Job and wage security continuing to decline

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Labour Market Index: Improving, but still in weak territory

Trade union Solidarity has released the Solidarity-ETM Labour Market Index (LMI) for the second quarter of 2017. The LMI is a measure of job and wage security in the South African labour market, where 50 represent the break-even level between rising and falling security.

The LMI increased from 45.3 in Q1 2017 to 46.7 in Q2. Although this is the fifth consecutive quarter of increase, it is concerning that the index remains below 50.0.

Gerhard van Onselen, researcher at the Solidarity Research Institute (SRI), argues that labour market conditions remain stagnant and stifled, but not as bleak as in the second quarter of 2016. “Despite improving somewhat from a revised low base in Q1 2017, labour affordability, one of the index’s subcomponents, remains a significant concern. Given the stagnating economic conditions, employers have little incentive to expand their expenditure on labour,” he said.

“While the Business Cycle Index is pointing toward marginal improvements in the South African economic conditions in Q3 and Q4 of 2017, it is uncertain how easily and strongly this trend will be sustained. Just as is the case with various other macro-economic indicators, the index overall remains sluggish, pointing towards a broader trend of economic stagnation.”

Bad news for job market

“Labour Market conditions at present appear to be severely affected by political uncertainty and poor policy decisions. A policy environment hostile to free enterprise and the possibility of future political shocks are probably keeping a lid on local investments and expansion.”

“Political uncertainty in general and the ANC National Conference in particular are likely to have an impact on the index in the coming quarters. Presently the government lacks the will to commence with much needed deregulation and policy reform to remedy the problem. In fact, policies such as the latest Mining Charter seem to be exacerbating this underlying trend of stagnation,” according to Van Onselen.