Logic missing in debate on pay

Plan should not worsen problem it’s meant to fix

THE recommendations of the national minimum wage advisory panel, chaired by our deputy president and now Cosatu’s presidential candidate, Cyril Ramaphosa, set tongues wagging this week, with many unions and opposition parties criticising the R20 an hour (R3 500 a month) as too low.

According to reports, this all started with Nedlac convening a labour-relations indaba in November 2014, at which government, business, labour and community representatives agreed to “engage on the modalities of introducing a national minimum wage in South Africa”.

The task teams established to look at this deadlocked several times. Back then, business proposed a R1 900 monthly salary, while labour wanted a threshold between R3 750 and R4 500.

But what exactly are we trying to achieve by setting a national minimum wage? What is the problem we are seeking to solve with this intervention, and is this the solution to that problem? Do we have a shared understanding of what a national minimum wage means, as opposed to a living wage or the “right” wage? And, finally, who pays this wage, and can they afford it?

By definition, the minimum wage is the lowest remuneration that employers may legally pay to employees. It is not the target wage, nor the living wage, nor the right wage. It is the minimum wage, the lowest you are allowed to pay.

It follows that employers are expected to pay more than this wage when remunerating their employees. This raises the question: why are we debating whether it’s enough, since, by definition, it cannot be enough — it’s meant to be the lowest?

Well, perhaps an uncomfortable truth is rearing its head in this debate. The reality is that South Africans do not trust their employers to treat the minimum wage as the lowest pay allowed; instead, they are likely to treat it as a target.

I don’t think you can blame them, either. Look at BEE. More than 20 years ago, government legislated a minimum of 25% black ownership for South African companies.

This was followed by a plethora of BEE deals at 26%, 25.1% and even 25.01%. What was the message? Do the very minimum, tick the box and comply.

Therefore, in a context of distrust, the temptation is for social partners to set the minimum as high as possible — because they know that it will soon become the target or as in the case of BEE, the maximum.

The advisory panel’s report confirms that the national minimum wage is a means to close the wage gap and therefore overcome poverty.

The purported logic is that if we, through legislation, force every employer — big, small, corporate or domestic — to pay its staff more, we will make society less unequal.

The logic incorrectly assumes that all employers can afford to pay this minimum wage.

According to the advisory panel, there is no evidence of small businesses paying their employees less than larger companies, and start-ups should comfortably afford the wage. I wonder which small businesses spoke to the panel for it to conclude that “most small businesses will be able to adjust”. This is simply not true.

But perhaps by far the most poignant example of the potential negative impact of a minimum wage relates to domestic workers.

In major metropolitan municipalities and cities, helpers currently earn a minimum of R11.44 an hour, or R2 230.70 a month. The proposal from the panel is that all sectoral minimum wages be abolished and one national rate apply to the whole country, which in itself is debatable logic.

For domestic workers, this will be 70% of the proposed rate of R20 an hour, which would be an immediate increase of 22% in remuneration for domestic workers.

This higher wage must also be paid by the single mother living in a modest apartment, where she employs a helper to care for her children while she is at work. She, too, must pay.

Of course we need to fix inequality. Of course we need to reverse the ugly legacy of exploitation in the workplace.

All the more reason for us to ensure that our interventions solve the problem, not unwittingly exacerbate it.

Khumalo is the chief investment officer of MSG Afrika Group and presents “Power Business” on Power 98.7 at 5pm, Monday to Thursday

It must also be paid by the single mother living in a modest apartment