Inflation-adjusted unit labour costs (ULCs) reflect the balance between wage growth and productivity. When wages outpace productivity, real ULCs rise, adding cost-push pressure to inflation and eroding competitiveness and firm margins.
Today’s post shows that real ULCs turned negative over the last couple of years according to estimates from the SARB and Productivity SA. SARB projects real ULC growth at –0.2% in 2025, 0.1% in 2026, and –0.1% in 2027—substantially below long-run averages. This means the SARB is assuming contained labour market pressures, underpinned by moderate wage settlements and gradual productivity recovery. If this does not bear out, it might require a more restrictive policy stance than the SARB currently assumes.
As we have discussed in earlier posts, there is a lot of uncertainty around measures of wages and productivity, reflecting differences in measurement, industry coverage, amongst other things.
