Technology and minimum wages are likely to change the mix of capital and labour in industry
While technology is making capital cheaper, policies like the national minimum wage will make labour more expensive. What does this mean for the choices firms make in terms of labour and capital inputs? This research shows that higher prices for labour will result in lower demand for labour, making job creation more difficult. Low-skilled and high-skilled labour are substitutes – higher wages for low-skilled workers will encourage firms to employ more high-skilled workers and become more skill intensive.
Technology, labour power and labour’s declining income share in post-apartheid South Africa
The share of labour in aggregate income in South Africa has declined significantly since 1993, while that of capital has increased. Concurrently, real wages have increased slower than productivity. This article argues that financialisation and the more aggressive returns-oriented investment strategies applied by large, global investment institutions have translated into investors requiring higher rates of return on capital. This, in turn, has led to the increased adoption of capital-augmenting, labour-saving technology that has reduced labour’s share of total income – with important consequences for income distribution.
What is the role of manufacturing in boosting economic growth and employment in South Africa?
There is a widespread view that countries no longer need to industrialise in order to develop. However, in South Africa manufacturing remains the core driver of GDP growth and direct employment while other sectors – particularly many services sectors – are likely to increase employment on the basis of growing demand flowing from a growing GDP. A nuanced understanding of the direct and indirect linkages through which diversified manufacturing growth can boost economy-wide employment is essential.
Reducing unemployment: Waiting for high growth? Waiting for Godot?
In trying to reduce unemployment in South Africa, the pursuit of higher economic growth is the single most agreed-upon policy strategy. The consensus on this ‘obvious solution’ may blind us to the fact that economic growth, though important, may only be half of the solution. Attempts to fine-tune and turbo-boost the formal-economy ‘engine of growth’ to absorb more labour are fundamentally constrained. Economic policy makers must look at other options for generating employment and self-employment for unemployed people.
Industrial policy and unemployment: Can South Africa do better in labour-demanding manufacturing?
In spite of policy statements prioritising labour-absorbing growth, de facto policy support has favoured heavy industry and been damaging for employment. Industrial policy should be less concerned with ‘beneficiation’ and technological upgrading and more concerned with promoting economy-wide efficiency. In the context of massive unemployment, this means tilting the playing field towards labour-absorbing growth to mobilise the huge potential of an under-employed and poorly-skilled workforce.