‘Invest in workers’

Johannesburg - Investment in workers and better wages play a crucial role in improving productivity levels to help boost economic activity, says Chilean Professor Jose Gabriel Palma.

Palma, currently Senior Lecturer in the Faculty of Economics at Cambridge, said on Friday although South Africa’s investment per worker had doubled since 1994, it lagged other emerging countries.

In China, for example, the investment per worker had increased 26 times since the 1980s, he said.

He was speaking at the National Economic, Development and Labour Council’s (Nedlac) annual summit which was focused on finding solutions to South Africa’s poor economic growth and creating decent jobs.

The conference was attended by representatives from labour, the government, business and civil society.

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In his address, Deputy President Cyril Ramaphosa said stabilising the economy and increasing production levels was required excessive wage demands to be dealt with, as this was employment.

Although Palma agreed with Ramaphosa that excessive wages could result in high inflation, he also warned that it would be dangerous to accept conditions where wages were not rising fast enough. This would impact negatively on production levels.

“Yes be careful, but also be very careful of wages not growing high enough. When we look at productivity in Latin America then we see that where wages have fallen so has productivity,” said Palma.

One solution was that South Africa should look at creating more jobs in the service industry.

Even though employment and economic growth were separate issues, Palma said if the country waited until it had achieved desirable growth numbers before it tackled employment, then it would have to deal with an increasing unemployment rate. The rate is currently officially sits as 26.6 percent.

LABOUR BUREAU