Wage practices are unsustainable

Your feature article, “Big Wage Worries” (Features, August 3-9), refers. It focuses on a proposal made by the employers in the metal and engineering industry for a lower entry wage for new hires, but fails to mention their further proposal that wage increases should be on the agreed rand minimums for each grade instead of on the current practice of granting a percentage increase on each employee’s actual wage.

Your article states that the Steel & Engineering Industries Federation of Southern Africa (Seifsa), one of the employer organisations involved in the negotiations, by its own admission “walked away” from both of these proposals in negotiations with the National Union of Metalworkers of SA.

This was most unfortunate. I was the executive director of Seifsa for more than 20 years and in 1992 I made the mistake of supporting a proposal to change the industry’s main agreement from basing wage increases on grade minimums to percentage increases on actual wages. This change was introduced as a quid pro quo for a new clause in the agreement aimed at protecting companies against plant-level bargaining — from having to negotiate on wage increases over and above those contained in the main agreement at individual company level. One of the two employer proposals referred to above was to revert to the pre-1992 arrangements.

The net effect of this change over the years has been to increase real wages in the industry to levels that are now unaffordable to many companies. The numbers in your article speak for themselves: 140,000 jobs lost in the industry in the past 10 years and 25,000 lost over the past year alone. While not all of these job losses can be ascribed to high wage levels, a substantial number most certainly can.

Many companies in the industry continue to support the current wage agreements only very reluctantly, for the reasons that they at least protect them from having to bargain at plant level and that their competitors in the industry have to pay the same high wage levels. At the same time, in order to survive they are obliged to reduce employment levels, including, of course, by increasing mechanisation.

But for how much longer can this go on? Simply conceding to trade union pressure and continuing with current wage practices in the industry will worsen the problems, adding to the numbers of unemployed, with few new employers being willing to enter this sector and fewer companies able to survive. The employer proposals were intended to begin to address the serious crisis facing this key industry, and they need to be pursued much more vigorously.