This paper quantifies the impact of the covid-19 economic shock on aggregate earnings and employment by industry in South Africa. We construct pre-covid-19 counterfactual forecasts for the 2020 Q2 – 2022 Q4 period and compare these with reported earnings and employment levels up to 2021 Q1. We find that total compensation of employees in 2020 Q2 was 9% below forecast while employment was 14% lower than the counterfactual. Between 2020 Q2 and 2021 Q1, aggregate earnings recovered more than three times as quickly as employment, indicating a rise in inequality. We calculate possible recovery paths of earnings and employment to 2022 Q4. We outline implications for the Unemployment Insurance Fund and suggest ways in which the employment recovery might be accelerated.

R Script: https://social-insurance.saldru.co.za/ters/qlfs-2020
YouTube presentation; Slides

Employment levels and the distribution of earnings by industry in 2010 and 2019/20 are examined in this paper, illustrating trends  over  this  decade  before  the  impact  of  Covid-19  and  the  accompanying  economic  downturn.  Drawing  on  both  the  Quarterly  Labour  Force  Survey  (QLFS)  and  the  Quarterly  Employment  Statistics  (QES)  aggregates, we provide estimates of the distribution of earnings consistent with the System of National Accounts (SNA) income and production aggregates. 

We  draw  attention  to  similarities  and  differences  between  the  QLFS,  QES  and  SNA  data  sources,  and  note  differences in the implicit trends over the 2010-2020 decade. We provide distributions of gross earnings within eleven  employment  and  industry  sectors,  consistent  with  the  national  accounts  compensation  of  employees’  aggregates adjusted to include earned income attributable to employers and the self-employed in unincorporated enterprises.

We find evidence that the national accounts have under-estimated growth in earnings since 2010, and that the levels of both nominal and real GDP in recent years are understated. Nonetheless we find that QLFS estimates of earnings have to be raised by about 50 per cent in order to generate earnings levels consistent with the national production  accounts.  The  adjustments  required  vary  considerably  by  industry.  We compile  uprated  earnings  distributions  by  industry  in  two  ways:  aligned  with  industry-specific  SNA  aggregate  earnings,  and  uniformly  uprated to align with aggregate SNA earnings. 

Both  employment  and  earnings  were  severely  disrupted  by  the  2020  Covid-19 economic shock.  At  the  time  of  writing (early 2021) the economic recovery path is far from clear. This paper provides sectoral benchmark data from official sources against which the recovery might be assessed,  but also indicates that there are substantial discrepancies between the available measures of earnings by industry.

QLFS earnings uprating factors: https://social-insurance.saldru.co.za/data

This paper highlights the unnecessary complexity of South Africa's Unemployment Insurance Fund (UIF) benefit function, known as the Income Replacement Rate (IRR), and the disadvantageous manner in which the IRR is low for most earners. Possible alternative formulae are described, along with the implications for total expenditure on the UIF. The paper recommends simpler (and more optimal) formulae.

• Policy Brief (forthcoming)

Despite high government expenditure, education in South Africa is poor quality. We focus on how teacher quality can be improved by improving the structure of their remuneration. Performance-related pay, which can be based either on measuring learner test scores, or by measuring teacher content knowledge or pedagogical skills, has sometimes been successful in countries with low levels of teacher effort, and may be applicable in South Africa. However, measures to enhance accountability or reward performance need to take into account resistance by teacher unions. We situate the discussion in the context of South Africa’s existing framework for teacher remuneration under the Occupation Specific Dispensation. From this, we criticize the relatively flat progression of salaries as teachers’ experience increases, which discourages skilled teachers from remaining in the profession. We propose that performance-based pay be integrated into the existing salary structure through bonus salary notch progressions, thereby also increasing the slope of salary progression.

This paper explores the feasibility for utilizing a wage subsidy in South Africa. Whilst a wage subsidy is already in place in South Africa, it is fairly unsubstantial, and this paper investigates the prospect of expanding it. Design characteristics of wage subsidies are discussed, in the context of South Africa. The paper shows how a wage subsidy is currently being used in South Africa (the Employment Tax Incentive) and ventures to show how a wage subsidy can be constructed in future. The finding is that wage subsidies currently do little to reduce unemployment, especially with the low levels of subsidization such as what currently occurs in South Africa, but that subsidies would need to be considerably extended in order for there to be a determinable impact on unemployment. Some suggestions are made about targeting subsidies towards employment-intensive industries, and towards small firms.