What is the true cost?

The lat­est re­search sug­gests that any min­i­mum wage will cost jobs, but should boost eco­nomic growth and taxes – that’s only if em­ploy­ers bother to com­ply

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week, claimed the talks were at an “ad­vanced stage”, aside from the fact that there was no agree­ment on the level of the min­i­mum wage or the mech­a­nism through which it was sup­posed to be set.

Th­ese two is­sues are re­ally the only im­por­tant ones, cre­at­ing the im­pres­sion that noth­ing of sub­stance has re­ally been agreed to yet.

Cosatu has pushed for a wage of at least R4 500 or up to R6 000 – a level far above what most work­ers are cur­rently paid. It is also fight­ing the ap­par­ent plan to have the min­i­mum wage set by a tech­no­cratic panel of ex­perts.

Ni­coli Nat­trass and Jeremy Seek­ings, aca­demics at the Univer­sity of Cape Town (UCT) with years of ex­pe­ri­ence in labour mar­ket re­search, this week ar­gued that the Em­ploy­ment Con­di­tions Com­mis­sion, which sets the coun­try’s ex­ist­ing sec­toral de­ter­mi­na­tions, should also set the min­i­mum wage. A mech­a­nism for this is al­ready writ­ten into labour law.

Divorc­ing the wage from the com­mis­sion’s process from sec­toral de­ter­mi­na­tions cre­ates the pos­si­bil­ity of a pow­er­ful new tool for mo­bil­is­ing for wage in­creases on a na­tional and cross-sec­toral ba­sis by unions and other groups.

This week, Nat­trass and Seek­ings wrote on Groundup.org.za that R2 700 looked more or less like the min­i­mum wage South Africa would adopt if it fol­lowed in­ter­na­tional prac­tice in set­ting it as a ra­tio to the av­er­age and me­dian wages al­ready be­ing paid in the econ­omy.

R2 700 is also the level where South Africa’s ex­ist­ing patch­work of 124 sec­toral min­i­mum wages tend to con­verge.

They, how­ever, added that there was a case to be made for set­ting it lower in the in­ter­est of job cre­ation through lower wages.

Ar­gu­ments for a high or a low min­i­mum have only one thing in com­mon – the as­sump­tion that peo­ple are ac­tu­ally paid the min­i­mum wage.

Ha­roon Bho­rat, an­other econ­o­mist at UCT, has been re­search­ing the ex­tent to which em­ploy­ers have ev­i­dently ig­nored min­i­mum wages.

A re­cently pub­lished up­date of this re­search, for in­stance, shows that there is a ten­dency to “par­tially com­ply” with hikes in min­i­mum wages. Wages go up, but stay be­low the ac­tual le­gal min­i­mum in many places.

More than half of farm work­ers were paid less than the then min­i­mum in their sec­tor in 2007, ac­cord­ing to his anal­y­sis of of­fi­cial labour force sur­veys up to that point. It is not hard to get away with it ei­ther, as the prob­a­bil­ity of Cape farm­ers be­ing vis­ited by a labour in­spec­tor that year was 11%, ac­cord­ing to Bho­rat.

In­ter­view with the labour min­is­ter on page 2

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