Is it time to pay up?

Nedlac is handing off the minimum wage hot potato to a new body, writes Claire Bisseker

Government is creating a panel of seven academic experts to try to resolve, by October, the impasse over the introduction of a national minimum wage.

In SA, minimum wages vary by sector. In 2015, the median wage of all workers covered by these sectoral determinations was R2,447/month. In addition, trade unions and employers negotiate in bargaining councils the minimum wages for sectors like mining and manufacturing. These pay more than R4,000/month.

About 27% of workers are not covered by sectoral determinations, trade unions or bargaining councils. There is agreement that the current system is too complicated, patchy in its coverage, and that weak enforcement has resulted in low compliance. The advantage of one national minimum wage (NMW) is that it would be simpler and more equitable.

The problem is the wide gap between low minimum wages in agriculture and domestic work and high ones in mining and utilities, and how to harmonise them.

After 18 months of negotiations, the parties in Nedlac are deadlocked with labour favouring a national minimum of around R3,500/month, business arguing for R1,800/month and government somewhere between the two.

Their task hasn’t been made easier by two of SA’s top universities producing large bodies of diametrically opposed research.

Wits University’s National Minimum Wage Research Initiative finds that an NMW, if set at a meaningful level above the lowest

‘‘ A NATIONAL MINIMUM WAGE IS NOT A ONE-WAY BET WHERE ALL THE CONSEQUENCES ARE POSITIVE HAROON BHORAT

sectoral minimum wages, could reduce working poverty and inequality in SA while lifting income, spending, productivity, investment, output and growth. And it could do so without causing significant job losses.

It says an NMW beginning between R3,500 and R4,600 and escalating to R3,900 and R5,100 after five years could add about 2.1% to SA’s GDP growth rate every year on average from 2016 to 2025.

University of Cape Town (UCT) research finds, however, that a minimum wage of R3,400 could cause more than 500,000 job losses even under moderate assumptions (see table). Moreover, any beneficial impact on wage inequality and poverty would be relatively modest, given that many of SA’s poorest households have very few or no wage earners.

“In a country that is so job-starved, choosing a national minimum wage which is going to cause unemployment is deeply problematic,” says Prof Haroon Bhorat, lead author and co-ordinator of UCT’s research.

“Wits has taken a particular view,” he adds. “They’ve taken only evidence of where the introduction of an NMW would have a positive impact and run a public campaign based on that. An academic view would have to consider all the evidence. For SA it suggests you can have disemployment effects.”

He is referring to the fact that almost 200,000 jobs were shed in agriculture between September 2002 and September 2003, when a minimum wage was introduced in the sector for the first time. It pushed up wages by about 17%.

“A national minimum wage is not a oneway bet where all the consequences are positive,” says Bhorat. “The market will bite back and you will see employment losses. You can’t put your head in the sand and pretend it won’t.”

Professor Imraan Valodia, Wits’ dean of commerce, law & management, is expected to chair the new panel — though he is wait-