Busi­ness shoots it­self in the wage foot

Terry Bell

CityPress - - Business - Busi­ness@ city­press. co. za

The open­ing salvoes have been fired in an­other round in the war about a na­tional min­i­mum wage. And on both sides there are ac­cu­sa­tions of the se­lec­tive choice of re­search to bol­ster ar­gu­ments.

There is a sub­stan­tial body of data avail­able that can be used by ei­ther side.

But most of the ma­te­rial used by those op­pos­ing the idea tends to deal with the in­tro­duc­tion of a min­i­mum wage in iso­la­tion, with­out other nec­es­sary in­ter­ven­tions. Yet ad­di­tional mea­sures are usu­ally called for by sup­port­ers.

In a re­cent ar­ti­cle, Neil Cole­man, the strate­gies co­or­di­na­tor in the Cosatu sec­re­tariat, pointed out that a de­cent min­i­mum wage would in­crease de­mand and, there­fore, play a role in economic devel­op­ment, but only “if com­bined with ap­pro­pri­ate in­dus­trial and in­vest­ment poli­cies”.

One de­sired ef­fect of an in­creased min­i­mum wage would be to com­press the coun­try’s ob­scenely large wage gap. But the in­tro­duc­tion of a “floor level” liv­ing wage would not, in it­self, do that.

Wages are the big­gest cost fac­tor in busi­ness. But they also con­sti­tute the na­tional in­come. They en­able busi­ness to func­tion be­cause wage earn­ers are also con­sumers

This is a cru­cial point, but it is one that tends to be ig­nored by op­po­nents in busi­ness. They do not want what they see as greater in­ter­ven­tion in what is, in ef­fect, the an­ar­chy of the mar­ket. In this in­creas­ingly in­tense, dog-eat-dog en­vi­ron­ment, any in­crease in the cost of do­ing busi­ness is seen as a threat.

Wages are usu­ally the big­gest cost fac­tor in busi­ness. But they also con­sti­tute the na­tional in­come. They pro­vide the where­withal to en­able busi­ness to func­tion be­cause wage earn­ers are also con­sumers.

The more money work­ers have to spend, the more prod­ucts and ser­vices they will buy. Even Adam Smith, the fa­ther of lib­eral eco­nom­ics, said: “Con­sump­tion is the sole end and pur­pose of all pro­duc­tion; and the in­ter­est of the pro­ducer ought to be at­tended to only so far as it may be nec­es­sary for pro­mot­ing that of the con­sumer.”

But then Smith, much lauded by “free mar­ket” sup­port­ers, thought sup­ply and de­mand would some­how mirac­u­lously bal­ance. He did not un­der­stand that a sys­tem based on com­pe­ti­tion in the pur­suit of profit would re­sult in the ab­surd sit­u­a­tion of global over­ca­pac­ity and over­pro­duc­tion.

This is a re­al­ity that most economists and trade unions have also not taken fully into ac­count. And yet it lies at the core of the cur­rent and on­go­ing economic cri­sis.

The fact that in South Africa we have a de­clin­ing manufacturing base can be at­trib­uted to this. Across var­i­ous sec­tors, the lo­cal ca­pac­ity to pro­duce has been eroded by cheaper — of­ten sub­sidised — im­ports in a world awash with sur­plus.

And this in a coun­try with­out an ad­e­quate so­cial se­cu­rity net and where at least half of the na­tional work­force earns less than R3 100 a month. Per­haps as many as a third of men and women in work earn less than R2 000 a month. Yet most trade unions and hu­man rights groups es­ti­mate that a bare liv­ing wage in 2014 would be between R4 000 and R5 000 a month.

One of the sim­ple — some say sim­plis­tic — ar­gu­ments against a min­i­mum wage is that the ad­di­tional cost to busi­ness would be passed on to con­sumers. This, in turn, would re­sult in ris­ing costs across the board and min­i­mum wage earn­ers would fall back into poverty.

Such a sce­nario would be fea­si­ble if a rea­son­able min­i­mum wage were to be in­tro­duced to the cur­rent sys­tem with­out any other mea­sures.

So if, for ex­am­ple, a min­i­mum wage lifted large num­bers of men and women out of poverty, but the in­creased de­mand for goods boosted mainly im­ported items, this would be dou­bly wor­ry­ing.

To­day, the ANC is com­mit­ted to sup­port­ing a na­tional min­i­mum wage and gov­ern­ment has a vir­tual al­pha­bet soup of pol­icy acronyms – NDP (Na­tional Devel­op­ment Plan), NIP (Na­tional In­fra­struc­ture Plan), NGP (New Growth Path), Ipap (In­dus­trial Pol­icy Ac­tion Plan) and the MTSF (Medium-Term Strate­gic Frame­work).

Crit­ics, how­ever, point out that ei­ther in­di­vid­u­ally or in com­bi­na­tion, th­ese plans and poli­cies are still based on the same failed (neo) lib­eral the­o­ries.

And there is no se­ri­ous at­tempt to in­tro­duce not only a na­tional min­i­mum wage, but also labour-based em­ploy­ment to pro­vide the vast army of the un­em­ployed with work at a de­cent wage.

With­out a rad­i­cal change in poli­cies and more work with de­cent pay, the so­cial fab­ric of the coun­try will con­tinue to fray and tear.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.