An Analysis of the Relationship between Remuneration (Real Wage) and Labour Productivity in South Africa

Abstract

This study involved analysis of the relationship between remuneration (real wage) and labour productivity in South Africa at the macroeconomic level, using time series and econometric techniques on annual time series data from 1970 to 2011. The variables are tested for stationarity using the Augmented Dickey-Fuller and Phillips Perron are proved to be integrated to order one. Further analysis yields a result which depicts significant evidence of a structural break in 1990 and a long run cointegrating relationship between remuneration, labour productivity and unemployment. The coefficient of the error correction term in the labour productivity is large, indicating a rapid adjustment of labour productivity to equilibrium. However, remuneration does not Granger cause labour productivity and vice versa.

DOI: 10.5901/jesr.2014.v4n6p59