National minimum wage debate

National minimum wage debate

KATHERINE ATKINSON

South Africa’s national minimum wage (NMW) will soon increase from R11 per hour to R20 per hour, which equates to R3500 per month. The NMW was meant to be implemented on 1 May, but there is a delay since the bill is currently with the labour department for revision, says Mail and Guardian.

The new NMW is intended to improve living conditions of the working class. However, a worker needs to earn at least R26 per hour to break the cycle of poverty for themselves and their dependents, says Mail and Guardian. Several federations are pushing for an NMW of R26 per hour, or R4750 per month, but they believe that the new NMW is a step in the right direction. These include federations such as the Federation of Unions of South Africa (Fedusa), the Congress of South Africa Trade Unions (Cosatu) and the National Council of Trade Unions (Nactu). Fedusa stated that they are “keenly aware that a R3500 a month minimum wage is less than an ideal living wage but will certainly lift an estimated 4.5 million workers currently earning below that amount out of abject poverty,” says Fin24.

On the contrary, organisations such as South African Federation of Unions (Saftu), National Union of Metalworkers of South Africa (Numsa) and the EFF believe that R20 per hour is insufficient. The leader of Saftu, Zwelinzima Vavi, has called the NMW a “slave wage” and says that R5400 would be more satisfactory, says Fin24. Mail and Guardian has reported that Saftu “utterly reject the argument that this [National Minimum Wage] bill should be supported because R20 an hour is ‘better than nothing’,” as it “will still leave workers trapped in poverty”. According to Mail and Guardian, Numsa have called the NMW an insult which “takes the black and African working class back to the racist apartheid faultline”. On Wednesday 25 April protest action was taken by these groups to oppose the NMW. Here Vavi challenged politicians to live on R20 per hour.

On Freedom Day, President Cyril Ramaphosa admitted that the NMW is not a living wage, but rather a sign of progress. “Some people have argued that the starting minimum wage of R20 an hour is not a living wage. They are correct. Some argue that the national minimum wage will not end income inequality. They too are correct,” said Pres Cyril Ramaphosa.

One of the most heated debates surrounding the new NMW is whether it will escalate unemployment. Head of the Economics Department at the University of Pretoria, Prof Koch, says that “economic theory would argue that a minimum wage, when there are such large levels of unemployment, is simply not a good idea”. Prof Koch says that economic theory also argues that workers “should be hired, as long as they ‘earn’ more for the company than they cost.” Focus should therefore be on creating an environment where workers are able to earn at least R20-26 per hour for their businesses. Prof Koch adds that “we do not really know enough to say for sure how many workers might lose their job compared to how many workers would receive a pay increase, because of the minimum wage.”

In attempts to counter potential unemployment in vulnerable sectors, different tiers of implementation are to be introduced, says Mail and Guardian. For 2018 the NMW will be R18 per hour for farmworkers, R15 per hour for domestic workers and R11 per hour for those on the Expanded Public Works Programme. After an estimated two-year transitional period, the NMW of R20 should be reached. This coincides with what Prof Koch believes to be the best approach to implementing the NMW. Koch says that it would be most effective to offer different minima with annual increases in different provinces, as well as some opt-outs in some areas but not others. Prof Koch says that this would offer “society and economists the opportunity to examine the effects of minimum wage laws on unemployment, living standards, or maybe reductions in crime, amongst other things.” 

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