Facts a casualty as wage pegged
The vaunted report proposing a national minimum wage of R3 500 per month shows every sign of being a political stitch-up, writes
THE one thing you can be sure of when it comes to the minimum wage is that “experts” are only giving you one side of the story.
You have to tread carefully and always ask for the data.
A case in point is a study by university “experts” in hamburger outlets in New Jersey.
The study, by Princeton economists David Card and Alan Krueger, showed employment went up after the imposition of a minimum wage.
But other studies of the same hamburger joints, by David Neumark (University of California) and William Wascher (the US Federal Reserve), showed jobs were lost.
Both parties subsequently revisited their initial positions.
As The Economist reported: “Messrs Card and Krueger no longer insist that the higher minimum wage pushed employment up; they have settled for saying that . . . it ‘probably had no effect’.”
In the case of the Nedlac minimum wage panel, the conclusion was reached that we should have a national minimum wage set at R3 500 a month.
But as economist Mike Schüssler has pointed out, this would effectively put South Africa at the third-highest minimum wage for which the Organisation for Economic Cooperation and Development has published data. At 92.5% of the full-time median wage, it “beats all developing countries that on average have a minimum wage of 51% of the median wage”.
Only two developing countries in the world have a higher minimum to median wage rate — and no developed country has a ratio anywhere close to 92.5%. Even Brazil sits at only 78%.
The panel’s report includes no information on how it reached its conclusions.
The R3 500 proposal would, in the panel’s words, “maximise benefits to the poor and minimise any possible disemployment effects”. That’s SELLING LABOUR: Cosatu, which has long campaigned for a national minimum wage, rewarded Deputy President Cyril Ramaphosa with its endorsement for ANC president just days after he tabled a report proposing a R3 500 wage code for “It won’t cost any jobs”.
On what basis does it reach this conclusion? No one knows.
Yet it is common cause that, for example, in 2003 we lost many jobs in the agricultural sector when the minimum sectoral wage was introduced.
The panel appears to have relied on three sets of research modelling of potential outcomes of a national minimum wage in South Africa: modelling done at the University of Cape Town, the University of the Witwatersrand and the National Treasury. The panel seems to not accept the UCT model, makes no comment on the Treasury model and seems to love the Wits model, which predicts “a fairly optimistic view” of the impact of a minimum wage of R3 500.
Why not comment on the Treasury model?
“The National Treasury . . . model reaches a similarly pessimistic view as that of the [UCT model]. Based on a minimum wage of R3 189 in 2014 numbers, the National Treasury concludes that approximately 715 000 jobs will be lost . . . [and] that GDP will fall by 2.1%.”
Surely if the Treasury has massive concerns, they should not be ignored?
Even more surprisingly, Finance Minister Pravin Gordhan has issued a press release welcoming the minimum wage report. How very odd.
Cosatu endorsed Deputy President Cyril Ramaphosa as its preferred ANC leadership candidate a mere four days after he tabled the minimum wage report.
It is further concerning that the only economic modelling that appears to have been accepted by the panel was the study done by students at Wits, where the chairman of the minimum wage panel is a dean of faculty.
All of this makes it very difficult not to suspect a political stitch-up.
With 47.3% of current workers earning below the proposed wage, how are we to conclude that there will be no job losses?
Without the proposed national minimum wage, the economy is flat-lining with latest figures showing nine million people unemployed, including the 136 000 added to the unemployment queue in the last quarter alone.
Under these circumstances, does anyone believe that there will be no job losses?
Surely we should be more cautious if we are making such a significant change to the labour regime in South Africa.
The DA is proposing just such a cautious approach: a sectoral minimum wage instead of a national minimum wage.
There are about 15 sectors not covered by sectoral determinations. Each of these should be brought into line.
This will result in a total of 26 sectoral minimum wages. All of these should be set by a minimum wage panel.
This panel must not be subject to political interference from, say, presidential candidates or cabinet ministers.
It should also not be unduly influenced by big business or big labour organisations.
The official proposal forces a one-size-fits-all wage that is utterly unworkable.
Ollis is a DA MP and the party’s spokesman on labour. Follow him on Twitter @ianollis
Surely if the Treasury has massive concerns, they should not be ignored?