South African productivity and capital accumulation in manufacturing: An international comparative analysis

Economic progress hinges on raising productivity – output per unit of input. Sustainable growth of living standards, employment, and exports all depend on growth of productivity. Per capita income, the single best measure of economic welfare, is clearly closely related to output per worker. Productivity growth also boosts employment to the extent that employers’ demand for labour will rise if workers become more productive. Exports depend on international competitiveness, particularly unit labour costs relative to other countries, as demonstrated in Edwards and Golub (2002, 2003). Relative unit labour costs, in turn, can be broken down into relative productivity and relative wages. While competitiveness can be improved either through reductions in South African relative wages--directly or via currency depreciation- -or higher relative productivity growth, clearly the latter is the preferable