Vavi has disappointed me with his call for a R4,500 minimum wage.
There is no question that higher pay is better, all else being equal. I expect the overwhelming majority of eyes that have ever glanced at this blog belong to beings that earn more than R4,500 a month.
There is no question that lower income inequality would be more desirable. There is no question that we would be a happier society with fewer people living off very little income.
There is also no question that a higher minimum wage would, all else being equal, lead to an increase in unemployment and therefore quite likely an increase in income inequality and a decrease in the productive capacity of our country, a likely increased tax burden on tax payers and greater social ills.
Let’s look at this a little more clearly. This took me all of a couple of minutes to draw, so I can’t believe Vavi hasn’t seen the same drawing somewhere. (If he disagrees with it, fine, but then he should address the problem head-on and not just ignore the problem.)
Increasing the minimum wage had a doubly negative impact on employment
I blog from time to time about education in South African and its frightening link to unemployment and all the societal ills that go along with that. I also point out that as a nation we spend a fair amount of money on education with very poor results.
This story about absenteeism amongst South African teachers goes some way to explaining the problem.
Teachers in our public school system took an average of19 days of sick leave per year. I also blog about the dangers of averages. For every teacher that doesn’t take sick leave (and I’m sure there are many) there are teachers taking more than 19 days of sick leave per year.
What’s interesting here is that not only is this an astonishingly high number, it’s also clearer more than the 10 days per year on average on a rolling 3 year basis that is allowed under the Basic Conditions of Employment Act. Let’s also not forget that while teachers should probably be paid more in an ideal world, they do also get vastly more annual leave than most already.
I’d also like a four day week every second week thank you.
How exactly are these teachers allowed to take so much sick leave? Well unfortunately the answer is the same as why our education system is in such a sorry state. Poorly trained, poorly motivated teachers without a culture of pride in their work, overly strong unions and no political will to do anything about it.
The last month hasn’t been pretty for economic performance, credit or retail sales. Everyone from Richemont to Mr Price has taken a beating. Woolies is down about 13% in the last month.
And now both Capitec and African Bank are reporting worse default experience (respectively through temporary strike-blips or through a cyclical downwards trend) and are pulling back on credit extension.
I think I buy African Bank’s more pessimistic view than Capitec’s “blip from the strike and growth will slow”. The reality is economic growth has been very low for several years and much of the consumption over this period has been through a reinflating credit “bud”. It’s not at bubble proportions, but when that bud starts slowing in growth the true impact of several years of poor economic and basically non-existent employment growth will be felt.
I still need to update 2013 predictions, but so far I’m not feeling particularly optimistic about being a credit retailer and certainly not enough to justify the still-high PE multiples.
This is getting ridiculous. Shockingly bad policy is now being shown empirically to be shockingly bad. Only thing is, the policy proponents aren’t admitting they were wrong.
I get randomness. I understand that we don’t know exactly where the UK would be without austerity policies. We don’t have a control group, there’s no clear comparison. But come on, the result is as predicted by those who said austerity was a bad idea and totally different from what proponents were claiming. Huge double dip recession at an accelerating rate in the UK.
So why isn’t their an admission and about-turn? Because no clear measure of how to measure the success of the policy were ever put into the public space. So now proponents can, and probably will, say how much worse it would have been without austerity. Nonsense.
All major policy proposals should include an analysis of what the impact is expected to be with and without the policy, reviewed by credible, independent observers. (Like the CBO in the US.) Then, when the policies turn out to be rubbish, let’s haul out the predictions and see what was promised.
The World Bank has won an Obviousness Award and was second princess for Uselessness. “SA must fight inequality“, but not a word on the political and structural blockages to that.
Not at all helpful.
Felicity Duncan from moneyweb wrote an article on South Africa education for Moneyweb and Discovery Invest. It talks to a topic I’ve also blogged about, but with some truly horrifying league tables.
This is the part that really disappointed me:
according to the World Economic Forum’s latest Global Competitiveness Report, which ranks South Africa 133rd out of 142 countries for the overall quality of its secondary and tertiary education systems, and 138th out of 142 countries
for the quality of its maths and science education
Felicity goes on to mention that even Chad outperforms us in education.
We can talk for as long as we want as hard as we want, but as long as we don’t recognise that our education system is completely broken and must be fixed as a priority over all other priorities, massive, structural unemployment will be part of South Africa for decades. Everything else we achieve will be overshadowed by poverty, crime and unhappiness.
This is very depressing.
Mike Schussler has crunched some numbers and suggests, very strongly, that SA unskilled labour is vastly overpaid compared to international peers. My recent posts about the cause of structural unemployment in SA have mentioned the supply and demand imbalance of unskilled labour and the downwards rigidity of wages. If Schussler is right and the current wage levels are far too high to be internationally competitive then we have an even larger, even longer term problem to solve.
What Schussler doesn’t look at, which would be telling, is whether there are differences in the costs incurred by workers in SA and, to use an example that he does, India. Comparing price levels is one thing, but if a typical Indian worker lives 500m from his or her place of work and a typical South African worker lives 15km from his or her place of work, then that is an infrastructure problem that must also be solved before we can be internationally competitive.
Should South Africa import Chinese television sets? Your answer to this question depends probably on your education.
If you were university educated in South Africa, you are likely to be in the market at various times in your life for a large LED backlit LCD panel with a high refresh rate and more HDMI inputs than you will ever need. You will also quite likely have a market-oriented, Anglo-Saxon view of government’s role in industrial policy and international trade. Thus you would probably say “yes, import cheap TVs from China so I can buy a cheap TV and not pay for inefficient local firms to manufacturer expensive, inferior TVs.”
If you are a TV snob, you will still want free imports of Chinese TVs to keep the prices down of competing, but fancier Sony and LG models from Japan and Korea.
If you are a little cynical, you might say South Africa could never have the manufacturing capability and scale to produce all the components and assemble them into a modern LCD TV. That’s not actually the debate I ant to pursue now, so in that case let’s say the alternative would be to locally assemble sets made with significant local components, even if the LCD panel itself were imported. Of course, the reason South Africa doesn’t have the scale to produce the panels themselves at the moment is a function of industrial policy decisions decades go. There is no absolute reason we couldn’t have that capability. But, that debate is related but separate post. Continue reading