Celebrating the new minimum wage deal
The advisory panel established by Nedlac last year proposed a historic NMW of R20 per hour
SOUTH Africans will remember February 2017 as a historic time in our history of addressing poverty and inequality in South Africa.
This is the time when we joined the international community of caring and humane economies and agreed on the establishment of a national minimum wage (NMW).
The advisory panel established by Nedlac last year proposed a NMW of R20/hour. This works out to roughly R3 500 a month for each worker, depending on the hours of work.
The panel, in its report, acknowledged this is a very low figure. It’s below the poverty line, it’s below the living wage.
It won’t support a family of four comfortably. The panel received some criticism, and no doubt there will be other individuals who completely reject this figure when it is signed off.
The panel was told by some individuals the figure was way too low, that it did not make a significant difference to poor workers, and that it continued a system of poverty wages and the working poor.
On the other hand, the panel was also criticised for the level being set too high. Individuals from the other end of the spectrum said it was not a policy South Africa could afford to introduce in an economy with such high levels of unemployment, and at a time when our economy is almost stagnant, with growth forecasts for the next three years being very low.
We were told that such a high figure would lead to a jobs bloodbath – and as we all know the very last thing this country can afford is for still more people to join the ranks of the unemployed.
These critics accused the panel of not caring about the unemployed and that it was focusing on the privileged – that is, those already employed at the expense of those desperately seeking employment at any cost.
We spent many hours debating these issues. We were certain we wanted to propose something that would make a significant difference to the poorest of workers. But we were equally certain we wanted to protect jobs and not add further to this massive crisis of unemployment.
So we came up with a proposal we believed struck a balance between these competing concerns.
We proposed no worker (except those excluded or those who are being brought into the system through a tiered arrangement) earn less than R20 an hour.
R20 feels low to us, but even at that rate we have been warned some businesses will find it very hard to pay their staff that amount and there is a risk they will shut down and retrench workers.
We also took note of the fact that workers who are most vulnerable, who are earning these very low wages, are generally not organised by the trade union movements and do not have the benefit of collective bargaining deals which could negotiate higher wages. It is also important to note we are not proposing that anyone should earn R20/hour. Rather, our proposal is that no one should earn less than R20/hour. This nuance is very important.
It was as shocking to us as it was to the rest of the country to discover that 47% of workers in this country earn below the proposed introductory level. The picture we were able to paint from the 3 month process of engagement and analysis was one of extreme poverty and desperation among many South Africans.
This policy is not an unusual one. It is important here to make some points about introducing a national minimum wage. Firstly, no-one can accurately predict the future and so there is no definite way of telling, with 100% certainty, what effect it will have.
Secondly, we believe the introduction has been cautious enough that it will give businesses sufficient time to adjust and ensure the public are adequately informed about the process. Thirdly, it is our strong belief something had to be done. There was no indication that anything else was going to shift to significantly raise the wages of these workers.
Fourthly, we carefully studied the international experience and had the benefit of senior ILO economist, Dr Patrick Belser, to advise us.
We were encouraged that no country has reported the introduction of a national minimum wage was a mistake and did more harm than good.
Professor Imraan Valodia is chair of the NMW Advisory Panel