Contrary to a common perception that the labour market was inflexible, the IMF said the way in which jobs responded to the upswing of 2000 to 2007 and the downswing of 2007 to 2009 demonstrated that this was not the case. It said: "The response of employment to growth was the highest among the G20."
However, it described wages as "much stickier". The report said: "As economic growth slowed and eventually turned negative during the period 2007 to 2009, wage growth remained strong. The average wage settlement between unions and businesses last year reached 9.3 percent, led by the public sector wage increase of 11.2 percent, significantly outstripping inflation and productivity gains."
Due to the recession, firms were unable to pass on the higher labour costs and were forced to shed jobs. The report concluded that the wage bargaining framework was not sufficiently flexible.
Data released yesterday by Statistics SA show the trend was still in place. Between June last year and June this year earnings in the formal sector rose more than 14 percent while 114 000 jobs were lost - a decline in employment of 1.4 percent.
Kevin Lings, the economist at Stanlib, said: "The reason annual incomes rose despite job losses, was that average monthly earnings of formal sector employees rose by a dramatic 19.2 percent over the year to the end of May."
full story from Business Report here
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