Living wage needs just as much focus as executive pay
It is time the heightened focus on executive pay gives way to serious discussion about a living wage. While companies should be expected to explain the large salaries of top executives, they should equally be called on to explain how they calculate the salaries of lowest-paid workers.
Have they applied their minds to what amount might constitute a living wage, an amount that would cover the cost of housing, food, transport, education and healthcare, at the very least?
Encouragingly, says PwC, discussion about a living wage is increasingly taking place in the boardrooms of South African corporations.
While there is no scientific definition of what a living wage is, it is distinct from a minimum wage in that it enables a better life than a minimum wage would allow.
In 1874, labour writer Lloyd Jones described a living wage as one that “will secure sufficiency of food, and some degree of personal and home comfort to the worker; not a miserable allowance to starve on”.
A 2014 paper by the Labour Research Service proposed that a housing-based living wage would amount to about R8,000 per month. This assumed individuals spent no more than 30% of their gross salary on bond repayments for a R250,000 house built in an affordable housing project.
Assuming annual inflation of 6.5%, the same house would now cost about R300,569, with the living wage having risen to R9,662. This is considerably more than the R3,500 legislated minimum wage, which will take effect in May 2018.
It is not that far off the R12,500 demanded by the Association of Mineworkers and Construction Union in 2014, when 70,000 mine workers held the platinum industry to ransom in a fivemonth strike.
The cost of housing is a useful base off which to price a living wage, but many other factors should be considered.
A calculator on www.livingwage.co.za looks at household size as well as costs of food, transport, housing, healthcare, education, communications and recreation.
The calculator is designed by OpenUp, previously Code for SA, and is targeted at South Africans who employ domestic workers. Certainly, paying a living wage should not be the duty of corporates only.
For companies sceptical of the benefits of a living wage, the UK’s Living Wage Foundation finds that it delivers immense benefits through better employee retention, lower absenteeism and staff members whose work quality is of a higher standard.
This is hardly rocket science. People who are paid properly are less likely to work multiple jobs and are more likely to be focused while at work, since their levels of personal financial stress will be lower.
Companies can also use a living wage to build brand equity with their customers. In the same way that businesses boast about being fair-trade certified, they could publicise the fact that they pay their employees a living wage, which would no doubt win the loyalty of increasingly socially conscious consumers.
The living wage is not without its challenges though. Raising the salaries of lowerpaid workers could exacerbate the unemployment problem, as companies employ fewer, better-paid workers.
Furthermore, if a greater number of people in an economy are earning more money, the prices of goods and services will rise, which in turn will force an increase in the living wage.
Nevertheless, if SA wishes to break the perpetual cycle of poverty in which so many of its citizens are trapped, a living wage must be considered by all employers, including households.
PEOPLE WHO ARE PAID PROPERLY ARE LESS LIKELY TO WORK IN MANY JOBS AND ARE MORE LIKELY TO BE FOCUSED