Reserve Bank gives wrong data on productivity
AIDC researchers have uncovered incorrect Reserve Bank productivity data, claiming a 20% drop in productivity. In reality, productivity has climbed in the contradiction to Reserve Bank reports. Workers are in fact workers are adding greater value over time to the national income. The misleading data is being used by the business media against unions engaged in wage bargaining.
The fallacies started in a Discovery Invest article and continued on to a Money Web blog before being picked up by Wednesday's Business Day editorial (20/7).
The editors of Business Day do note that OECD says that SA has a "relatively strong development of labour productivity". They also note the strange fact that the entire decline in labour productivity seems to have taken place between 2000 and 2003, which might "suggest that there is some statistical issue".
Indeed, any economist with some semblance of reality would regard a productivity drop of 20% within three years as completely impossible, precluding some catastrophic external cause. But wage bargaining is going on and this "scientific" ammunition against workers is too good to be wasted by the entrenched business community.
The productivity index series presented in the statistical tables on page 133 in the SARB June 2011 Quarterly Bulletin is based on misleading data. AIDC has confirmed this with the responsible researchers at SARB. The major source of these distortions can be seen in the increase in financial sector employees from 195 000 in year 2000 to around 1 779 019 by 2010.
A part of this is due to changes in statistical practices that started including real estate and business services under ‘Financial Institutions' from the 3rd quarter of 2002. But the main reason for the huge discrepancy is the SARB's shift from using their own business surveys to ones conducted amongst households by Stats SA. This is shown in another massive 40% hike in the number of finance employees in the 4th quarter of 2004, from around 1.1 million to 1.55 million, and again in 2006.
If used, the misleading figures show a drop of productivity within the finance sector of about %75 between 2000 and 2003. The weight of finance employment in the statistics, which is completely distorted, creates an overall drop in national productivity of 20% over 3 years, or rather in 2002 alone! The SARB has confirmed that the numbers are kept for historical reasons and not revised publically. Business Day's use of these figures for narrow political ends is entirely spurious.
AIDC has pointed out that the wage share of GDP in the economy has dropped every year since 1998, but GDP has grown every year, except for 2008. On the average since 2000, productivity increases in the economy have been well over 3%. This is confirmed by SARB sources. More and more of the new value created in the economy is going to profits and less to wages. Inequality is the inevitable outcome of this state of affairs.
The unions are well within their rights to demand wage increases way over inflation. Increasing the share of the national income that goes to wages is not only good for employment in the long run, it is necessary. A vibrant domestic market where households can afford to by food, essentials and semi-durable goods is a precondition for prospering a domestic industry.
Statement issued by Dr Dick Forslund, Alternative Information Development Centre (AIDC) economist, July 20 2011
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