Aggregate public-private remuneration patterns in South Africa
Andreas Wörgötter and Sihle Nomdebevana
Last Modified Date:
2021-05-28, 09:30 AM
Publications > Working Papers
The rich international literature on public-private remuneration patterns finds that in most cases public sector remuneration follows developments in the private sector. This pattern is also found for South Africa since the introduction of the inflation-targeting framework in 2000. Co-integration tests and analysis confirm that there is a stable, long-run relationship between nominal and real remuneration in the public and private sector. The adjustment to the deviations from this long-run relationship is strong and significant for public-sector remuneration, while private-sector wages neither respond to the deviations from the long-run relationship nor the lagged changes of public-sector remuneration. The causal direction from private- to public-sector remuneration also holds for real earnings. This is confirmed by simple Granger causality tests. If this pattern remains stable, efforts to slow down the speed of the wage-price spiral should not exclude the private sector.