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Blog 2: 3 January 2017 (Compensation of employees vs GDP per sector)
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In today's 2nd blog we take a look at the compensation of employees per sector plotted against the GDP of each sector, in order to determine what percentage of the GDP per sector is made up by compensation of employees.
Note data used: GDP current prices as COE is only published in current prices |
So which sector has the highest wage bill compared to the sector size
While looking at the wage bill of different industries one can draw a lot of conclusions. The main conclusion/assumption everyone makes is that South African public service officials are over paid. And this argument stems from the fact that government has a very large wage bill. But what people tend to forget government has a very large staff complement. So the wage per person is not necessarily as high as people would think. According to the Quarterly Employment Statistics (QES) published by Stats SA that measures formal non agricultural employment and earnings the average wage per person per industry is as follows
Mining and quarrying: R21 784.78
Manufacturing: R17 368.73
Electricity, gas and water: R45 950.82 (ESKOM fatcats)
Construction: R14 057.49
Trade, catering and accommodation: R13 061.48
Transport, storage and communication: R23 461.54
Finance, real estate and business services: R21 823.59
General government services: R22 705.4
Mining and quarrying: R21 784.78
Manufacturing: R17 368.73
Electricity, gas and water: R45 950.82 (ESKOM fatcats)
Construction: R14 057.49
Trade, catering and accommodation: R13 061.48
Transport, storage and communication: R23 461.54
Finance, real estate and business services: R21 823.59
General government services: R22 705.4
So now that we know government workers salaries are not as high disproportionately high compared to other industries, and looking at average wages per person provides some perspective it does not tell the full story. Below we map the amount of money spent on wages per industry (the vertical axis) against the size of that industries' contribution to South Africa's economy (horizontal axis). Thus the higher up the daimond the more is paid in wages, and the further to the right the daimond the greater that industry's economy. So what does this tell us?
For starters it shows us just how small South Africa's agricultural sector is, both in terms of earnings and economic size. The same can be said about South Africa's electricity, water and gas industry. But not a lot of people work the industry so large number of very high income earners in this industry, as we showed earlier in the article. But in saying that compensation of employes is only 28% of the GDP of Electricity, gas and water. So for every R1 employees in this sector is paid they generate economic output of R3.57
The agriculture and transport and storage sectors just behind the Electricity, gas and water industry with compensation of employees being 31% of the respective industries GDP. Manufacturing and personal services industry have very similar compensation levels with both these industries compensation making up roughly 63% of these industries respective GDP's
And the industry who's compensation of employees as a percentage of the industry's GDP that is the highest is that of General government. Now one can argue that since government is not a producing entity the output it delivers will be lower. The alternative and more likely argument here is that government is not using their staff complement efficiently enough. So while government staff are not necessarily over paid, their productivity, when looking at compensation over economic output is far lower than that of the other industries.
So their employees might not be overpaid in monetary terms, but in terms of economic output they produce R1.14 per R1 they are paid they do seem extremely overpriced. Time government uses this information to ensure their staff are more product. Or start cutting staff while keeping output at current levels to ensure productivity per staff member increases and begins to match that of private sector staff.
So their employees might not be overpaid in monetary terms, but in terms of economic output they produce R1.14 per R1 they are paid they do seem extremely overpriced. Time government uses this information to ensure their staff are more product. Or start cutting staff while keeping output at current levels to ensure productivity per staff member increases and begins to match that of private sector staff.