UNION MIL­I­TANCY: Shin­ing a spot­light on

Finweek English Edition - - COLUMN - GRETA STEYN

“Those who

try to black­mail us

about job losses can go and jump

into the near­est pool”

THE UNIONS’ “Win­ter of dis­con­tent” has so far been par­tic­u­larly fe­ro­cious and South Africa’s strike sea­son isn’t over yet. The wave of strikes has shone the spot­light on a sen­si­tive is­sue: the large gap be­tween work­ers’ and ex­ec­u­tives’ wage in­creases.

The Na­tional Union of Me­tal­work­ers’ of SA (Numsa) gen­eral sec­re­tary Irvin Jim says: “SA is the most un­equal coun­try in the world in terms of in­come. The most con­crete way to ad­dress that... is to close the wage gap.” Numsa de­manded a 13% pay hike, while em­ploy­ers of­fered be­tween 4% and 7%.

Numsa’s strike was joined by the Chem­i­cal, En­ergy, Pa­per, Print­ing, Wood and Al­lied Work­ers’ Union, which also sought a 13% pay hike. The unions – both af­fil­i­ated to Cosatu – said they de­manded their wage in­creases match those of their man­agers.

To ar­gue their case, the unions are us­ing re­search con­ducted by PwC on the re­mu­ner­a­tion of ex­ec­u­tive direc­tors. The re­search found that, for large cap com­pa­nies, ex­ec­u­tives’ to­tal guar­an­teed pay in­creased by 23,3% to R4,8m at the me­dian. The most sig­nif­i­cant in­crease was in the ser­vices sec­tor, where the me­dian to­tal in­creased by 42%. For medium cap com­pa­nies, to­tal guar­an­teed pay­ments also in­creased sub­stan­tially, ris­ing above pre-re­ces­sion lev­els.

Other in­for­ma­tion sources in­di­cate a large wage gap. The Labour Re­search Ser­vice re­ports a low wage worker would have to work 145 years af­ter 2009 to earn what an ex­ec­u­tive di­rec­tor earns in one year. In­ter­est­ingly, that was bet­ter than in 2008, when the wage gap was 203 years.

Of course, Jim is wrong to ar­gue nar­row­ing the wage gap would re­duce in­equal­ity in SA. It won’t do so if higher wages put more peo­ple out of work, mak­ing them de­pen­dent on in­ad­e­quate hand­outs that se­verely lower their in­comes.

How­ever, the PwC sur­vey also pro­vided food for thought. If the in­crease in ex­ec­u­tive direc­tors’ re­mu­ner­a­tion at 23,3% bears no re­la­tion to the 4,6% in­fla­tion rate, why should work­ers be happy with in­fla­tion-re­lated pay, es­pe­cially when they be­lieve SA’s in­fla­tion rate un­der­states the true state of af­fairs?

Glob­ally, there’s been a back­lash against “ex­ces­sive” ex­ec­u­tive re­mu­ner­a­tion, es­pe­cially at banks. That led to caps be­ing placed on bankers’ bonuses in some coun­tries. But it’s im­por­tant to note banks are a spe­cial case. They re­ceived tax­pay­ers’ money, so tax­pay­ers rightly had a say in bankers’ earn­ings.

Wage in­equal­ity isn’t lim­ited to SA, de­spite this coun­try’s famed in­equal­ity. No­bel lau­re­ate Joseph Stiglitz points out United States-style dereg­u­lated cap­i­tal­ism brought greater ma­te­rial well-be­ing only to the very rich­est in the world’s rich­est coun­try. Over a 30-year pe­riod in the US most Amer­i­cans saw their real in­comes de­cline or stag­nate year af­ter year.

Stiglitz doesn’t say this, but rel­a­tive to SA the US has a low un­em­ploy­ment rate. It seems the price to be paid for low un­em­ploy­ment is high wage in­equal­ity. There’s a pos­i­tive re­la­tion­ship be­tween low wages and em­ploy­ment. But the unions don’t want to hear that. Cosatu gen­eral sec­re­tary Zwelinz­ima Vavi says: “Those who try to black­mail us about job losses can go and jump into the near­est pool.” That’s not the kind of in­tel­lec­tual en­gage­ment any­one would like to have with the unions about the is­sue.

Eco­nomic De­vel­op­ment Min­is­ter Ebrahim Pa­tel’s New Growth Path seeks to cap salaries and wages. It sug­gests pay and bonuses for se­nior man­agers and ex­ec­u­tives earn­ing more than R550 000/year be capped.

If you find wage in­equal­ity re­pug­nant, you should al­ways re­mem­ber the top earn­ers are the wealth cre­ators of this coun­try. True, that isn’t al­ways the case – but it’s up to share­hold­ers to point that out. But the wealth cre­ators should be re­warded, be­cause they’re cre­at­ing the prof­its that pro­duce the rev­enue Gov­ern­ment uses for its so­cial wel­fare net.


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