Less sacrifice: from collective to competitive price coordination in the South African economy
Christopher Loewald, Nic Spearman Andreas Wörgötter
Last Modified Date:
2023-12-11, 01:17 PM
Publications > Working Papers | What's New
Aligning productivity and real wages is critical to sustainable economic growth. Their poor coordination gives rise to inflation and creates a trade-off between price stability and growth. Social partnership mechanisms, such as collective bargaining and social pacts, can help improve coordination, but constructing these agreements is difficult. Complexity arises due to their targets, scope, representativity, required trade-offs, and difficult relationship histories. In South Africa, social pacts are often touted as a solution to poor coordination; however, their utility is unclear, given the poor functioning of other social partnership mechanisms already in place. We review local and global experiences with collective bargaining and social pacts to identify lessons for improving coordination in South Africa. We find that coordination would benefit most from inflation-target-aligned price commitments at national macro-level bargaining forums, complemented by micro-level wage bargaining flexibility that reflects productivity and capital-intensity variance at the firm level.