R3500 wage a step to moral economy
To strengthen it, the minimum wage must be linked to other policies and interventions
We read with disappointment the piece by John Spiropoulos (“The minimum wage and the moral economy”, January 6) on the proposal by the advisory panel of the National Economic Development and Labour Council (Nedlac) for the introduction of a national minimum wage.
Spiropoulos suggests that the panel’s report is a “compromise” and takes no account of the specificities of young adults in the labour market.
Although we agree with a lot of what Spiropoulos says about the nature of the labour market, he incorrectly makes a link between his own research and the panel’s proposed R20 an hour as the first national minimum wage and then, without any substance, suggests that we ignored the issues of young adults.
Poverty in South Africa is undisputed. The panel wrote extensively on this in the report. The panel also received input from a wide range of actors in vulnerable sectors and considered research on, among others, youth, care workers, small businesses and informal workers.
The proposal from the panel is crafted precisely with these people in mind. The report is available at
The panel’s view is that the trajectory of economic and labour market policies is not addressing the challenges we face. We need a radical change of policy.
We are fully aware of the precarious nature of employment in many of the sectors, coupled with the alarmingly high unemployment level. But our brief was strictly to look at a national minimum wage and this is the area we focused on.
It is worth remembering that the national minimum wage is seen primarily as a poverty relief measure and not as a job creation tool.
The experience around the world is that a national minimum wage has had a positive effect on poverty alleviation and, in some countries, on employment growth.
It is generally accepted that a national minimum wage should aim to have little or no disemployment effects and is not used as a measure to create jobs. As highlighted by the International Labour Organisation (ILO), the national minimum wage should not be used in isolation but should be linked to other progressive policies that bring about meaningful socioeconomic change.
The panel noted the advice from the ILO and dedicated a chapter in the report (Chapter 8: “Further measures to address inequality and poverty”), in which we suggested other policy issues that need to be considered to strengthen the effect of a national minimum wage.
These include:
as well as physical and digital infrastructure support for small businesses.
These areas were beyond the brief of the panel but we recognised the importance of a holistic approach that includes research and discussion on issues beyond the national minimum wage.
Chapter 8 was a demonstration of our understanding that the national minimum wage on its own will not make the necessary changes to the South African landscape that we so desperately need.
Which brings us to the level. The panel had the invidious task of developing a clear proposal on the national minimum wage in a time of extremely low economic growth, high unemployment and rampant poverty.
We were also conscious that poverty does not only affect the unemployed but that there are also a great many workers who fall into the category of “working poor”.
We believed that to expedite the introduction of this progressive policy it would be more prudent to make decisive proposals, which led us to a rate of R20 an hour, rather than a number of options to send back to the negotiation table, or a range that would be more complicated. Anyone would agree that introducing a new far-reaching policy in a time of strong growth is hard enough; in a time when the economy is not growing, it is incredibly difficult.
We agreed with the view of the social partners that this has the potential to make a fundamental difference to many people.
The proposed level of R20 an hour will affect no fewer that 47% of workers, which raises a worrying picture of current earning patterns in the labour market. That alone has been a useful exercise in that it got the nation talking about the widespread levels of extremely low pay.
We must repeat what we have said on numerous occasions — nobody believes R20 an hour (roughly
The panel could have taken the populist approach and set the level much higher but we believed that this would run the risk of having many businesses going off the radar and falling outside the system, which would benefit no one. At levels above R20 an hour we believe that the risks of higher unemployment and noncompliance are a serious concern. We believe R20 an hour strikes the balance between implementation of a bold and progressive policy but also ensures coverage and implementation is as wide as possible.
We believe we have, as much as we were able to predict the future, protected jobs that exist and any higher wage level at this initial stage would probably result in high levels of noncompliance and greater jobs losses. This would be a great injustice to the 47% of workers we are targeting.
The anecdotes Spiropoulos mentions are familiar to the panellists.
Our view is that community support and ubuntu are to be celebrated and not to be discouraged.
It is our belief that after the first review we will have a much better picture of the dangers and benefits of a national minimum wage.
We hope that by this time South Africa will be on a firm growth path, which will allow for an increase in the national minimum wage. We also trust that the social partners responsible for policy development will take seriously the recommendations in Chapter 8 and ensure that the national minimum wage becomes part of a package of progressive policies to support the poor.
In the meantime, rather than being a bad compromise, we see the proposed national minimum wage as the first step towards building a progressive and moral economy that serves to bring all South Africans into — at the very least — decent employment that will allow them to enjoy a living wage.