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Minimum wage: Puzzle of proper pay

by Claire Bisseker
Introducing a national minimum wage - an ANC pre-election promise - could have a negligible impact on inequality in South Africa, because so many people are unemployed. But that doesn’t mean a national minimum amount is a bad idea.

According to the International Labour Organisation’s (ILO) Global Wage Report, more than 90% of countries set minimum wages, including the US, the UK, India and much of Latin America.

However, the potential for its mismanagement is extremely high, warn Geneva-based ILO researchers Patrick Belser and Kristen Sobeck in a recent paper.

“Minimum wages that are set at unrealistically high levels can trigger inflation, unemployment and/or widespread noncompliance,” they conclude. “On the other hand, wage floors that are too low are ineffective and leave many workers and their families in a life of misery and poverty.”

South Africa has battled to strike this balance in the past. In 2003, when a minimum wage was introduced in agriculture, it pushed up the going wage by 17%. In the immediate aftermath, 220 000 farm workers lost their jobs, according to a study by University of Cape Town (UCT) professor Haroon Bhorat and others.

Over the ensuing decade, rural farm workers’ wages rose by 50% in real terms, but that still left the minimum wage at a paltry R69/day in November 2012, when farm workers in the Western Cape went on strike.

They demanded a minimum wage of R150/day. Government compromised by raising it by 52% to R105/day, but created an unprecedented loophole by allowing farmers who could not afford this to apply for an exemption. Since then the department of labour has been flooded with around 900 applications for exemption, leading to complaints from farm workers that their lot has not improved.

Clearly, it would be of little benefit to anyone if South Africa were to legislate a national minimum wage in tandem with a huge exemption process that government lacked the capacity to implement.

Unlike those in many other countries, minimum wages in South Africa vary by sector. The Employment Conditions Commission (ECC), a representative body within the department of labour, advises the minister at what level to set them. In 2011, these sectoral determinations averaged R2118/month.

In addition, trade unions and employers negotiate the minimum wages for sectors like mining and manufacturing in bargaining councils. Manufacturing pays more than R4 000/month, but the average minimum wage across bargaining councils was R2 725/month in 2011.

The problem, says Costau strategies co-ordinator Neil Coleman, is that studies put the minimum living level for a household of four to five in South Africa at around R4 500-R5 000/month, so minimum wage earners remain stuck in poverty.

Costau hasn’t settled on a level for a proposed national minimum wage but says it should be linked to a researched minimum living level — something that has led it to publish indicative levels of R4 500-R6 000/month in the past.

Given that the median monthly wage in South Africa in 2013 was a mere R3 033 (and that half of African workers earned less than R2 600), Cosatu’s projections are so unrealistic that they have almost served to shut down the debate.

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