The Solidarity Research Institute (SRI) released its fourth quarterly labour market report for 2013 today. The report inter alia refers to why CPI-linked salary increases actually impoverishes employees over time and how thousands of job opportunities could be financed if unemployment insurance premiums should be reduced.
On the issue regarding the impoverishing effect of CPI-linked increases, Piet le Roux, senior economic researcher at the SRI, said: ‘These days, one often hears that trade unions should limit their salary demands to adjustments that are in line with consumer price index inflation (CPI inflation). However, Solidarity has argued for some time that CPI inflation underestimates salaried workers’ loss of purchasing power. In this issue of the labour market report we show how employees are actually losing out when salaries are adjusted for CPI changes, instead of for broader measures of price inflation. Therefore, to even merely earn the same real income year after year, employees have no choice but to negotiate increases that are a few percentage points above CPI inflation.’
Le Roux said the SRI also found that thousands of employment opportunities are lost annually due to too high unemployment insurance premiums. ‘Due to the sustained high premiums collected from South African employees over the past decade, the Unemployment Insurance Fund has established an investment portfolio of more than R80 billion. The premiums are currently so high that the fund would still show an annual surplus in income, even if the requisite unemployment insurance premiums are halved. In 2013 the fund collected R7,6 billion rand more than it needed to pay unemployment benefits. In 2013, this unnecessary recovery of premiums withdrew an amount from the economy equivalent to the amount that could be used to employ 278 000 farm workers at minimum wages, or 158 000 entry level employees at an illustrative R4 000 per month.’ Le Roux is of the opinion that a simple step that would improve employment would be to scale back drastically on the excessive recovery of unemployment insurance premiums.
The list of articles in the labour market report includes the following:
How lowering unemployment insurance premiums can create employment
Why Correctional Services embodies SA’s affirmative action problem
Minerals Act in conflict with the rule of law
Economic overview: growth, rand and consumer credit
Why CPI inflation underestimates workers’ loss of purchasing power