The ‘Pig­ment pre­mium’

Is there grow­ing an­i­mos­ity to­wards black pro­fes­sion­als who earn marginally higher salaries than their white coun­ter­parts?

Finweek English Edition - - Openers - BY SIZWEKAZI JEKWA sizwekazij@fin­week.co.za

LAST WEEK I RE­CEIVED a very short but thought-pro­vok­ing email from a friend, who posed a very sim­ple but con­tro­ver­sial ques­tion. He asked: Is it right that em­ploy­ers should pay a pre­mium for skilled black labour, which may re­sult in a sit­u­a­tion where two peo­ple do­ing sim­i­lar work are be­ing paid very dif­fer­ent salaries?

I thought about that for the whole week, be­cause – let’s face it – it’s a very big ques­tion in South Africa at the mo­ment and the crux of all con­tro­versy con­cern­ing em­ploy­ment eq­uity pol­icy. “Af­ter all, isn’t af­fir­ma­tive ac­tion just re­verse apartheid?” I’ve heard some of my white col­leagues ask. As a black wo­man I’m pretty sure you know what my an­swer is… I do think it’s ac­cept­able. But not for the rea­sons you think.

Let’s put aside the moral and so­cial rea­sons for af­fir­ma­tive ac­tion for a mo­ment and try to ig­nore the dam­ag­ing ef­fect of apartheid on this coun­try’s black pop­u­la­tion. Let’s also for­get about the hun­dreds of years where white peo­ple earned higher salaries by pure virtue of the fact that they had less pig­men­ta­tion than oth­ers, and fo­cus for a minute on the eco­nomic rea­son­ing.

Why is it so im­por­tant to in­clude more black peo­ple into the main­stream econ­omy? The sim­ple an­swer is that black peo­ple (which, for the pur­pose of this col­umn, in­cludes coloureds, In­di­ans and Asians) con­sti­tute the ma­jor­ity of this coun­try’s pop­u­la­tion. For any coun­try to de­velop and pros­per, the ma­jor­ity of that coun­try’s peo­ple must be em­ployed and skilled so that they in­crease pro­duc­tion and con­sump­tion within that econ­omy. Im­pov­er­ish­ing your pop­u­la­tion does noth­ing for de­vel­op­ment.

Ex­clud­ing the ma­jor­ity of SA’s pop­u­la­tion from par­tic­i­pat­ing in the econ­omy was one of the big­gest con­trib­u­tors to apartheid’s down­fall. So ed­u­cat­ing and em­ploy­ing as many black peo­ple as pos­si­ble clearly makes per­fect eco­nomic sense.

If we ac­cept that ar­gu­ment and the need for em­ploy­ment eq­uity poli­cies, we can now deal with the main ques­tion it­self: Is it right that skilled black em­ploy­ees should earn more than white em­ploy­ees, even when they’re do­ing sim­i­lar work?

Once again, there’s no sim­ple an­swer. But I would say that it’s ac­cept­able and un­der­stand­able un­der the cir­cum­stances. The logic be­hind my an­swer is one of the few pieces of knowl­edge I’ve re­tained from univer­sity and use reg­u­larly in my ev­ery­day ex­is­tence: de­mand and sup­ply the­ory.

I love that piece of eco­nomic the­ory, as it pro­vides a sim­ple ex­pla­na­tion to most mar­ket pric­ing trends we see in ev­ery­day life. Wher­ever there’s a short­age of some­thing in an un­re­stricted, free mar­ket, the price goes up. When there’s an over­sup­ply of any­thing in a mar­ket, the price goes down.

As we all know, apartheid did a pretty good job of en­sur­ing that there were very few black peo­ple who had a de­cent ed­u­ca­tion, so nat­u­rally there aren’t enough black skills to go around. So the price goes up. But the beauty of high prices (and high prof­its) is that they en­cour­age new en­trants to the mar­ket. And as long as they are no ma­jor bar­ri­ers to en­try, sup­ply will in­crease and, over time, equi­lib­rium is reached that re­flects the in­trin­sic value of the com­mod­ity in ques­tion.

So in the case of black skills, the high pre­mi­ums will do two things: they will en­cour­age more black peo­ple to gain skills and ed­u­ca­tion be­cause re­turns on ed­u­ca­tional ex­pen­di­ture will be worth­while; they’ll en­cour­age em­ploy­ers to skill more blacks within and out­side the com­pany through bur­saries, schol­ar­ships and skills de­vel­op­ment pro­grammes so that they don’t have to bid for scarce re­sources on the open mar­ket.

The ul­ti­mate re­sult will be that the pre­mium on black salaries will dis­ap­pear.

In con­sid­er­ing what my white friends call the “Pig­ment pre­mium”, let’s re­mem­ber how dif­fi­cult it is for the av­er­age black per­son to ob­tain a pro­fes­sional qual­i­fi­ca­tion in the first place. Not only do they have to over­come the in­fe­rior ed­u­ca­tion they re­ceive in town­ship and rural schools, they must also find a way to fi­nance their ed­u­ca­tion.

Frankly, any black per­son who has man­aged to achieve a pro­fes­sional qual­i­fi­ca­tion de­serves a boost due to the un­be­liev­able odds they’ve had to over­come to get there. Most black pro­fes­sion­als (though there are ex­cep­tions) are first gen­er­a­tion pro­fes­sion­als. They have no par­ents to sup­port them fi­nan­cially while they study, which means they’ll in­cur some sig­nif­i­cant debt be­fore they’ve even earned their first pay cheque.

And if they some­how man­age to over­come all the fi­nan­cial and ed­u­ca­tional ob­sta­cles and qual­ify, they’ll still have to sup­port their par­ents, plus any other brothers and sis­ters they may have. And things will only be­come more dif­fi­cult once they have a fam­ily of their own, which they will also need to sup­port on that same salary.

I can’t tell you how many young women I know start­ing out in their ca­reers who haven’t had chil­dren of their own yet are sup­port­ing chil­dren back home while pay­ing off huge univer­sity debts.

One of my own close friends is pay­ing R12 000/year to­wards one of her baby sis­ter’s school fees (she also has to sup­port two other younger sis­ters). At the same time she’s pay­ing off a Gov­ern­ment loan she re­ceived to study. Al­though I sus­pect she’d love to get mar­ried in the near fu­ture, she can’t even con­sider it be­cause she and her boyfriend both have fam­ily to sup­port.

The re­sult is that most black pro­fes­sion­als aren’t even en­joy­ing the full ben­e­fit of their marginally higher salaries. I bet if you asked your black col­leagues some of them would gladly switch places with their debt­free white coun­ter­parts any day – even if it meant tak­ing a pay cut.

I worry about the ten­sion this is­sue is cre­at­ing be­tween black and white peo­ple, but per­haps it’s im­por­tant to re­mem­ber that there’s a greater pur­pose here. Em­ploy­ment eq­uity isn’t some kind of “re­venge” on the op­pres­sor by the op­pressed. It’s a strat­egy to en­sure that the mess cre­ated by the pre­vi­ous es­tab­lish­ment isn’t per­ma­nent.

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