranged from 5% in the paper/printing sector to 10% in both the mining and manufacturing sectors. This compares with initial management offers that ranged from 2% to 8% and averaged 5.2%. Initial union demands ranged from 6.6 % to 20% and averaged 14.8%.

In terms of wage disputes, the time taken to settle from the date the demands were first tabled ranged from 3 to 180 days and averaged 68 days. 67% of companies reported that wage negotiations had taken place in positive bargaining environment compared with 53% in 2014. Disputes were declared in 39% of wage negotiations, compared with 36% in 2014.

Encouragingly, industrial action (strikes etc) took place in only 3.5% of wage negotiations, compared with 16.6% in 2014. The number of working days lost as a result of strike action fell to 640 000 in 2015 compared with a staggering 11.8 million in 2014. Unsurprisingly, the major strike trigger was wages, accounting for 81% of working days lost and 55% of the number of strikes.

Overall, despite the sharp reduction in the number of working days lost to strike action in 2015, South Africa’s labour market remains extremely volatile and highly disruptive within many of the key productive sectors of the economy. This tends to undermine business confidence and retard expansionary fixed investment. In contrast, union activism in South Africa has certainly helped to improve real incomes within a number of key sectors, systematically narrowing the massive wage divide that existed during the apartheid years. Unfortunately, there is evidence to suggest that the relatively large number of strikes in South Africa has generally undermined the growth in productivity as well as the overall expansion of the labour market.

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