The gender-wage gap in South Africa (blog 2 of 2)

In a previous blog, we discussed unconditional wage gaps in South Africa. As a refresher, an unconditional wage gap is simply the difference in average or median wages between demographic groups (say, for example, the gap between females and males), not controlling for factors that influence wages, like experience or education. As a reminder, unconditional estimates suggest that men earned approximately 36% more than females according to the 2019 Labour Market Dynamics Survey (LMDS).

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What lies behind the recent Rand strength

Vulnerabilities prior to Covid19 meant that investor sentiment around South Africa (SA) was particularly fragile. The severity of the pandemic itself, further eroded investor sentiment, thereby weakening the rand and increasing market volatility. During this time, we saw the USDZAR trading at over R19/$. In recent weeks, however, the rand has gained substantial strength, and is now trading below R14/$. In this blog, we explore some of the reasons for the rands remarkable recovery. These include: 1) Dollar weakness on the back of global markets balancing US fiscal and monetary policy. 2) High real interest rates offered in SA, which continue to attract offshore investments and capital. 3) A historic current account surplus on the back of strong commodity prices; and 4) Stronger-than-expected tax revenue data easing growth concerns. With global risks such as rising US inflation at bay for now, the rand may continue to benefit. The rand may also find support from a continued commodities upswing which is supportive of the trade balance and growth. However, local risks remain. SA’s economic growth is still a source of concern for investors. SA still faces serious fiscal challenges, including large government debt and tricky negotiations around the public sector wage bill. Adding to this, the slow start to the COVID19 vaccination programme and the threat of a third Covid-19 wave could add downward pressure to overall investor sentiment. These real economy risks may limit future rand strength.

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Demographic gaps in South Africa over time

Gender and racial inequality permeate the South African social landscape, even 25+ years after our democratization. This bias towards females and people of colour has inextricably created labour market tensions. Females and people of colour often earn substantially lower salaries for the same level of work. Even though affirmative action policies have been implemented across the country to some effect, not enough has been done to close the gap between earnings for people of colour and white individuals and separately for females and males. In this multi-part blog series, I look to discuss the gender and race salary differentials in the country, paying particular attention to the difference between conditional and unconditional wages.

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Unpacking South Africa’s GDP and employment stats for early to mid-2020

Statistics South Africa (Stats SA), the country’s official provider of national statistics, is tasked with producing reliable data on a regular basis. The COVID-19 pandemic, and the related lockdown measures, have caused a severe economic contraction in 2020, but have also resulted in confusion over the degree of the pain felt by the real economy in the second and third quarters of 2020. This note briefly unpacks the method employed by Stats SA to estimate the reported changes in GDP and unemployment to better understand how the statistics office has arrived at these GDP and employment numbers.

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Overcoming the limits of human rationality

The world is filled with noise, distractions, making it difficult or impossible to make a truly informed decision. Even when that information does exist, we behave consistently irrationally. For example, if I give you a warm cup of coffee, you are more likely to like me than if I give you a cold glass of water. This is a predictable deviation from the expected outcome – namely that the beverage I provide should not be related to your opinion of me. So, if we aren’t as rational as we might believe, how do we make decisions?

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Profit-led or wage-led growth; How income distribution influences the macroeconomy

“Income distribution dynamics and the macroeconomy have a very intimate link. This link is evident in many key macroeconomic indicators, especially when looking at how national production changes with changes in income distribution. As such, this blog tries to unpack the relationship between output and income distribution (measured by the labourer’s share of national income), and discusses its relevance to South Africa.”

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