The sceptical optimist: Mike Schussler Economists.co.za. 1

Transcription

1 The sceptical optimist: Mike Schussler Economists.co.za 1

2 A short History and context. The employee losses in the current platinum strike. Entry level Average Other losses from the strike. Economic losses from a few recent strikes. An economic forecast. Tax losses. A forecast on strikes in SA.

3 The recent history of strikes in SA shows an upward trend which I do not believe was expected by most. 3

4 Millions Work days lost. Five year smoothed average in Workdays lost The data is from Andrew Levy(via J Visser review for pre 1990 data). The 2013 data is my estimate based on Andrew levy for first three quarters and 2014 is so far via own calculations up to April. Andrew Levy data differ from Department of Labour data but show similar trends. The Trend is a simple five year moving average to show trends in work days lost due to strikes. Five year moving averages is what many consider to be a better indicator in strike trends as data can differ widely from year to year. There is a clear upward trend at present

5 UK SA SA public sector strike Winter of Discontent Mineworkers strike along with others against closures of mines SA Public sector strike

6 Iceland Spain Greece Canada South Africa Turkey Korea Italy Finland Denmark Australia Ireland New Zealand France Norway Sweden United Kingdom United States Poland Portugal Belgium Netherlands Germany Luxembourg Austria Japan Switzerland Some countries including SA; Japan and others until Data for SA from: A racially divided class: Strikes in South Africa, Wessel Visser of Stellenbosch. The rest from OECD table D

7 Japan Thailand Phillipines Hungary Sweden Poland NZ USA UK Malta Australia Italy Ireland Korea Spain Finland Sri Lanka Denmark Canada South Africa Sources: Society at a glance and EU Industrial relations report. This is a five year average from 2005 to In some cases it may be that the data is for the five years to

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9 Differ from country to country and time period. Not much data around but the average strike lasted less than 7 days according to OECD data for the five years to The typical strike was just about 3 days in OECD countries. This is less than the typical 5 days in the early 1980s. Also strikers are paid at least partly from union strike funds in most of these countries. But in France in 1968 there was a very long general strike that lasted weeks. The longest strike was by 130 hotel workers that officially lasted ten years but 40 workers left the strike in first few days. In the end there were no original employees on strike anymore. 9

10 Platinum strikes the biggest since Very close to surpassing what is believed to be the biggest private sector strike ever. Total workdays lost in platinum over last two years now exceeds 8 million workdays. This means more than 40 days per worker has been lost in platinum industry. This is probably the biggest financial loss as well as the biggest workday losses ever in private sector. 10

11 4 out of 10 adults work (6 out of ten world average). 2,5 in the formal non farm sector (similar to non farm payrolls in USA and also 98% of PIT tax payers in this sector). 1,5 work in informal, domestic or farm and subsistence sector. Formal employment outside of government sector constrained. QES data suggest that private sector still under 2006 level. SA workers median wage is R3100 compared to Around R660 for world median. (LFS type surveys via ILO) 11

12 Probably the biggest loser but remember no one wins here. 12

13 Employees On Strike Number of People Affected by Strike Employees whose Salaries/Wages are directly affected by strike in the platinum strikes (Including Contractors) Contractors on the Platinum Mines that are not being paid Non striking workers effected directly Workforce Affected in Direct Mining Industry 13

14 Actual Money lost per entry level employee since strike began Rand Lonmin Implats Amplats Average Main Companies Involved 14

15 Wage Benefits 5016 Overtime/ production bonus Gross work income lost (total) Non work losses average household debt level 3414 Gross losses from work and nonwork The wages used are the average wages of the three companies said entry level wages of last year with 8% added on as that was the offer as strike started. The overtime is typical and estimated as 40% on top of the actual cash wages. Debt is calculated at 75% of gross income. Prime plus 8% is used for calculation. All data is linked to the number of days lost. 15

16 Wage Benefits 9697 Overtime/ production bonus Gross work income lost (total) Non work losses average household debt level 6089 Gross losses from work and nonwork The wages used are the average wages of the three companies said average wages of last year with 8% added on as that was the offer as strike started. The overtime is typical and estimated as 40% on top of the actual cash wages. Debt is calculated at 75% of gross income. Prime plus 8% is used for calculation. All data is linked to the number of days lost. 16

17 The average non-striking employee has lost about R in overtime and production bonuses so far. That is about R5 000 per month and is about a quarter of their income. This too is hurting as many have commitments and our last survey showed that average discretionary spending is only about R2 000 pm or less than 17% of their income. They too will give up paying something and therefore incur debt and penalties although no fault of their own. 17

18 While income lower than mine employees they still have major losses. While they are less than 20% of the people affected on the mines (+/ vs ) They earn just slightly less than employees and probably they have lost about R1 billion in income at present. They only earn when they work so they have lost a lot and they often do not have any security of employment. 18

19 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% % of After Tax (Net) Yearly Income lost for Average Employee including benefits Increase needed to make up income loss in one year after taxes and taking account of debt first. If debt takes longer to repay or new debt is incurred, the gross increase needed will increase. 26.6% 21.1% 22.8% 42.8% 0.0% Time Strike alone % Net Loss from strike after tax % Net loss including debt % gross increase needed to make up for losses. 19

20 40% 35% Losses / Raise needed as percentage of annual income after taxes (Net) Raise needed to make up income loss in one year after taxes and taking account of debt first. If debt takes longer to repay or new loans are made then gross increase will have to be higher. 37.0% 30% 25% 22.8% 25.7% 24.7% 20% 15% % Net Loss from Strike alone % Net Loss with debt interest added % Net Loss with overtime plus interest as per household debt average Gross increase needed 20

21 Even if increase given to their total cash payments to R12521 by July a 61% increase. Inflation is at 6% would make the overall real increase only about 35% in todays money. While entry level workers will need a 37% increase needed over time with interest on debt etc. It is unlikely that they make up current losses at all. Even assuming debt paid off immediately with the 37% increase. Average employees who needed a 47% increase by Tuesday will need even longer and will never make up the money lost. Also since 2012 about 8% of all jobs in the platinum industry have gone. It is very likely that 30% of all jobs could go in the next four years before the final increase. 21

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23 Many of the above employees have lost bonuses which can make up another 50% or so of the basic wage. It can make up to around 30 to 40% of take home pay. (about people) Many who have high debt levels have been forced to sell things such as cars etc. Almost all contractors have lost all of their income for the period of the strike. (About ) These people usually get less than miners and many had to sell nearly everything from kitchen appliances to TV s and of course the car. 23

24 No production bonus in the next while as mines will take a few months to get back to levels where production bonuses can be earned. Many have been forced to take leave and some future leave in next few years has also been taken. Many are unlikely to have leave for a while. Confidence in industry is also waning so some are looking elsewhere for employment. 24

25 It is impossible to estimate the total number of others affected outside of the industry. It is clear however that many thousands of others are affected and it is unlikely to be less than another More likely to be in the region of to adults who either lost jobs or are working short time or giving up bonuses and the like. Includes engineers; clothing suppliers; manufacturers of mining equipment; retailers; service providers in many areas as miners and mines themselves buy much less. 25

26 The number of workers, self employed etc. affected is therefore estimated to be in the region of to people. This will grow over time. As many firms close their doors, others will find difficulty in staying open who are even further removed from the mining industry. Remember that some miners are now competing with say hairdressers or shop keepers to stay alive. Also even schools and municipalities are affected by these strikes as the length makes help ever less likely. 26

27 Municipalities (Rustenburg) have reported a drop of 27% in service payments. About 60% of the city economy is related to mining. Many businesses are being forced to close. This is expected to increase as even unrelated businesses are under pressure and more people will not be able to pay municipal bills. Other towns such as Brits; Pretoria West; Thabazimbi also feel the effects. More businesses are at risk. Areas where miners come from and send money too are also feeling the effect. 27

28 The property market could (like with Marikana) see less sales (about a 30% drop for two to three months). We also expect at least some building activity in the broader area to be affected. Repossessions will happen with cars probably first in line but will spill over to housing market. Defaulting on loans and the inability to get normal loans will drive up the cost of borrowing for almost all involved. 28

29 Major losses this year and probably some form of capital needed to power up to full production levels. Switch to more mechanisation and to the easier reef UG2 which allows for firms employing fewer people. Slow decline in number of shafts in the Hans Merensky reef in Rustenburg and Brits areas. The employees in the industry could drop to under within a few years. 29

30 Using two recent examples of long strikes in South Africa -in the Motor Industry and the Platinum Industry. 30

31 Median monthly earnings of employees by industry (2013) Data from StatsSA LFS. Include informal sector; and in surveys many forget the pension; medical; taxes and other things that is taken off their salary before it is drawn from the bank. SA median is currently R3033 compared to International median of R660. Often people only look at basic pay and not things like housing allowances, bonuses; etc. Includes public sector 31

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35 Mining production will show decline this year! Manufacturing should be positive for the year but negative for the first quarter. Retail sales growth will be below 2% for a period probably from March to June. Electricity usage will also be lower. Eskom will not reach target as smelters use a lot of power and they are switched off in some cases. The Current Account will again be under pressure. 35

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37 Year GDP Growth Consensus (Last year budget time forecasts) 2012 (actual) (actual) (2.71) (3.53) (3.84) (3.53) (3.59)

38 The cost of the strike is now well over R15 billion and as it is a primary industry almost all can be taken away from GDP as well as Exports. This means that GDP will be 0,4% lower directly but more likely about 0,6% lower than would otherwise be the case. Many sectors will lose from domestic tourism to manufacturing and retail sales. I do not think there has been a strike of this magnitude ever in SA. (Earlier data is not compatible) The fact that the platinum price did not rise when the biggest producers in the world shut down is also of concern. 38

39 Government losses out too and that means our deficit is likely to be higher too. 39

40 40.0% 30.0% Since the last quarter of 2002 personal tax has increased with 167,3% until the last quarter 2012mostly due to bracket creep. Over the same period inflation increased with 55,4% and average salaries around 85%. About 40% of the increase in personal taxes is due to the fact that tax breaks in the whole are well below the rate of inflation and certainly below wage inflation. 20.0% % change in Personal Income tax collected. 10.0% 0.0% Strikes -10.0% Jan-03 Jun-03 Nov-03 Apr-04 Sep-04 Feb-05 Jul-05 Dec-05 May-06 Oct-06 Mar-07 Aug-07 Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12 Aug-12 The Great Recession -20.0% 40

41 Personal Income tax average salary equal R872 million If employees entry level -only R309 million. (includes some overtime) Vat estimate R375 million (employees only) Corporate Income tax Difficult but we estimate a loss over the next three years of about R300 million. Other taxes about another R100 million Total over R1,5 billion 41

42 We mean contractors, suppliers and retailers etc. We think that the knock-on effect will be about half the direct effect on taxes. We do not have a hard number but guesstimate about a further R750 million. Combined we think that over the next while the tax losses will be in excess of R2,3 billion 42

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45 We will not see another strike of this magnitude in the next two decades I do not think we will see another platinum strike for quite a while! Unions with a more moderate view will come to the fore in the industry. Thousands of job losses anyway. AMCU will not be majority union in a year. 45

46 Strikes will play a lesser role in SA within the next few years as workers will refuse to give up gains already made. Long strikes are going to become rarer. Government will side more on the side of industry as economic losses are not helping create jobs - our biggest problem. Expect a rethink by government on the way strikes are conducted. 46

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