Public Service Wage Increase Costing Government Billions

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National Treasury will need to identify more than R37 billion to cushion the impact of implementing wage increases for public service workers. Worker unions agreed to a 7,5% increase in April for public service workers.


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In February 2023, Finance Minister Enoch Godongwana tabled the second adjustments appropriation bill for the 2022/2023 fiscal year during their 2023 Budget Speech. 

This bill proposed an allocation of R45.6 billion to provide for the carry-through costs of the 2022/23 public-service wage increase. The budget included pay progression, a housing allowance, and other benefits for civil servants. 

Minister Godongwana emphasised the need for wage negotiations to strike a balance between fair pay, fiscal sustainability and staffing requirements in the public service. 

In April 2023, a wage deal was agreed for a 7.5% increase for 2023/24 and a CPI-linked wage increase for 2024/25 for public service workers. This increase is set to cost the government R37.4 billion. 

Godongwana says National Treasury will need to identify the equivalent amount in savings to cushion the impact of the 7.5% wage increase agreements. 

Deputy finance and fiscal commission chairperson, Michael Sachs says it is not factually correct to say workers received a 7.5% increase. They effectively received a 3,3% increase and a 4.2% increase relating to a cash gratuity. 

In 2020, the year of covid, we gave nurses, doctors, police officers [and] teachers zero percent increases. The following year they got about a 4.2% increase in the form of a cash gratuity. In 2022, last year [the] government unilaterally implemented a 3%increase and all of these increases have been far below the rate of inflation.

Sachs explains that the increase was implemented in the backdrop of four years over which public workers received below inflation increases. They add that over the last four years, public service workers have seen a 10% real reduction in their pay. 

They believe work must be done to ensure that wage negotiations do not result in the erosion of the credibility of the budget. 

If you table a budget in February that says one thing and then within March, within a month you're saying that there's a crisis and we don't have the resources to cover a wage settlement that is far below inflation, that is not a sustainable direction for us to move along. 

Sachs says while the treasury may succeed in reducing the public wage, however, finances have not yet stabilised. They warned that a continued reduction in the salaries of public service workers could impact the quality of personnel working in the public service.

If you push down the salaries of teachers and nurses and police officers year after year that's going to have consequences on the quality of the personnel you're able to recruit and deploy into those professions

They add that the private sector generally imposes wage increases that are above inflation. This overtime could lead to more people leaving the public service for the private sector.

 

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