Minimum wage 'no substitute for economic growth'

Deputy President Cyril Ramaphosa. (David Harrison, M&G)

Deputy President Cyril Ramaphosa. (David Harrison, M&G)

Momentum for the introduction of a national minimum wage is gathering pace, with South Africa looking to other countries for guidance on how to implement this policy.

Under the auspices of National Economic Development and Labour Council (Nedlac), the government, business and labour are negotiating over the introduction of a minimum wage.

The first round of discussions are set to conclude in August.

Opening a workshop on the international experience of national minimum wages over the weekend, Deputy President Cyril Ramaphosa said that for the first time there is broad acceptance on the need to introduce a minimum wage.

The parties had determined that a national minimum wage “shall be the legal floor for a defined period of time, guaranteed by law, below which no employee may be paid in South Africa”, Ramaphosa said in his opening speech.

He said there is broad agreement that a national minimum wage will apply to all employees, both in the public and private sectors, unless provided for otherwise by an exclusion, phase-in or phase-out in an upfront agreement

A range of other issues had also been agreed upon, he added, including that “collective agreements, including bargaining council agreements, sectoral determinations and contracts of employment, may not provide for a wage that is lower than the national minimum wage, but may only vary wages upwards”.

Currently South Africa sets minimum wages in certain sectors of the economy through sectoral determinations, set by the minister of labour. They cover, among other workers, domestic workers and farm workers.

A national minimum wage would be economy wide.

Collective bargaining processes govern a range of other sectors such as the mining, manufacturing and the public service sectors.


Ramaphosa said however that depending on the minimum wage level, certain exceptions may be needed.

A body, similar to the Employment Conditions Commission, which currently recommends sectoral determinations to the minister of labour, will be responsible for determining a national minimum wage, he continued.

The body will “determine and periodically review a national minimum”.

The commission’s composition, which currently includes representatives of organised business and labour and independent experts, provided a “sound building block” for the future body he said.

The creation of a national minimum wage, long supported by unions, also has opponents.
These include organisations such as the Free Market Foundation which believes its effects on the economy will be negative. The foundation’s Jason Urbach has argued that support for a minimum wage by large businesses is due to the fact that it protects them from competition from small businesses.

But academics believe the impact of a minimum wage could be far-reaching.

According to Gilad Isaacs, the coordinator of the National Minimum Wage Research Initiative at the University of the Witwatersrand, minimum wage coverage through sectoral determinations is “uneven, exceptionally low, and frequently unable to meet the basic living needs of most workers”.

Minimum wage legislation is also frequently violated, said Isaacs.

At a panel discussion hosted by the institute on Friday, a number of international experts, flown out to present to Nedlac, revealed the growing global renewal of a support for a national minimum wage.

Experience of minimum wages in countries such as Brazil and Germany and new research from United States had demonstrated that if they are properly operated and set at appropriate levels, a positive effect on wages and inequality was seen, without large negative effects on jobs. This was according to Patrick Belser, a senior economist in the conditions of work and equality department of the International Labour Organisation (ILO). 

The key however was that it “operated properly and set at an appropriate level”, he said.

‘No substitute for economic growth’

“The issues is not so much should you have a minimum wage or not. We don’t hear that debate at all very much in the ILO anymore, but [it’s] really about how the minimum wage should be operated,” he said.

But he cautioned that a minimum wage was no substitute for economic growth.

It was also very important that there was “sound articulation” between minimum wages and other policies, said Belser.

This included policies on collective bargaining and other labour protection policies such as the regulation of working time, occupational safety and health, maternity protection, and social security.

“Most of them are complimentary and it is together that they will provide the social protection that workers … need,” said Belser.

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