/ 30 May 2018

Maximum wages are the next step in SA’s social dialogue

(Delwyn Verasamy/M&G)
(Delwyn Verasamy/M&G)

The minimum wage has received considerable attention over the past months in South Africa. And rightly so.

Half the population is living in poverty and about 20% of those employed are living on wages below the minimum. Yet, while higher minimum wages are needed for the poor to regain trust in the future, there is also a high need for maximum wages for development to turn in the right direction.

Some, including President Cyril Ramaphosa, are hoping for a social dialogue to provide a path forward to rebuild the economy and the nation. But it will never succeed without these two issues seen in relation to each other: lowest wages need to increase and top wages decrease.

“Social dialogue” has become a global buzz-phrase. It is a tool to achieve better working conditions, higher standards of living and higher productivity. It is a miracle recipe for sustainable development, decent work and growth.

In 2015, the social dialogue process in Tunisia, represented by the Tunisian National Dialogue Quartet, was awarded the Nobel Peace Prize. The organisations that were part of the dialogue were influenced by the tripartism of the Nordic countries. The most well-developed social dialogue systems are generally regarded to be found here.

In Norway, the state, private employers and trade unions negotiate labour market issues and working conditions, but also welfare, pension systems and health-policy. The welfare system and stable democracy we see today are, to a large extent, products of dialogue and negotiations between the three parties, in a fine balance of power and a complicated web of institutions.

Ever wondered why Norway regularly tops international statistics of development, equality and even happiness? The answer is to a large extent found in social dialogue.

But, you cannot just decide, or dictate, that you want social dialogue. To encourage proper social dialogue, everyone must give something. Labour has to give. The same with employers and businesses and the state.

You must also give what others want, otherwise the offer makes little, or no sense.

Parents who give their children vegetables, when they ask for candy, understand that. And doctors who give their patients Panado, when they need penicillin, know that the patients will continue to ask for help.

If everyone gives a little bit of what others want, everyone gains. It is that simple.

The way the Norwegian social dialogue started was by making a basic deal about how to share the national “cake”. Workers would get a larger share of the cake in exchange for contributions that makes the national cake bigger.

Wage moderation, industrial peace, active labour market policies, job creation and welfare benefits have all been elements of various bargained deals.Our social dialogue rests on strong and democratically organised labour and employers’ federations, and on a solid collective bargaining system, which the social dialogue in turn reinforces and provides a framework for.

In other words, the Nordic model may be explained as “making the cake bigger” by distributing “pieces of cake” differently. And most political parties agree that this is a crucial pillar of our democracy and welfare system, as well as an important method for assuring smooth transitions and economic safety in difficult times.

READ MORE: Ramaphosa yields to wage concerns

Contrasts between South Africa and the Nordic countries are stark. While South Africa has the highest inequality rate in the world, the Nordic countries have the smallest wage and wealth gaps. While South Africa has staggering unemployment, the Nordic countries have some of the world´s lowest. While South Africa has astounding poverty rates, Nordic countries have some of the lowest poverty rates.

However, from a historical perspective, the differences are less obvious. The Nordic model started up as a developmental model, a means to an end. Low inequality, industrial peace, low crime and high welfare is a product of the social contract rather than a prerequisite.

The Nordic social dialogue model did not develop out of surplus, but of need and desperation. All parties in the Nordic countries saw the need to find a common solution to the massive problems they were unable to solve on their own, not so different from where South Africa is today.

The major difference does not lie in the organising and preconditions for the model, but in political will and the perception of risks and possibilities for future growth and development.

Unless South African leaders realise the writing on the wall, which is the urgent need for redistribution of wealth, there will be major costs to be paid.

And the minimum wage can be a meagre, but radical first step in the right direction, because there is no way to legitimise that millions of workers are paid less than the minimum level of living. In reality, there is a well-pocketed chief executive behind each corporation and organisation claiming they cannot afford to pay the minimum wage.

There is no way to legitimise that top wages in the private and public sectors are higher in South Africa than in Norway, where price levels are much higher.

In order to gain faith in a social contract, you not only have to increase minimum wages, but also lower the top wages. Introduce a maximum wage. While “everyone” is debating minimum wages in South Africa, far more people should discuss maximum wages.

In fact, not only is the wage gap a disgrace for the people at both the top and the bottom, it is a hindrance for proper social dialogue. How can workers gain trust in leaders who earn 700 times more than them?

There is an urgent need in South Africa for labour organisations, employers and the state to sit down and start talking about a major overhaul of the economy and the social fabric of society.

The criteria for a social contract is respect for the fundamental rights of freedom of association and collective bargaining, as well as a recognition that all parties are stronger together, if the others are well organised. Another is the actual political will among all partners to realise that they can achieve more together than on their own.

Last, but not least; social dialogue requires high-quality leadership.

South Africa has what it takes, but it will be difficult. Fractured organisations and trust must be rebuilt. The first step is to show political willingness to establish a proper living-level minimum wage and a maximum wage. Lower the gap.

If not, the result will be a society with less trust, development and dialogue, and more social unrest, crime and conflicts.