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UASA: Statement by Andre Venter, UASA spokesperson, asserts that increased workforce will stimulate economic activity (17/09/2013)

17th September 2013

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Business owners and shareholders should be prepared to cut profits and employ more workers instead of reducing their workforce and recording higher profits. The result of the latter is an increase in the gap between the rich and the poor as more people join the ranks of the retrenched, with lower disposable income levels leading to businesses seeing fewer sales.

Today’s employees are also expected to deliver a much higher output than before as they work harder to get their own work and that of their former colleagues done.

What is needed is a new social conscience paradigm – a strategy that leads to employment opportunities, fair treatment of existing employees and a profit for employers.  

The South African economy’s inability to create sufficient jobs for purposes of unemployment reduction was again illustrated by the second quarter results of the Quarterly Employment Survey (QES).

According to QES released by Statistics South Africa, formal sector employment excluding the agricultural sector, declined by 28 000 workers compared to the first quarter of 2013. Compared to the second quarter of 2012 the number of employees working in the formal sector (excluding in the agricultural sector) increased by only 7000.

When analysed in conjunction with economic growth statistics, it becomes clear that more value is added in the production process per worker. In the first quarter the value added per formal sector job (excluding in the agricultural sector) was R3.368 million. This increased to R3.461 million in the second quarter of 2013. The value added per formal sector job was also almost 7% higher when compared to the second quarter of 2012.

The above numbers can also be interpreted in another way, namely the output created per person. In this context it is clear that the output per person is increasing, suggesting that less formal sector workers are needed to create the same output.

Whilst the above suggests higher productivity, it is also a worrying phenomenon, especially when viewed in the context of job losses in a country such as South Africa with almost 8 million people unemployed (according to the expanded definition of unemployment) in the second quarter of 2013.

For instance, in the beleaguered mining sector some 23 000 formal mining jobs had been lost over the year since the second quarter of 2012, whilst gross worker earnings increased by almost R1 billion. This means that the average gross worker earnings increased 8.9% over the year between the second quarter of 2012 and second quarter of 2013. Put differently, had no jobs been lost and the number of employed workers remained constant throughout, the average increase in gross earnings would only have been 4.1%. So 23 000 workers had to be sacrificed for an additional increase of 4.8 percentage points.

The same phenomenon – sacrificing workers for higher wages occurred in the manufacturing industry.

Notwithstanding the above, listed mining and manufacturing companies continue to post healthy profits an annual basis. This changes the above inferences as it means that workers are sacrificed in order to assure shareholders of higher profits.

In short, in order to make the rich richer, the number of poor people must increase. This is not sustainable and a different way of thinking is needed by especially corporate management and shareholders.   

Increased employment opportunities might mean lower profits in the short term, but increased economic activity by workers who have money to spend will lead to super profits in the long run.

 

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