PUBLIC-SECTOR WAGE BILL
ANTHONY BUTLER: Fallout from austerity is a valuable lesson
Since the global economic crisis numerous countries experimented with ‘austerity budgets’ with mixed results, at best. Here’s what South Africa can learn
As the government and trade union negotiators lock horns in the Public Service Co-ordinating Bargaining Council, there has been a growing clamour in the business community for the public sector wage bill to be slashed. After all, the ANC describes SA as a "developmental state" in which investment should take priority over consumption. Diverting a third of government spending into wages suggests precisely the opposite tendency. The government has been forced to cut key grants for municipal infrastructure, water services and urban settlements to accommodate higher pay for more numerous public servants. A growing public sector payroll, meanwhile, forces the finance minister to borrow more, thus crowding out private investment. Unilaterally imposed public sector pay cuts or freezes offer a tempting route to fiscal consolidation. An across-the board 10% wage cut could, in theory, reduce public spending by a whacking 3%.But governments elsewhere have accumulated a wealth of experience abo...