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
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