The Relationship between labour productivity and economic growth in South Africa from 2000-2016

Abstract

Labour Productivity is associated with the acceleration or slowing down of the rate of economic growth, at times without discerning the extent of the relationship between the two. The relationship is generally assumed and in the context of South Africa, it is mostly regarded as negative without an in-depth study of the nature of the relationship and concrete proposals on what should be done to turn it into a positive relationship. Now, especially after the global economic crises, there is a need to understand the nature of the relationship and how what consideration should be made by policy makers to take South Africa out of a growth slump. This quantitative study examines the relationship between labour productivity and economic growth from 2000 to 2016 in South Africa. The study relies on Gross Domestic Production, labour productivity and total factor productivity sourced from the South African Reserve Bank from 2000-2016. The study then applies a simple linear regression method to determine the strength of the relationship between labour productivity and economic growth. The results shows that in the period under review the contribution of labour towards growth have declined significantly whilst the economy has become capital intensive. We conclude the study with recommendations for policy makers on what should be done to improve labour productivity and ensure that the economy is driven from capital intensity to labour intensity.