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Job and wage insecurity persist - Solidarity

Johannesburg – Weak wage growth, retrenchments in certain sectors and persistent job and wage insecurity are still dragging down South Africa’s score on the Solidarity Labour Market index (LMI).

Given improvements in the business cycle in the fourth quarter, South Africa’s score improved from 42.2 for the third quarter of 2016 to 43.4, according to the LMI. The LMI measures job and wage security in the South African labour market. The break-even level is at 50.  

But despite the improvement in the business cycle index, a survey among Solidarity's members shows that it was not enough to improve employee confidence or labour affordability.

The business cycle index increased from 41.2 to 46.9. “This was driven by increased bank lending activity, stabilising consumer credit indicators, recovering global commodity prices … and a firmer rand,” said the report.

Contrarily, the employee confidence index declined from 43.1 in the third quarter to 42.44 in the fourth quarter. Of the members surveyed, 27% said they felt less secure in their jobs. “Since the survey’s inception in 2013, employee job security has been deteriorating,” the report said.

The labour affordability index declined to 41, after rising to 42.3 in the third quarter.

 “Since the improvement in the broader business cycle indicators have not yet translated into stronger business confidence in general, stronger business cycle indicators will have to be maintained to make a substantial contribution to job and wage security,” said Gerhard van Onselen, economics researcher at the Solidarity Research Institute.

Improvement in South African commodity export prices have contributed to the improvement in business cycle indicators. However, companies still appear “sceptical and cautious” despite the commodity price recovery, said the report.

Over the six months ending December 31, 2016, retail sales had been week, the report highlighted. “Lower inflation trends should soften some of the adverse effects of the difficult labour market conditions and business climate,” the report stated.

Solidarity further added that consumer conditions are not expected to improve in the short-term. “Despite an uptick in Reserve Bank leading indicators and the improvements in the commodity terms of trade, overall business earnings analysis implies still tough earnings conditions.”

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