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...

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Main Authors:	Langbein, Joerg, Weber, Michael
Format:	Working Paper
Language:	English
Published:	World Bank, Washington, DC 2018
Subjects:	LABOR FORCE PARTICIPATION LABOR MARKET WAGES UNEMPLOYMENT TAXATION LABOR COSTS UNIONIZATION TRADE UNION PRODUCTIVITY SKILLED LABOR
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

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recordtype	oai_dc
spelling	okr-10986-301942021-05-25T09:16:37Z Does Employing Workers or Accepting Work Pay? Analyzing Labor Costs in South Africa Langbein, Joerg Weber, Michael LABOR FORCE PARTICIPATION LABOR MARKET WAGES UNEMPLOYMENT TAXATION LABOR COSTS UNIONIZATION TRADE UNION PRODUCTIVITY SKILLED LABOR 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. 2018-08-10T20:52:42Z 2018-08-10T20:52:42Z 2018-04-30 Working Paper 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 English CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Working Paper Africa South Africa
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	LABOR FORCE PARTICIPATION LABOR MARKET WAGES UNEMPLOYMENT TAXATION LABOR COSTS UNIONIZATION TRADE UNION PRODUCTIVITY SKILLED LABOR
spellingShingle	LABOR FORCE PARTICIPATION LABOR MARKET WAGES UNEMPLOYMENT TAXATION LABOR COSTS UNIONIZATION TRADE UNION PRODUCTIVITY SKILLED LABOR Langbein, Joerg Weber, Michael Does Employing Workers or Accepting Work Pay? Analyzing Labor Costs in South Africa
geographic_facet	Africa South Africa
description	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.
format	Working Paper
author	Langbein, Joerg Weber, Michael
author_facet	Langbein, Joerg Weber, Michael
author_sort	Langbein, Joerg
title	Does Employing Workers or Accepting Work Pay? Analyzing Labor Costs in South Africa
title_short	Does Employing Workers or Accepting Work Pay? Analyzing Labor Costs in South Africa
title_full	Does Employing Workers or Accepting Work Pay? Analyzing Labor Costs in South Africa
title_fullStr	Does Employing Workers or Accepting Work Pay? Analyzing Labor Costs in South Africa
title_full_unstemmed	Does Employing Workers or Accepting Work Pay? Analyzing Labor Costs in South Africa
title_sort	does employing workers or accepting work pay? analyzing labor costs in south africa
publisher	World Bank, Washington, DC
publishDate	2018
url	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
_version_	1764471385850118144

Does Employing Workers or Accepting Work Pay? Analyzing Labor Costs in South Africa

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