Testing Asymmetric Cointegration Between Real Wage, Labour Productivity And Job Opportunity In South Africa
Labour productivity and real wage are two dynamic economic indicators that, among many others, influence employment changes. Their effects on employment or job opportunities can either be positive or negative. This study investigates the asymmetric cointegration between real wage, labour productivity and job opportunity in South Africa between 1994 and 2018. The used methodology includes the application of a non-linear autoregressive distributed lag (NARDL) model, ECM and the dynamic multipliers. The obtained results from the bound testing suggested the existence of a long run relationship among the underlined variables. The estimated NARDL model revealed that real wage and labour productivity asymmetrically influence job opportunity dynamism. While positive component of productivity dominates over negative components; negative component of real wage dominates the positive component leading. Thus, labour productivity growth creates job opportunities whilst increase in real wage leads to a decline in the job opportunity. The study, therefore, recommends improvement in both labour productivity capacity through skills enhancement and real wage management through currency strengthening.
Adudu, S.A & Ojonye S.M. (2015). Employment–real wage relationship and economic growth in Nigeria. Journal of Economics and Sustainable Development, 6(2), 179-188
Alani, J. (2012). Effects of Productivity Growth on Employment Generation, Capital Accumulation and Economic Growth in Uganda. International Journal of Trade, Economics and Finance 3(3), 170-183.
Amassoma, D. & Nwosa P.I. (2013). The impact of unemployment rate on productivity growth in Nigeria: An error correction modelling approach. International Journal of Economics and Management Sciences 2(8), 1-13.
Apergis N. (2008). The employment-wage relationship: was Keynes right after all? American review of political economy 6(1), 40 – 50.
Arestis, P. & Bittes, T.F.H. (2018). Keynesian macroeconomic policy: Theoretical analysis and empirical evidence. Panoeconomicus, 65(1), 1-20.
Autor, D. H. & Salomons, A. (2017). Does productivity growth threaten employment? Paper prepared for the ECB Forum on Central Banking.
Bakker, M.B. (2015). Employment and the Great Recession. International Monetary Fund, Washington.
Bhorat, H. (2003). Employment and unemployment trends in post-apartheid South Africa. Government Gazette, Pretoria.
Bjuggren, C M. (2018). Employment protection and labour productivity. Journal of Public Economics 157, 138-157.
Bocean C.G. (2015). Relationships between wages and employment indicators. Revista tinerilor economişti, 24, 41-50.
Borjas, G. 2010. Labour Economics, 5th ed. McGraw Hill, New York.
Das, P., Basu R. & Halder, A. (2017). Employment, Wage and Productivity: Analysis of Trend and Causality in Indian Manufacturing Industries. The Journal of Industrial Statistics, 6(1), 41-56.
Dickey, D.A. & Fuller, W.A. (1979). Distribution of the Estimators for Autoregressive Time Series with a Unit Root. Journal of the American statistical association ,74(1), 427–431.
Elżbieta, K. & Danuta, K. (2015). Wages in Labour Market Theories. Folia Oeconomica Stetinensia, 15(2), 177-190.
Falk, M. & Hagsten, E. (2018). Employment impacts of market novelty sales: evidence for nine European Countries. Eurasian Bus Rev 8, 119–137.
Gallegati, M., Gallegati, M. & Ramsey, J. B., Semmler, W. (2016). Productivity and unemployment: A scale‐by‐scale panel data analysis for the G7 countries. Studies in Nonlinear Dynamics & Econometrics, 20(4), 477–493.
Gans J., King, S., Stonecash R. & Mankiw, N.G. (2011). Principles of economics, 4th ed. Cengage Learning, Melbourne.
Graetz, G. & Michaels, G. (2018). Robots at work. Review of Economics and Statistics, 100(5), 753-768.
Habanabakize T, Meyer D.F. & Oláh, J. (2019). The Impact of Productivity, Investment and Real Wages on Employment Absorption Rate in South Africa. Social Sciences, 8(12), 1-15.
Hammermesh., D. 1993. Job opportunity. Princeton University Press, New Jersey.
Jafari, Y., Othman, J. & Nor, A.H.S.M. 2012. Energy consumption, economic growth and environmental pollutants in Indonesia. Journal of Policy Modeling 34(6), 879-889.
Junankar, P.N. & Madsen, J.B. (2013). Unemployment in the OECD: Models and Mysteries. IZA Discussion Paper No. 1168. Institute for the Study of Labour, Bonn.
Karabarbounis, L., Neiman, B. (2014). The global decline of the labor share. The Quarterly journal of economics 129(1), 61-103.
Klein, N. (2012). Real wage, labor productivity, and employment trends in South Africa: A closer look (No. 12-92). International Monetary Fund, Washinton.
Kwiatkowski, D., Phillips, P.C., Schmidt, P. & Shin, Y. 1992. Testing the null hypothesis of stationarity against the alternative of a unit root. Journal of econometrics 54(3), 159-178.
Landmann, O. (2002). Employment, productivity and output growth. ILO. Mimeographed.
Onyimadu, C. (2015). Beyond the Neoclassical Paradigm: A Real World Economics Proposal. Munich Personal RePEc Archive.
Morton, B. & Blair, C. (2020). Real Wages, Productivity and Employment. https://www.21century.co.za/real-wages-productivity-and-employment/. Date of access: 14 July 2020.
Partridge, M., Tsvetkova, A. & Betz, M. (2019). Are the Most Productive Regions Necessarily the Most Successful? Local Effects of Productivity Growth on Employment and Earnings. Journal of Regional Science, 1-32.
Pesaran, M.H, Shin Y. & Smith, R.J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of applied econometrics16:3, 289–326.
Pettinger, T. (2017). Real Wage Unemployment. https://www.economicshelp.org/blog/1507/economics/wages-and-unemployment/. Date of access: 13 July 2020.
Seputiene J. 2011. The estimation of the relationship between wages and unemployment in the European Union. International Journal of Social Sciences and Humanity Studies 3(2), 277-285.
Shin, Y., Yu. B. & Greenwood-Nimmo, M. (2014). Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework. Springer, New York.
South African Reserve Bank. (2020). Quarterly bulletin, March 2020. Pretoria: South African Reserve Bank.
Statistics South Africa. (2020). Quarterly employment statistics. http://www.statssa.gov.za/?p=13185. Date of access: 13 July 2020.
Wakeford, J. (2004). The productivity–wage relationship in South Africa: an empirical investigation. Development Southern Africa, 21(1), 109-132.
Wittenberg, M. (2014). Analysis of employment, real wage, and productivity trends in South Africa since 1994. Geneva: International labour organisation.
Yusof, S.A. (2008). The long-run and dynamic behaviors of wages, productivity and employment in Malaysia. Journal of Economic Studies, 35(3), 249 – 262.
Copyright (c) 2020 Thomas Habanabakize
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
The author fully assumes the content originality and the holograph signature makes him responsible in case of trial.