Minimum wage, maximum debate

Opinions about a national minimum wage at last week’s parliamentary labour portfolio committee meeting differed widely, depending on what parliamentarians were basing their figures on, with proposals ranging from outright rejection to between R3 000 to R6 000. 

Stanlib economist Kevin Lings said: “The risk with trying to establish a national minimum wage is what government will be benchmarking it against. The minimum wages presently vary greatly between sectors.” 

In general, those in favour of the government’s proposals to implement a minimum wage put forward a figure of R4 500. 

The various calculations arrived at by the Labour Research Service, Unisa and the University of Pretoria showed that the amount required by a family of between four and five to live above the poverty line ranged between R4 000 and R5 500.

The International Labour Organisation’s (ILO) global wage report said the national minimum wage should not be less than 40% to 50% of the average wage or about 66% of the median wage. 

Sectoral wages
In South Africa, the minimum sectoral wage determinations were estimated in 2011 to be between R2 118 and R4 000 a month. Domestic workers are still lower at R1 877.70 per month.

According to IHS Global Insight, the median monthly income in South Africa is R3 000. 

Depending on what data you look at, the gap between ILO requirements and what labour and the government would like is not insurmountable. 

But Cosatu and South African Commercial, Catering and Allied Workers Union (Saccawu), said their calculations indicate that the minimum salary, based on guidelines from the ILO, should be between R4 800 and R6 000.

A Saccawu shop steward, Stephanie Duffy, said: “About 75% of workers in South Africa earn an average of R3 300, which is below a minimum living level.”


Risk of job destruction
Opposition parties and some researchers warn against raising the minimum wage too high and running the risk of destroying sectors and jobs. 

These issues aside, Deputy President Cyril Ramaphosa indicated last week that he is determined to see a national minimum wage in place – one of President Jacob Zuma’s pre-election promises. 

Ramaphosa told delegates at the National Economic Development and Labour Council (Nedlac) summit last week that he expects submissions on the matter from labour and business at a November labour indaba, so discussions could begin in earnest.

“The talking time for minimum wage is over. We must move now to how we deal with the modalities,” he said. 

Either way, government officials say that achieving consensus on the structure of the national minimum wage plan is likely to be long and complicated. 

Key to reducing poverty
The indaba is ostensibly to look at ways to grow the country’s economy and galvanise the implementation of the long-discussed National Development Plan, but Ramaphosa made it clear at the Nedlac summit that he expected to walk away with at least the bare bones of a plan, or a starting point to ensure that a national minimum wage was implemented in the future. 

The ANC and Cosatu believe a national minimum wage is key to reducing poverty. 

The acting director general for labour policy and industrial relations, Thembinkosi Mkalipi, told the Mail & Guardian this week that coming up with a minimum wage would be long and involved. 

“While it is impossible to ignore the present situation in the country, it’s not going to be as easy as some people think to reach a resolution around this issue,” he said. 

“There are a number of issues that will have to be discussed such as existing bargaining councils and sector agreements around minimum wages and which will have precedence.” 

Indaba topic
He said, too, that the minimum wage would be only one of the topics discussed at the indaba. Others issues affecting labour, such as strikes, were also on the agenda. 

The issue of a minimum wage presents an interesting puzzle for the government to solve. 

There are already bargaining councils, and in some cases sectorial agreements, that have been in place for years, which have yielded mixed results. 

Cosatu believes that in many cases the present minimum wage is too low, trapping workers in poverty. 

The Democratic Alliance and some business and research organisations said at the labour portfolio committee in Parliament this week that, if the minimum wage was set too high, it would kill jobs and destroy smaller firms, increasing unemployment. 

Many of them referred to the agriculture sector and the job losses that had taken place there after sectorial increases were implemented. 

For and against
Studies for and against a minimum wage were presented in Parliament and appear to contradict each other. 

The ILO in its 2010-2011 global wage report acknowledged that “economists, after decades of theoretical and empirical research, are still deeply divided on the necessity and effectiveness of minimum wages” and said that, if a minimum wage was set “at an unrealistically high level, the result will be either nonenforcement or dislocation of some workers into unemployment or informal employment”. 

But it goes on to say that its data suggests that minimum wages “reduce poverty and inequity, increase demand and contribute to economic stability”.

A report by Professor Haroon Bhorat and Benjamin Stanwix of the University of Cape Town’s Development Policy Research Unit found that the implementation of a minimum wage in agriculture in 2003 led to 220 000 job losses initially, but Stanwix said they appeared to have been largely part-time positions and the full-time workers did see an increase in wages. 

They found, looking at the period between 2001 and 2007, when minimum wage settlements were set up in most sectors, that they did not have a significantly negative effect in the retail or security industries or on domestic work. 

But, the study shows that there has been a reduction in the sectors that require unskilled work, such as manufacturing, and an increase in skilled work sectors, such as the finance sector. 

Insufficient policing
Stanwix told the M&G that research indicated that there was insufficient policing of the sectors to ensure that they complied with minimum wages, with nearly 50% in agriculture not being paid the required wage. This was an issue raised in Parliament.

“That would need to be addressed in any minimum wage plan,” he said. 

Nicoli Nattrass and Jeremy Seekings, also of UCT, in a report released in June this year contradicted the evidence put forward by Cosatu and their colleagues. 

They found that, in the South African clothing sector, the “minimum wage setting has played an important role in the destruction of jobs”.  

One of their points is that a minimum wage made it harder for the sector to compete against countries that could offer cheaper products. 

A former DA spokesperson on labour, Ian Ollis, who argued against a national minimum wage in the parliamentary hearings, said: “I believe there are bargaining councils and sector agreements, and that is sufficient.”

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