Government vs private sector salaries in South Africa

Workers in the South African public sector are more educated, older, more skilled, and more diverse when compared to the formal private sector – which translates into a better salary.

These are some of the findings in a new research paper published by the Development Policy Research Unity from the University of Cape Town, investigating the demographic, employment and wage trends of South Africa.

The university department said there are currently around 15 million people employed in South Africa – up from 12.4 million in 2004.

This increase of 2.6 million over the last decade is equivalent to an average annualized growth rate of 2.3%.

Despite a growth in jobs, overall unemployment in the country has worsened, with as many as 8.2 million people jobless.

Certain industries have seen a massive decline over the past decade – particularly the primary sector (agriculture and mining) which have seen close to 720,000 jobs lost between 2001 and 2012.

The tertiary sector picked up the slack, however, adding 2.72 million jobs over the same period – most of which were created in the community, social and personal services industry – predominantly made up of public sector employment.

Government has become one of South Africa’s biggest job creators: the total number of public sector employments has increased from 2.16 million in 2008 to 2.69 million at the end of 2014 — an increase of more than half a million jobs in a six year period.

This is further broken down into 2.37 million people who are employed by government directly, and 322,960 who are employed by state-owned enterprises.

Thus the main drivers of public service jobs has been within national, provincial and local government structures, rather than within SOEs, which have remained fairly stable in their overall employment.

Comparing the public sector demographics to the private sector yielded some interesting findings- most notable of which was that, on average, public sector workers get paid more than their private sector counterparts.

“In addition, public sector wages have less dispersion than private sector wages, indicating a lower level of wage inequality within the public sector,” the group said.

This is because public sector workers are more unionized than private sector workers, which gives them more power to negotiate wages.

For non-unionized workers, the average real monthly wage in the private sector is statistically significantly larger than that of the public sector, by a margin of ZAR952 (USD99).

“This suggests that the public sector premium is negative, or at the least disappears, for workers that do not belong to a union,” the researchers said.

Wage distributions for public and private (non-public) formal sector employees, by union status (2013)

Other interesting demographic findings:

• The average age of public sector workers is 41 years old, compared to 38 in the private sector.
• Public sector workers have a significantly higher average educational level – with this average rising faster in the public sector than the private.
• Females have greater representation in the public sector, making up 52% of the respective workforce, compared to 44% in the private sector.
• From making up 72% and 66% of public and private sector employees in 2008 respectively, Africans now make up 77% of public sector employment, with little change in this proportion in the private sector.
• White workers make up a smaller proportion of workers in both sectors now than they did in 2008.

Worrying situation

While segmenting the unionised vs non-unionised, public vs private workers in such a way is typically out of “general curiosity and (for) academic interest” – the researchers note that, for South Africa, this is a worrying picture.

For an economy that is unable to generate enough private sector jobs – or where firms are avoiding direct employment through labour brokers – basing a long-term employment strategy on jobs in the public sector would require “critical reassessment” for forward growth strategies.

This is of particular concern when you note that South Africa’s public wage bill is sitting close to R500 billion a year – over a third of the budget.

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