National basic wage a pro, con balancing act
Ramaphosa advisers to consider macro gains of minimum salaries
AS a panel set up by Deputy President Cyril Ramaphosa to advise on the national minimum wage held its first meeting this week, Moody’s ratings agency said it was monitoring the outcome of the discussions.
The national minimum wage itself is not a key driver of a ratings assessment, but “in the case of South Africa, what matters is if and how it would affect key drivers of the rating, which are the growth recovery, stabilisation of government debt ratios and the strength of South Africa’s institutions”, Moody’s Investors Service said this week.
It said it was following developments as part of broader structural measures, specifically labour reforms that the government had planned to undertake to stimulate growth, projected to be 0% this year.
Ratings agencies Fitch and S&P Global Ratings cautioned recently against the implementation of a minimum wage ahead of local government elections this month. This would have amounted to a populist policy to gain votes. Fitch also said redistributive regulatory policies could undermine growth.
Fitch and S&P could not provide additional comment this week.
Asked about whether the implementation of a national minimum wage would be positive or negative for the economy, Moody’s said: “It will be about specifics and how they will balance social benefits against potential employment losses, what other labour market reform measures are introduced and what the overall impact of the various measures will likely be on economic growth.”
It said the minimum wage may incentivise some groups to be more productive or seek employment if they were currently unemployed.
If set too high, the minimum wage could be disadvantageous to “outsiders” who are unemployed or just entering the market and it would deter small and medium companies from hiring new staff or maintaining current staff levels, “given that they tend to employ a high share of lessskilled workers”.
Negotiations on a minimum wage — involving business, labour and the government — have been held over the past 18 months. Labour is demanding a minimum wage of between R4 125 and R5 276 a month; business wants R1 800.
The panel, led by Professor Imraan Valodia of Wits University, met for the first time on Thursday.
Other members are macro strategist Mamokete Lijane, Professor Murray Leibbrandt, economist Dr Patrick Belser, Oxfam project manager Ayabonga Cawe, law professor Debbie Collier and Dr Siphokazi Koyana, a market-research and skills-training expert.
Cosatu, which welcomed the appointment of the panel, said a single national minimum wage was an important component to resolve “unacceptable levels of working poverty and wage inequality”.
Labour economist Andrew Levy expected the panel to not recommend a minimum wage lower than R1 800, the agricultural sector minimum wage.
“Bear in mind, people in agriculture very often get a home or somewhere to live and a bit of land on which they can run a cow or grow a mealie.
“If you grossed it up it’s more than that but that’s the kind of level I anticipate it will come in at.”
The panel has to walk a tightrope to ensure the minimum wage is not too high that it induces job losses. But if it is too low it may have no effect on employment. “In the South African labour market, where there are so many people who are desperate, who will work for anything, and where we have employers who will ignore the law, it will encourage noncompliance,” Levy said.
The implementation of sectoral minimum wage determinations in 11 industries in South Africa had benefited workers in the wholesale and retail, agriculture and domestic worker sectors, where employment has not declined significantly following the introduction of minimum wages.
Research undertaken three years ago by the Development Policy Research Unit at the University of Cape Town showed that the introduction of minimum wages did not have a statistically significant negative effect.
Monet Durieux, a manager in Stats SA’s labour unit, said this week that changes in employment levels in surveys conducted by Stats SA could not be directly attributed to changes in sectoral determinations or minimum wages “as other factors may be at play”.
Xhanti Payi, an economist at Nascence Advisory and Research, said work had not declined in the mining sector, for example, despite wages increasing.
Although there were job losses in the platinum and gold sector, jobs were being created in cement and rock drilling. “So that’s where the jobs are coming from.”
Levy said there were job losses in the agricultural sector after strikes by workers.
Research published last month by Wits argued that economy-wide output would be 2.1% higher if a monthly minimum wage were introduced at levels of between R3 500 and R4 600 between 2016 and 2025.
About 5.5 million workers earn below R4 125 — the working poor line — and cannot meet their basic needs, the research showed.
A UCT study said a minimum wage of R3 400 would cause about 500 000 job losses.
The panel is expected to give its recommendations in October.
About 5.5 million workers earn below R4 125 and cannot meet basic needs