The impact of employee remuneration inequalities on employee productivity in the South African workplace

Abstract

Orientation: This article is part of an ongoing research project on various aspects of employee productivity in the South African workplace. Research purpose: The aim of this article is to determine firm-based employee productivity impacts as a result of employee remuneration inequalities (excess-remuneration and under-remuneration) in the South African workplace. Motivation for the study: The study focuses on understanding the impact and magnitude of employee remuneration inequalities on employee productivity in a unionised South African workplace. Research design: The article adopts two distinct estimation models. The aim of the additive multivariate linear estimation model is to determine the sign and the significance of the impact of both under- and excess-remuneration levels on employee productivity when employee characteristics such as levels of training, work experience and managerial involvement are considered. The second model is a fixed-effect panel data estimation where the full sample set of the relevant firm-based data is used. The aim of the panel data estimations is to estimate the robustness of the additive multivariate linear estimates. The manufacturing industry of Gauteng has been chosen as the case study, given the importance of this industry, in the gross geographical product of Gauteng province and the availability of firm-based data. Main findings: Estimation results indicate a strong and significant negative impact of under-remuneration on employee productivity levels. Excess-remuneration levels have a small positive impact on employee productivity levels. Practical/managerial implications: The estimations indicate the necessity to eliminate remuneration inequalities and opt for equalised remuneration structures for similar occupations in the market to enhance employee productivity levels. Contribution/value-added: The study contributes to our understanding of the impact of remuneration inequalities for similar occupations on employee productivity.

Keywords

• remuneration gap
• fixed-panel data estimations
• the sen index
• employee productivity
• international standard classification of occupations (isco-88)
• additive multivariate linear model