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Minimum wage: Business no-show raises hackles

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The minimum wage being discussed is meant to protect farm workers, like Jonathan Arendse (right) and others who are most vulnerable, against economic exploitation

PHOTO: Lerato Maduna
The minimum wage being discussed is meant to protect farm workers, like Jonathan Arendse (right) and others who are most vulnerable, against economic exploitation PHOTO: Lerato Maduna

Big business came under fire this week for skipping an important minimum wage event.

The business and government-led teams representing Nedlac – the consensus-seeking body comprising government, business, ­labour and civil society – declined to attend a symposium on the single national minimum wage that was held at the University of the Witwatersrand.

This highlighted the divide that has deadlocked Nedlac talks on the establishment of a single national minimum wage.

This deadlock means millions of vulnerable and poorly paid local workers will continue to be left out of the net that a national minimum wage would otherwise provide.

Vanessa Phala, a Business Unity SA (Busa) director and part of the business team in the Nedlac talks, said the no-show at the symposium was because of a simple scheduling clash.

“Busa could not attend the symposium because we had our own social and transformation policy committee,” she said.

Talks at Nedlac on the national minimum wage have halted despite an unofficial mandate to have something ready for President Jacob Zuma to announce in his state of the nation address on Thursday.

Everything points to business and government eyeing a wage floor that is worlds apart from the R4 500 a month endorsed by Cosatu, the Economic Freedom Fighters and others as an absolute minimum.

This compares with the existing sectoral minimums of ­between R2 000 and R3 000 a month, which only cover selected “vulnerable” sectors.

The organisers, the Wits National Minimum Wage Research Initiative, wrote in an email to delegates they “regard the rebuffing of an opportunity for constructive public engagement as unfortunate”.

The work coming out of the Wits unit has ­apparently met with steely resistance from the non-union parties in Nedlac.

“The decision by business representatives within the Nedlac task team to represent our research as ­attached to labour is one of a number of attempts to side-line it,” said Gilad Isaacs, coordinator of the Wits unit.

“Perhaps this is because the evidence produced does not support the introduction of an ultralow national minimum wage,” he added.

The representatives of business at Nedlac had become increasingly hostile to the body because it had moved the debate towards an ambitious level for the minimum wage, Isaacs said.

Busa’s Phala dismissed this, saying there was no grudge and that “the research conducted by Wits was presented through the labour constituency to Nedlac, and that all ­constituencies provided their comments”.

The Wits unit’s voluminous work is not officially commissioned for the Nedlac process, but it has managed to become one of the most visible local attempts to answer pressing ­questions about what a minimum wage would achieve.

The unit’s work thus far includes modelling that shows even high minimum wages would have overwhelmingly positive economic effects at the cost of very few unskilled jobs.

“Why, when experts present evidence, are people so ­adamant that there must be some other evidence of ­cataclysmic employment effects? This is the evidence,” Isaacs said at the symposium.

The problem seems to be that research largely approaches the goal of the minimum wage as the eradication of working poverty and takes seriously the possibility of minimum wages as high as R6 000 a month.

Whatever is being said at Nedlac, the government shows no sign of wanting to radically raise existing minimum wages, much less completely negate them with a far higher new ­national minimum.

This week, the department of labour announced it would instead reduce the annual increase for farm workers.

This was to help the drought-stricken farming sector, the department said, adding farmers should apply for exemptions.

Instead of the 8% the normal inflation-linked formula would have given them, the department raised minimum wages on farms by only 6.6%.

This brings farm wages to R14.25 an hour, up from R13.30 an hour.

A monthly wage of R4 500 would translate into R23.26 an hour.

The domestic worker minimum wages were raised late last year to R11.44 an hour (up from R10.59), equal to R2 230 on a full-time basis – assuming a worker works nine hours a day, five days a week every week.

The least disruptive and consistent level to introduce a national minimum wage would logically be at this level – retaining the sectoral determinations, but plugging the holes in that system that leave millions of workers with no wage-setting mechanism.

According to Phala “we support the introduction of a national minimum wage to address ultralow wages”.

“We have agreed on the definition of a national minimum wage. We are exploring possible options and we believe such options should be tested against the social, economic and particularly employment implications.”

Symposium speakers’ summations of how the minimum wage is implemented across the developed and developing world

A recurring theme at the Wits symposium was how business groups and think-tanks tend to launch alarmist campaigns before minimum wages are set – and are usually proven wrong.

At the same time, case studies from a variety of countries that have done what South Africa plans to do provided caveats and warnings about setting national minimum wages, phasing them in and ultimately enforcing them.

Setting the national minimum wage low means it does virtually nothing. Setting it too high could lead to mass noncompliance, job losses or strategies such as reducing working hours, speakers pointed out.

. Alan Manning, from the London School of Economics, spoke about the developed world’s minimum wage experience.

“In the US, studies find it has very little effect [on jobs]. But the US had a very low minimum wage,” he said.

In the UK, there were claims that 1 million jobs would disappear, but the “best estimates show very little effect”.

“Employers have a number of devices at their disposal” to mitigate wage increases, he added. Reducing benefits on top of the wage is one way; cutting down on the hours worked by workers is another.

In the UK, only about 5% of workers were directly affected by the minimum wage, Manning said.

. In developing countries, minimum wages were an entirely different kettle of fish, said Uma Rani, senior economist at the International Labour Organisation.

Instead of affecting a small minority, they easily affected 30% of the population, she said.

She presented on India’s chaotic web of 1 679 different minimum wages for different jobs in different parts of the country, and emphasised the need to have a simple system.

South Africa’s sectoral determinations in effect create about 124 minimum wages, also discriminating between metro and rural areas.

. Shanmugam Thiagarajan, secretary of Malaysia’s National Wages Consultative Council, explained how his country phased in a national minimum wage to replace the previous sectoral system – precisely what South Africa is apparently aiming to do.

Malaysia introduced a national minimum wage in 2013 of around 900 ringgit (about R2 700 back then).There was a range of phasing-in exemptions and concessions that lasted no more than a year, although domestic work is entirely excluded from the wage.

The World Bank had been called on to consult beforehand and predicted massive job losses which “somehow” did not materialise, Thiagarajan said. With only two years’ subsequent data to gauge the effect, all the signs were positive when it came to jobs, growth and investment, he said.

The minimum wage was raised to 1 000 ringgit last year. – Dewald van Rensburg


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