South Africa has the most skewed distribution of income in the world after Brazil
Glenda Daniels Wage gaps in South Africa are excessive, the second largest in the world after Brazil, recent research shows. A report by the National Labour and Economic Development Institute (Naledi) shows that wage policy is one of the most contested and controversial areas in labour today, whether in the public service or recent inflation targets, or when linked to national budgets, tax levels and service delivery.
The research shows that poverty is still closely linked with race – with more than half of Africans living in poverty compared with 2,1% of whites. According to the Labour Market Commission, 38% of the formal workforce earn below the poverty line. “The overwhelming majority of the poor are not unionised, which further confirms the importance of bargaining power as a labour market determinant of poverty,” says the report.
Recent wage trends show that from 1996 to 1999 nominal wage settlements ranged from just above 7% to slightly higher than 11%. The overall average wage settlement for 1998 was 8,6%. For the first six months of 1999 the average wage settlement was 8,2% compared with 9,2% for the same period in 1998.
Using the cost of housing to make a calculation of the living wage, it is estimated that one would need to earn R2 156 a month to receive a housing loan of R40 000. South Africa has the most skewed distribu- tion of income in the world after Brazil. The poorest 10% have to make do with only 1,4% of income. By contrast, the top 10% of households have access to 42% of income. According to the Department of Labour, farm workers earn on average R457 a month. Furthermore, 72% of agricultural workers earn less than R650 a month. The International Labour Organisation said the gap in pay between engineers and labourers was higher in South Africa than in 20 other countries from which data was available. In South Africa the ratio between a typical manufacturing employee and a chief executive officer, for example, is 1:25 – this compares to a ratio of 1:8 in South Korea, 1:10,5 in Germany, 1:24 in the United States, 1:43 in Mexico and 1:48 in Brazil. The Congress of South African Trade Unions says between 5% and 10% of the country’s workforce earns less than R500 a month, so the federation is against an inflation target which entails a blanket wage restraint.
Some examples of the extraordinarily high salaries of senior executives, according to Naledi’s research, are the following. Chair and chief executive officer of Anglo- American Julian Ogilvie Thompson earns oe620 000 (or R6 200 000) a year (including a 10% annual bonus), a supplement equal to 15% basic salary, a car allowance of oe42 000 (or R420 000) a year, and an annual performance bonus of up to half his basic salary.
A group managing director of South African Breweries gets a basic annual salary of oe420 000, a oe44 000 car allowance, a oe100 000 relocation and housing allowance for the first three years, and an annual bonus of up to 60% of his annual salary – this converts to a maxi-mum salary of close to R8-million. Then there are Sappi executive directors who each earn R3 383 333 a year. Naledi’s report concludes with the argument that wage gaps in the country means that a social wage is imperative. This would provide protection and ensure socio- economic rights for those who have none. There are three primary advantages of the social wage, according to the report. “Firstly, it provides a central mechanism to maintain social cohesion during the consolidation of democracy, and the vagaries of globalisation. “Secondly, the imposition of a social wage could provide a central and sustainable poverty eradication strategy … it would be possible for the average family to provide for necessities, and for the state to provide for health and education services.
“Thirdly, the impact of a social wage policy will increase disposable income of workers.”