Today’s post by Ayrton Griffin-Ellis plots cumulative labour productivity (real GDP over formal sector employment) compared to economy-wide average pay (inflation adjusted compensation over formal sector employment) since 2008. Although labour productivity rose more than pay since the global financial crisis, their cumulative changes eventually aligned. This demonstrates that raising labour productivity is crucial for raising wages over time. As we have showed in a series of posts, labour productivity in SA has been mostly driven by increases in the capital stock. This means South Africa’s falling investment rate and weak potential growth will have major implications for welfare over the long term.
