A Minimum Wage Can Advance Social Inclusion

By Frank Meintjies · 7 Oct 2013

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Picture: Dario B/poverties.org
Picture: Dario B/poverties.org

Some workers earn nothing – they survive on tips. Some earn a daily rate that barely covers the costs of commuting to work and a square meal for the day. Then there are those who earn in the region of the median wage – about R3033 a month – but who fall prey to loan sharks and other debt collectors.

For these and many other reasons, South Africa cannot but consider a single statutory minimum wage. The mechanism has the potential to help stitch together the frayed edges of our newly formed democracy; it can stop the steady rise of ‘the working poor’.

To be sure, there are people – from all sides of the spectrum, to boot – who fear a minimum wage. There are many who feel a minimum wage is something for first world countries. Soon after COSATU’s formation, unionists shied away from the idea of a single national minimum wage, preferring the more open-ended slogan of a living wage.

At the time, key leaders feared setting a figure that highly profitable companies would abuse -- bosses would use it as a maximum wage and resist wage demands above this. Others pointed to the differences between sectors as well as provincial variations in the costs of living, arguing that it was “impossible” to agree on a single minimum wage.

It is common cause that employers dislike the idea of a living wage. In views articulated via pro-business labour market specialists, they regularly complain about an “inflexible” labour market. They decry what they see as “high wages”, which they claim makes South Africa economically uncompetitive. They seem oblivious to the fact that a low-wage economy, such as South Africa’s, is not a healthy one. They are unconcerned that, as Fedusa has reported, the share of wages in the national income dropped from 50% in 1994 to 45% in 2009, while the share of profits climbed from 40% to 45%.

But we need to understand where the free enterprise stalwarts who resist are coming from. As one put it, “If wage price fixing is good, why not ‘price-fix’ elements of capital: land and natural resources?” Such views are correct within their framework. But many South Africans don’t operate within that logic; to them, human dignity is paramount and workers are not mere inputs into the production process. 

Beyond the reactions based on vested interests and gut responses to the idea of a national minimum wage, proponents are often forced to concede the mixed research findings and disputes between economists regarding a minimum wage. But despite the dissensus, many countries have adopted minimum wage regimes. Against a backdrop of the adverse effects on globalisation, the Economist has detected a renewed interest in the minimum wage in Europe. In the UK, the minimum wage – first introduced in 1999 – is today uncontested and, in 2000, even the Conservative Party has switched to supporting it.

In South Africa, those punting a minimum wage will need to undertake solid campaigning. They will have the support of the International Labour Organisation and they can draw on the positive experiences of key countries. On the other hand, they will run into headwinds and crosscurrent from many angles.

Indications are that those who are lining up for a renewed push for a national minimum wage have answers to the many questions and fears.

For example, Neil Coleman of COSATU speaks pointedly about “affordability” – the belief that increased costs will damage mainstream businesses, spark job losses and hurt the economy. Coleman says Brazil has introduced a minimum wage and simultaneously succeeded in creating jobs. He argues that the increased buying power effected by a minimum wage will translate into an economic boost, fuelling the creation of jobs. He also argues that the data indicates that businesses adapt to a minimum wage through productivity changes, and by making customers pay slightly more and/or by trimming profit margins.

Such views chime with perspectives, which note that capitalists are a hardy bunch. In this regard, it is said that capitalist fear policy uncertainty, but once they ‘know the score’, they adapt to constraining policies. In this regard, many companies have remained – and even thrive – in countries where governments have imposed tough constraining measures, e.g. where states have adopted indigenisation, as in Zimbabwe, or insisted on co-ownership of certain key productive enterprises.

SA does not have a single statutory minimum wage. Like Sweden, it has minimum wages set by sector through collective bargaining agreements. It also has sectoral determinations which apply to, for example, the farm workers and domestic sector.

As we learnt during the recent farmworkers’ strike, many sectoral determinations are extremely low and can be described as poverty wages – especially in the face of relentless food price increases. According to a Mail and Guardian report in September last year, the Labour Research Service proposed a living level of R 4105 and Unisa suggested R4000 per month for a family of five. By contrast, the average for minimum wages achieved through sector determinations (2011 figures) are R2115 and via bargaining councils, R2725.

Defining a statutory minimum wage means agreeing on what it takes for a family (of, say, four people) to live on. By its nature it will be basic, it will recognising the logic of an “entry” level, it will take account of the conditions micro businesses face, and will not give up on the notion that most jobs should, in any case, have mobility. At the same time, a minimum wage seeks to combat poverty.

Many workers would earn above a minimum wage. They will still need to stay ahead of inflation and improve their lives. Many such workers will use trade unions and collective bargaining. But those who need a minimum wage the most are the vast number of unorganised worker as well as casual workers.

Despite their fervent commitment to the values that drive them, champions of a minimum wage should be open to rational debate. Through such discussion, they most likely won’t win convert fanatical capitalists, but they could win over important sections of public opinion.

As part of discussions towards a minimum wage, its proponents should consider:

  • The impact that a minimum wage will have on micro businesses and whether some form of government “top up” was required.
  • Whether households would need government support, for example through tax rebates, to pay a minimum wage for domestic workers.
  • Where to begin when first setting a national minimum wage, given resistance and other changes that need to be managed. COSATU last year floated a minimum wage of R2800.
  • Strategies for ensuring that minimum wage does not further impede youth access to jobs.
  • Providing further information, and perhaps some modelling, on the links (if any) between a minimum wage, the social grant system and an economy where workers and their households have more buying power.
A minimum wage, like most changes, will require adjustment and adaptation. But it will also have positive ripple effects. It will prod businesses to function better. It will advance social inclusion and have a positive impact on the lives of millions of workers.

**This article was amended at 18h45 on 7 October 2013. It had originally stated that the minimum wage in the UK is contested. This has been amened to reflect that the minumum wage is uncontested in the UK.

Meintjies is an independent consultant and a Visiting Research Fellow at Wits School of Public & Development Management.

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