An analysis of a relationship between Remuneration and Labour Productivity in South Africa

Abstract

This study analyses the relationship between remuneration (real wage) and labour productivity in South Africa at the macroeconomic level, using time series and econometric techniques. The results depict that there is a significant evidence of a structural break in 1990. The break appears to have affected the employment level and subsequently fed through into employees' remuneration (real wage) and productivity. A long run cointegrating relationship was found between remuneration and labour productivity for the period 1990 to 2011. In the long run, 1% increase in labour productivity is linked with an approximately 1.98% rise in remuneration. The coefficient of the error correction term in the labour productivity is large, indicating a rapid adjustment of labour productivity to equilibrium. However, remuneration does not Granger cause labour productivity and vice versa.