UNION MILITANCY: Shining a spotlight on
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.