I’ve been asked to have a look at how South Africa’s public wage bill compares to other public wage bills. Perhaps not too surprisingly, this kind of data is not easy to locate, but I did find some IMF data that gave an average for the 2000-2008 period.

So first, some generalisations:

I guess that one of the most interesting things to notice is that the OECD countries spend more of the GDPs on their public sector wage bill, but proportionally less of their overall spending. And on the GDP front, this makes sense, because the OECD countries have relatively more of their people working in the public sector:

And when you read those two graphs in tandem, what’s really surprising is that Sub-Saharan Africa has one of the highest wage bills as a percentage of GDP while having the least amount of people working in the public sector (other than South Asia).

The Specific Comparisons

So, comparing South Africa to the BRIC countries:

To the other African countries included in the data set:

And finally, to the other middling income economies that SA is usually compared with:

And that was back in 2008.

Since then, according to Stanlib:

And awkwardly, the general government wage bill has eclipsed the GDP growth rate every year, as well as the Total Compensation growth rate every year (with the exception of 2013):

And to show you the full impact of that:

1. Take two people in the same job position in 2008, both earning R200,000 per year, but Person A working for the government and Person B working in the private sector.
2. Today, on average:
   1. Person A would be earning R480,000 per year in their government job
   2. Person B would be earning R385,000 per year in their private sector job
   3. That’s 24% more in the public sector.
3. Because #compounding
4. And also, let me point out that the general government compensation growth rate is part of the total compensation growth rate, and is therefore pulling the “total” figure upwards.
5. Therefore, in practice, Person B would be earning less than R385,000 per year.
6. Just saying.

 
So it’s not altogether surprising that you hear Magnus Heystek saying things like:

…according to economist Mike Schüssler, the average salary in government is now R241 000 per annum versus R196 000 per annum in the private sector. The bloated government salary bill lies at the heart of much of our financial problems at the moment. And what are we getting in exchange? Surly, sloppy service with attitude and if you can’t do your job, you employ a consultant.

There was a time that a government employee would accept a lesser salary (relative to the private sector), in exchange for job security, medical aid, housing allowance and a generous pension fund. It was in the private sector where you would make the big bucks but where you could also lose your job and/or business if things went pear-shaped.

In the current financial year SA will spend R550 billion on the salaries of all civil servants from local to national government, more than half of the four major taxes central government receives, namely VAT, personal income tax, company tax and fuel taxes.

People often ask me what a fiscal cliff is. Just open your eyes and observe. We are busy storming at one right now.

I guess what I’d like to close with is this: it seems that South African politicians are particularly enamoured with China’s state-capitalism model. But if we’re going to emulate China by having a larger State, then we also have to emulate their labour policies. So:

• no more labour rights,
• no more trade unions, and
• no more bargaining power of government employees.

 
I mean – isn’t that State Capitalism 101?

Rolling Alpha posts about finance, economics, and sometimes stuff that is only quite loosely related. Follow me on Twitter @RollingAlpha, or like my page on Facebook at www.facebook.com/rollingalpha. Or both.