EDITORIAL: Public-sector wages poser
Without getting public-sector wage growth back into kilter, the state is unable to play a positive role to drive economic growth
The public-sector wage negotiations are at a critical point. After a long pause, during which the Department of Public Service and Administration changed ministers, there are signs that wage negotiations are on the move again. As the date for the implementation of the agreement is April 1, talks are already far behind.
Discussions between unions and the department resumed on Wednesday, although no hard negotiating was done.
Coincidentally, on the same day, the Institute of Race Relations produced a report, Slaying the Dragon, on the public-sector wage bill. President Cyril Ramaphosa is cast as the potential dragon slayer, with the report asking whether he has the courage to go where others have failed.
South African public sector pay as a proportion of GDP is higher than the average in the Organisation for Economic Cooperation and Development, a club of rich nations
The problem with public-sector wages has been explained often by the Treasury and credit ratings agencies. The growth of wages has tipped public finances into imbalance, with an increasingly bigger share spent on consumption, while investment spending suffers. Without getting this back into kilter, the state is unable to play a positive role to drive economic growth.
The report is filled with statistics: the government spends 32.5% of all expenditure on salaries; the number of public servants in absolute terms grew steadily between 2007 and 2013; and apart from growing in absolute numbers, wages and salaries outstripped consumer price index (CPI) and GDP growth from 2009 to 2016.
South African public sector pay as a proportion of GDP is higher than the average in the Organisation for Economic Cooperation and Development, a club of rich nations, the report says.
The reason why things have got so out of whack is political. With public sector unions, the biggest and most powerful is Cosatu, and due to the ANC’s dependence on their support internally and electorally, public sector unions have become untouchable. Therefore, as the rest of the workforce buckled under the pressure of the global financial crisis and jobs were shed in the past decade, the public sector was protected with guaranteed CPI-plus agreements every year except one since 2008.
But are these unions still untouchable and should they be? Is it fair and justifiable that public sector employees continue to be advantaged at the expense of the economy?
Recent experience shows this mindset is still rooted within the ANC. While the Treasury has forced the growth of public-sector employment to tail off and even go slightly into negative terrain over the past few years, it has done so by stealth, refusing to raise compensation budgets or fill non-essential posts, resulting in departments having to pause new appointments.
A further sign the ANC is not ready to shift its thinking was the way in which the government dealt with the R50bn hole in the budget in February. Instead of cutting back on jobs or wages — a 7.3% wage increase is pencilled in — it cut spending on infrastructure and raised taxes.
A 7.3% hike would equate to an approximate CPI wage increase as benefits have tended to add on 2% more to the wage bill, trends show. In talks so far, the government has offered a CPI increase and unions are still demanding about 10%. Several new benefits for employees have already been agreed on.
It is time, though, to turn the trend decisively towards a rebalancing. This begins partly through a tougher Treasury, but mostly through a changing political will.
Key to this is convincing the government and the ANC that the trends of the Zuma years can be reversed.
The most interesting thing about the Institute of Race Relations report is what it illustrates about the public sector during Thabo Mbeki’s presidency. From 1999 to 2009, compensation of public servants as a percentage of GDP shrank steadily each year until 2008. The Mbeki administration showed that what needs to be achieved is indeed possible.