National Minimum Wage Workshop: day 2

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Labour

24 June 2015
Chairperson: Ms L Yengeni (ANC)
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Meeting Summary

Representatives of major South African trade unions and organised business engaged with the Committee to discuss the proposal to introduce a national minimum wage (NMW).

The National Union of Metalworkers of South Africa (NUMSA) referred to the Freedom Charter, which stated that men and women of all races should receive equal pay for equal work, there should be a forty-hour working week, a national minimum wage, paid annual leave, and sick leave for all workers, and maternity leave on full pay for all working mothers. In the current economic context, there were more unemployed people than in 1994. Over 20% of the population was living below the food poverty line of R300 a month. Bargaining councils covered just 9% of the workforce. 70% of the workers had their salaries determined by their employers only. Sectoral minimum wages were widely violated and extremely low -- in reality, workers were paid on average 35% less than legislated sectoral minimum wages. Over the last 20 years, workers’ share of the GDP had gone down, while owners of capital had become richer.

The SA economy could not thrive in its current form, fundamentally unchanged from the apartheid colonial era. A wage policy must be part of new post-apartheid, non-capitalist growth path and industrial strategy for full employment. The industrial strategy must focus on job creation in sectors with higher wages and growth in sectors that can contribute to increased domestic demand and benefit from it. The objective was to lift large numbers of South Africans out of poverty. To achieve this objective, the NMW must be linked to other measures to deal with inequality, poverty and unemployment. This must be part of comprehensive social security system, including grants or living allowances for the unemployed, improved retirement and UIF contribution by employers, and improved quality of service delivery by the state in transport, housing, education and health. Socialism was the only way out of the historic and current South African human and environmental crisis. It was time to unite the working class behind the demand for a NMW and all demands of the Freedom Charter. The real struggle for the NMW would not be won in public hearings. It would be won by the working class in action, on the streets, united in its demands.

The South African Chamber of Commerce and Industry (SACCI) said studies of the impact of a NMI in various countries had produced mixed results – some successful, some failures and some where it had made no difference. It felt that a key prerequisite was a dynamic and growing economy. In SACCI’s view, and in the current circumstances, it was less about whether people in employment earned more or less, than it was about getting far more people into employment, and that would be achieved only if there was an aggressive focus on creating the conditions in which the economy could grow at least three to four times faster than it is at present. SACCI’s stance was not based on a principled aversion to a Basic Minimum Wage. Under different economic circumstances, the introduction of a minimum wage might be supported whole-heartedly. Vigorous and undistracted attention to economic growth was required at the present time. If the requisite level could be achieved, many other desirable initiatives, including a minimum wage, perhaps, may elicit the full support of the business community.

The Congress of South African Trade Unions (COSATU), the Federation of Unions of South Africa (FEDUSA) and the National Council of Trade Unions (NACTU) made a joint presentation calling for a NMW, social protection, and economic policy to address inherited inequality and poverty in the labour market. Labour proposed four pillars:

  • Adoption of a legislated national minimum wage (NMW);
  • New collective bargaining strategies to reconfigure the wage structure, based on comprehensive centralised bargaining;
  • A campaign for comprehensive social protection;
  • This package should connect to appropriate economic strategies aimed at promoting industrialisation and decent work.

The NMW, combined with restructured collective bargaining, should be consciously designed as part of a South African wage solidarity model to progressively increase real minimum wages, and reduce gaps in overall wage levels. Minimum wages significantly improved the lives of low income workers and their families “without the adverse effects that critics have claimed” according to 650 leading US economists. Low and declining wages did not create employment, as the real wages of low-skilled workers had fallen since the 1990’s, and their numbers had shrunk by nearly a million, yet 2.5 million jobs had been created for higher paid, higher-skilled workers over the same period – despite large increases in real wages. A national minimum wage would apply to all employees, both in the public and private sectors, unless provided for otherwise by an exclusion, phase-in or phase-out in an upfront agreement.

Labour had argued in Nedlac for a a medium term strategy, or road map, for transforming the wage structure in a managed way. This would start with a level of the NMW which significantly improved the income of low paid workers, and progressively increase the value of the NMW in line with achieving the average wage within a reasonable time. This would be a bold but managed approach, in line with the Latin American experience, of systematically increasing the value of the NMW at a significantly faster rate than other wages in the economy. Labour did not want the NMW for the sake of it -- workers want, deserve, need and must have a decent and living national minimum wage. The days of slave wages must end. The days of poverty wages must stop. The days of South Africa being the most unequal nation in the world cannot be tolerated anymore. Workers expect nothing less in the 21 years of democracy. The arguments for business that they cannot afford to pay workers a decent living national minimum wage do not hold water while they live in the gap of luxury and retrench workers as an opportunity to maximise profit. Labour was adamant that the national minimum wage was the minimum workers must be paid and not the maximum. 

Meeting report

National Union of Metalworkers of SA (NUMSA)

Mr Woody Aroun, NUMSA Parliamentary Officer, said the Freedom Charter stated that men and women of all races should receive equal pay for equal work, there should be a forty-hour working week, a national minimum wage, paid annual leave, and sick leave for all workers, and maternity leave on full pay for all working mothers. In the current economic context, there were more unemployed people than in 1994. Unemployment was getting worse, not better: In May 2008 there had been 5.1 million unemployed, and in May 2013, seven million. The Gini coefficient was amongst highest in world (0.63). Over 20% of the population was living below the food poverty line of R300 a month. Bargaining councils covered just 9% of the workforce. 70% of the workers had their salaries determined by their employers only. Sectoral minimum wages were widely violated and extremely low -- in reality, workers were paid on average 35% less than legislated sectoral minimum wages. 54% of workers either received no regular wage increments or had wages determined solely by employers. Over the last 20 years, workers’ share of the GDP had gone down, while owners of capital had become richer.

Mr Aroun said the country must avoid the minimum wage also becoming the maximum wage. The struggles for a national minimum wage (NMW) and for a living wage, through improved collective bargaining arrangements, were complementary. Collective bargaining would, and must continue to, improve the minimum wage in all sectors. Millions did not work a 40-hour working week. Millions did not enjoy paid annual leave, and sick leave. Millions of women did not enjoy maternity leave on full pay: Currently, 24% work more than 48 hours a week, and the average is 44 hours. Only 32% have medical aid, 43% have no paid maternity/paternity leave, 31% have no paid sick leave, 50% have no pension or retirement fund, and 33% have no paid annual leave.

The National Minimum Wage was not negotiable. A fundamental requirement for millions of South African workers, and the full freedom and liberation, must include a National Minimum Wage. In 2013, half of SA’s workers received less than R3 033 a month. The national average salary is R15 000 a month, so half of all workers earn far less than the national average. That is the apartheid wage structure -- most workers earn very little, and a small number earn a huge amount. In 2010, the median earnings of African workers was R2 167, and of white workers was R9 500. There was need to abolish the exploitative wages of the majority of SA workers, to secure work and income security, to fight the poverty which largely afflicted Black and African workers, to win income equality in a free and democratic South Africa, to secure collective bargaining rights for all SA workers, end child labour, compound labour, the tot system and contract labour, and abolish South African racist and apartheid colonial capitalism.

The SA economy could not thrive in its current form, which had remained fundamentally unchanged from apartheid colonial era. A wage policy must be part of new post-apartheid, non-capitalist growth path and industrial strategy for full employment. The industrial strategy must focus on job creation in sectors with higher wages and growth in sectors that could contribute to increased domestic demand, and benefit from it. The objective was to lift large numbers of South Africans out of poverty. To achieve this objective, the NMW must be linked to other measures to deal with inequality, poverty and unemployment. This must be part of a comprehensive social security system, including grants or living allowances for the unemployed, improved retirement contributions by employers, improved UIF contributions by employers and an improved quality of service delivery by the state in transport, housing, education and health.

NUMSA demanded the following:

  • Declare a National Minimum Wage now. There should be no five-year investigation.
  • A dynamic and mobile NMW adjusted upwards for inflation and cost of living.
  • A national wage policy to abolish the apartheid wage gap, combat income inequalities, and remove impediments to collective bargaining and all trade union rights.
  • Immediately abolish labour brokering, child labour, compound labour and all abusive, super exploitative labour practices.
  • Guarantee a 40-hour working week and ensure compliance.
  • Ensure that men and women of all races earn equal pay for work of equal value.
  • Stop and withdraw from all current efforts to water down trade union rights and essentialise sections of the working class.
  • Guarantee paid annual leave and sick leave for all workers, and maternity leave on full pay for all working mothers.
  • Destroy the current SA economic foundation, dominated by imperialism and run by white monopoly capitalism and their parasitic black allies.
  • Radical destruction of the current growth path and replacement with a socialist, democratically owned, controlled and managed economy

Socialism was the only way out of the historic and current South African human and environmental crisis. NUMSA was participating in these hearings so that the voice of the working class was heard. History taught that the working class would always be victims unless they learnt to see class interests. In its demands, it had sought to unearth the true class intentions and origins of the NMW. It was time to unite the working class behind demands for a NMW and all demands of the Freedom Charter. The real struggle for the national minimum wage would not be won in public hearings. It would be won by the working class in action, on the streets, united in its demands.

Discussion

Ms F Loliwe (ANC) said the Committee was still in the consultation process, and NUMSA must not dictate to the Committee what to do. She asked which workers did not have bargaining rights, except for those in the judiciary.

Mr M Bagraim (DA) said NUMSA had not called for productivity in its presentation. It did not put a figure what it wanted the NMW to be, or consideration of its affordability in the light of the demands given. It must not demand what was not affordable, as businesses existed to make a profit.

Mr Aroun replied he was aware it was a consultation process, but workers had a political position on the NMW. Stats SA research showed only 30% of wages were decided in bargaining councils, and 70% of workers had their salaries determined by the employer. NUMSA had put its demands because there was no official document from the Department of Labour on the NMW.

Ms Sharon Nembudani, NUMSA National Researcher, said the Committee Chairperson had told delegates who were present the previous day that stakeholders must be clear on what they wanted on the NMW. The mining and engineering sectors which used platforms like the National Economic Development and Labour Council (NEDLAC) were the only ones benefiting from bargaining. The demands listed in the presentation were workers’ demands.

Mr Aroun replied the meaning of productivity was subjective. NUMSA did not have a figure yet, even though it was aware of the Association of Mineworkers and Construction Union’s (AMCU’s) R12 500 demand. NUMSA was not going to be bulldozed into giving a figure. It was the officials from the state who must suggest a figure and then engage the workers.

Mr I Ollis (DA) appreciated the effort taken to prepare the presentation. He asked what NUMSA thought was the cause of unemployment, and the solution to it. If the 44 hours a week was in the NUMSA policy document, what was wrong in extending the sectoral determination across sectors? The UK comparison might not be applicable to South Africa, as the country might not be able to sustain it. He did not want to see anybody poor or dying in hospital, but the country was not able to fund a living allowance for the 35% unemployed population.

The Chairperson said the Committee had invited members of the public to say what they thought about the NMW. The question of extending sectoral determinations was wrong, as it was an alternative to the Committee’s position.

Mr Ollis said the Chairperson’s remarks had denied him an opportunity to hear a reply, and denying him an opportunity to reply to the Chairperson’s remarks – which had been directed to him -- was undemocratic and if so, he could resign from the Committee.

The Chairperson replied that Mr Ollis had the right to resign, as it was enshrined in the Constitution, but she had the responsibility to direct the Committee.

Mr M Plouamma (Agang) persuaded Mr Ollis to reserve his comments for another day in the Committee, rather than to argue in front of the invited guests.

Mr D America (DA) said it was not for the Chairperson to decide which questions must be responded to, and the question asked was highly appropriate.

The Chairperson said Members must not ask questions outside the presentation, as this was out of order and politics was being played.

Mr Ollis said the Chairperson had always say the Committee had been asked to investigate the modalities of the NMW, and asked the reason why she was ruling out his question.

The Chairperson said Mr Ollis was trying to undermine her intellect. The question asked should not be imposed on invited guests. If possible, Mr Ollis must rephrase his question.

Mr Ollis asked if the modality of structuring the NMW should be a one-size-fits-all or a national sectoral determination.

Ms Loliwe said a modality to implement the NMW was not an option, as the President had asked for modalities of implementing the NMW, and not a comparison with a sectoral determination.

The Chairperson said Mr Ollis should rephrase his question again, as it was still out of order.

Mr Ollis refused to accept his question was out of order, and said he had to withdraw from the Committee. He withdrew, together with the other two DA members.

Ms S van Schalkwyk (ANC) asked whether NUMSA supported the R3 500 or R15 000 as the NMW.

Mr Plouamma said the Committee must accept the report as true, and the NMW must not be the maximal wage. Even if the NMW was finalised, NUMSA would not be satisfied as it talked to capitalism, nationalisation and imperialism. The presentation was more political in nature, presented against government policies which NUMSA did not like. However, the suffering of the people out there required a presentation of such a nature.

Mr Aroun replied that NUMSA did not have a figure and it felt comfortable if Labour put forward a policy document on the NMW.

Mr George Choshane, NUMSA Organizing and Campaign Head, replied that NUMSA did not want to change the system, but it believed it could transform it to benefit the majority.

Mr Aroun said the NMW was not the maximal wage, and it was not the ceiling. Collective bargaining would continue if the NMW came into force. The NMW was a victory to workers, but NUMSA also had to consider the unemployed. During the budget vote speech, capital transfer flight amounting to R147 billion had been noted last year alone. There was money in South Africa, and resources must be pulled together to come up with the NMW.

Ms T Tongwane (ANC) asked for the recent statistics on average salaries.

Ms Nembudane replied there were no significant changes to the numbers.

Ms Elena Konopelko, NUMSA Research Officer, replied the African annual average income was R55 000, whites R300 000, and for women-headed households was less than R55 000.

Mr Sean Walker, Treasurer, Large Pelagic SMME Association, asked if NUMSA considered industries on the streets in the NMW demands. The fishing industry had been in depression for some time. If a global NMW was implemented, this could do substantial damage to the industry. Large companies could afford it, but SMMEs would be driven out of business. The Department of Labour must come up with a policy document on NMW. From a social justice perspective, the living allowance was a noble idea, but given the Treasury stress on welfare budgets, it was impractical.

Mr Aroun replied that wage disparities were existing, and there were still apartheid wages.

SA Chamber of Commerce and Industry

Mr Andrew Layman, Consultant, South African Chamber of Commerce and Industry (SACCI), said during 2014, the Durban Chamber of Commerce and Industry, an affiliate of SACCI, had produced a discussion paper entitled “Economic Implications of Minimum Wage Implementation”. The purpose of this, which entailed quite extensive desktop research, was to formulate a position on the introduction of a mandatory Basic Minimum Wage in South Africa. The Chamber was concerned that support, or opposition, on the part of its members might not take sufficient account of the complexities involved. A study of sixteen different countries/regions where minimum wages had been implemented showed that six seemed to have had positive outcomes, both for the economies as well as employment, while six had resulted in declines in the number of available jobs and even a decline in economic growth, and the other four appeared to have no apparent effect one way or the other. Comparisons made among these examples must be considered superficial, at best. Not only did the studies involve different methodologies, but it was not helpful to take minimum wage initiatives out of the context of the countries’ or regions’ economic and social circumstances. It seems clear that what may work well in some countries, will not do so in others.

COSATU appeared to have motivated its call for a basic minimum wage, inter alia, on the notable economic progress made in Brazil during the first decade of the century. In a nine-year period, 17 million new jobs were created, unemployment declined from 11,5% to 6,1% and employment in the formal sector outpaced that in the informal by 3:1. Some 20 million people were given relief from poverty. At the same time, the national minimum wage increased by 81% in real terms.

In considering this particular set of circumstances, one must determine the factors to which the progress may be attributed. Was the increase in the national minimum wage cause or effect? It is quite clear that there was considerable growth in the economy in respect of production, for that is the only reason for the employment of additional people. Business prospered to an unprecedented degree. In the wake of this, the rate of job creation was complemented by the rate at which people gained relief from poverty. In this economic environment, the national minimum wage was a useful tool, perhaps even an essential one, by which the enhanced prosperity could be managed so that it was more widely distributed than might have been the case otherwise. Economic circumstances in Brazil have changed quite substantially for the worse in this decade, however, and the value of the national minimum wage might be open to question.

In 2012, a minimum wage was introduced in Thailand. The country’s Development Research Institute found that the small and medium sector of businesses would be most adversely affected. In the context of manufacturing, productivity would have to increase by 8% to mitigate the extra employment costs. This would necessitate additional training. Further examination by the Bank of Thailand revealed the expectation of a 1% increase in inflation, a decline of 1,7% in GDP, and 5,5% less employment.

SACCI recognises that a minimum basic wage, at the level which is being mooted and which was quite significantly higher than the average minimum wage determination in those sectors where such a determination has been made, would enable workers to cope better with their current circumstances and have the positive effect of their joining more aggressively the ranks of the country’s consumers. This was the basis of the argument emanating from the experience of Brazil: more money in the pockets of workers increased demand, created a more lively local market and led to increased production. Such additional consumerism would have a positive effect on the country’s GDP, but unfortunately the influence of consumption relative to production is already far too high and unsustainable going forward. An increase in GDP based on spending was not what our country needs, particularly when there are too many circumstances stacked up against meeting any additional product demand. Recent times have shown, unfortunately, that the correlation between consumerism and importation is too high.

SACCI believes that the fear that the introduction of a minimum wage will inhibit employment is well-founded. Employment was often thought to be an uninviting option. Not only was it perceived that legislation is inequitable in terms of the rights of employers and employees, but union activity and wage increase demands -- which are considered inappropriately high in the present circumstances, and unaffordable in some sectors -- are not conducive to the creation of additional jobs. Even if orders justified more jobs, many employers will seek alternative strategies to increase their production. This was evident in the mining and steel and engineering sectors.

While the country’s economy was not moribund, it is not dynamic and it was one within which small and medium enterprises (SMEs) have found it increasingly difficult to make progress. It has been estimated that 49 000 SMEs growing at 20% each year will be required to enable South Africa to meet the NDP target of 11 million jobs by 2030. SACCI suggests that the accelerated growth of our economy must be the priority, and that anything that might be an impediment to this should be avoided

SACCI’s view was that the introduction of a basic minimum wage at this time might prove to be just such an impediment. Current legislation, the existence of mandatory minimum wages in several sectors (covering 4.5 million workers) and the work of the Employment Conditions Commission together offer the requisite social protection of workers and the avoidance of most, if not all, exploitation. Above all, the plight of millions who are stricken by poverty will receive little or no benefit from the introduction of a minimum wage.

In SACCI’s view, and in the current circumstances, it is less about whether people in employment earn more, or less, than it is about getting far more people into employment, and that will be achieved only if there is an aggressive focus on creating the conditions in which the economy can grow at least three to four times faster than it is at present. SACCI’s stance was not based on a principled aversion to a Basic Minimum Wage. Under different economic circumstances, the introduction of a minimum wage might be supported whole-heartedly. Vigorous and undistracted attention to economic growth was required at the present time. If the requisite level could be achieved, many other desirable initiatives, including a minimum wage, perhaps, may elicit the full support of the business community.

Discussion

Ms Loliwe said it was not clear from the SACCI presentation whether it supported the NMW and it must be engaged on another day in the Committee.

Ms Van Schalkwyk agreed with Ms Loliwe to discuss the presentation on another day.

Mr Plouamma asked if having the NMW was contrary to the objectives of the NDP. He asked if SACCI had done research on the profits of its clients, and asked if SACCI was not concerned with the salary disparities.

Mr Layman replied SACC did not have a principled position on the NMW given the challenges in the economy. He believed NDP targets could be achieved by having more production. SACCI did not have the capacity to research the profits of its clients, but small industries would be adversely affected by a NMW. SACCI, like any other organisation, was concerned with income disparities and more people should be employed to move out of poverty.

Mr Choshane said in principle SACCI did not disagree with the NMW, but the timing was wrong. He asked when the time would be ripe for the NMW.

Mr Layman replied he could not say exactly when, but if the economy grew by 7%, it would be appropriate.

The Chairperson asked if the only way to uplift people out of poverty was getting them to work.

Mr Layman replied the employed people in this country were the most fortunate. The best way was not to increase salaries of those in work, but for the unemployed.

COSATU, NACTU and FEDUSA

Introductory remarks

Ms Freda Oosthuizen, COSATU National Treasurer, thanked the Committee for inviting the Congress of South African Trade Unions (COSATU), the Federation of Unions of South Africa (FEDUSA) and the National Council of Trade Unions (NACTU) to present on the progressive initiative of holding public hearings on the national minimum wage. She appreciated the fact that the Committee was holding hearings across the length and breadth of South Africa and thus presenting an opportunity for ordinary workers from farms to share their views with Parliament.

Organised labour was united in support for the NMW. 2015 marked the 60th anniversary of the Freedom Charter, the cornerstone of the country’s hard won constitution. It states that “there shall be a forty working hours a week, a national wage, paid annual leave and sick leave for workers, and maternity leave on full pay for all working mothers”. Workers did not want the NMW for the sake of it -- they want, deserve, need and must have a decent and living national minimum wage. The days of slave wages must end. The days of poverty wages must stop. The days of South Africa being the most unequal nation in the world cannot be tolerated anymore. Workers expect nothing less in the 21 years of democracy. The country could no longer afford or accept a wage system where CEOs make obscene, multi-million rand salaries while their workers were condemned to abject poverty and starvation. The arguments for business that they could not afford to pay workers a decent living national minimum wage did not hold water while they lived in the lap of luxury and retrenched workers as an opportunity to maximise profits. Labour was adamant that the national minimum wage was the minimum workers must be paid, and not the maximum. Let no boss think this would be an opportunity to suppress wages and maximise profits.

Organised labour was clear in its support for a living NMW. Its support was reinforced by the successes seen with its implementation in the United States, Germany and Brazil, where the minimum wage had put money in the workers’ pockets, bread on their families’ tables, stimulated local economies, created jobs, slashed unemployment and created social stability. The President and the Deputy President had been clear. The Freedom Charter was clear. There must be a national minimum wage, and it must happen this year in the 60th anniversary of the Freedom Charter.

Mr Neil Coleman, Secretary: COSATU, started by quoting Deputy President Cyril Ramaphosa: “We are involved in an historic endeavour. Not only are we called upon to give practical expression to one of the most important demands of the Freedom Charter. We are also called upon to find an approach to a national minimum wage that significantly improves the lives of workers, that reduces inequality, that lifts people out of poverty, and that contributes to economic growth and job creation.” There was recognition that post 1994, SA had not fundamentally transformed the inherited labour market structure, and South African workers continued to experience excessive levels of income inequality, working poverty, and unemployment. The NMW proposals aimed to transform the apartheid wage structure, and introduce a coherent wage solidarity policy.

While this submission was on behalf of organised labour, it was important to recognise that labour was working closely with the Nedlac community constituency. Currently, South Africa had not had a coherent wage policy and collective bargaining was under attack. The apartheid wage structure had not fundamentally altered as the majority of black workers, particularly in the private sector, continued to live in poverty. Minimum wages in sectoral determinations, and many bargaining council agreements, were way below the Minimum Living Level of about R4 500 to R5 500 per month. There were huge and increasing inequalities between levels of the wage structure: top, middle and bottom; and between different sectors. The labour movement was calling for a national minimum wage, social protection, and an economic policy to address inherited inequality and poverty in the labour market.

Labour proposed four pillars:

  • Adoption of a legislated national minimum wage (NMW);
  • New collective bargaining strategies to reconfigure the wage structure, based on comprehensive centralised bargaining;
  • A campaign for comprehensive social protection;
  • This package should connect to appropriate economic strategies aimed at promoting industrialisation and decent work.

The National Minimum Wage, combined with restructured collective bargaining, should be consciously designed as part of a South African wage solidarity model to progressively increase real minimum wages, reduce gaps in overall wage levels and improve pay for all those in the bottom half of the wage structure. According to the latest released Stats SA figures, a worker supporting four dependents in 2014 needed to earn R946 per family member, or at least R4 730 per month to save his or her family from poverty. In 2014, according to the Quarterly Labour Force Survey (QLFS), 50% of all South African employees reportedly earned below R3 033 per month (the median); in 2014, 50% of women workers earned below R2 600 per month; in 2014, 50% of African workers earned below R2 800 per month; in 2013, 50% of workers in the formal non-agricultural sector earned below R 4 333 per month; in February 2014, according to the Quarterly Employment Survey (QES), the average wage for all workers in the formal non-agricultural sector, including high paid workers, was R14 731.

“Evidence is mounting that moderate minimum wages can do more good than harm” according to The Economist, Nov 24 2012. Minimum wages significantly improve the lives of low income workers and their families “without the adverse effects that critics have claimed,” according to 650 leading US economists. The UK Low Pay Commission, responsible for setting national minimum wages, stated that their research could find no evidence that minimum wages caused damage to the economy or jobs. Latin American experience refutes the alleged trade-off between minimum wages and employment in practice. Brazil saw the creation of over 17 million jobs coincide with large real increases in minimum wages (see international appendix). Uruguay increased the NMW from US$100 in 2003 to $500 in 2014, yet unemployment in Uruguay is now at historically low levels. The University of Cape Town’s (UCT’s) Development Policy Review Unit (DPRU) found that between 2001 and 2007, after the introduction of higher minimum wages through sectoral determinations, net employment in the affected sectors actually increased by over 650 000 workers, from 3.45 million to 4.1 million, despite lost farm worker jobs. Bhorat et al (2013) found no negative impact on retail and wholesale, domestic workers, forestry, taxi workers, and private security. Bhorat et al showed a negative impact in agriculture, but latest statistics seem to contradict this. Low and declining wages do not create employment, as real wages of low-skilled workers had fallen since the 1990’s, and had shrunk by nearly a million. Yet 2.5 million jobs have been created for higher paid, higher-skilled workers over the same period – despite large increases in real wages. There was no mechanical relationship between the level of employment and the level of wages. Employment performance was explained by various economic factors. Sectoral conditions, industrial strategy and trade dynamics play a key role in determining how any sector performs. Therefore wage policy must be combined with appropriate macro and sectoral policies to have the desired employment impact.

Bargaining councils cover only about 2.4 million workers, and sectoral determinations 3.5 million out of 10.8 million formal sector workers. There were multiple, low, and minimum wages, some set through collective bargaining, including 47 bargaining councils, some by government through 11 sectoral determinations, and some through agreements at company level. There are 124 minimum wage schedules in SA. There was no national approach, fragmentation, and technocratic processes – for example, in the Employment Conditions Commission -- which sets statutory minimum wages, disadvantages workers, and assists powerful interests. Many workers covered by minimum wages are getting stuck at a very low level and remain in poverty. There were low levels of enforcement.

Some of the questions of policy design of the national minimum wage should include:

  • How would the NMW relate to other wage setting mechanisms, such as collective bargaining and sectoral determinations?
  • Should the NMW be implemented universally or should there be a transition in certain sectors, ie a phasing in?
  • Should it include all sectors and employers, or allow for some exemptions and exceptions?
  • Should it be set hourly, daily, weekly, and monthly?
  • How and by what amount should the NMW be increased, how often, and what process should be followed?
  • Should businesses be offered incentives to co-operate in implementation of the NMW?
  • What institutions and capacity need be put in place to oversee implementation of the NMW and effective enforcement and monitoring?

Many of these issues were still being discussed at Nedlac. Despite many disagreements and difficulties, labour was moving towards agreement on elements of the NMW architecture, and had now agreed on the principle of a National Minimum Wage, including the following, as outlined by the Deputy President on Saturday 20 June: The national minimum wage shall be the legal floor for a defined period of time, guaranteed by law, below which no employee may be paid in South Africa. A national minimum wage will apply to all employees, both in the public and private sectors, unless provided for otherwise by an exclusion, phase-in or phase-out in an upfront agreement.

Labour had argued in Nedlac that there were essentially three scenarios which could be adopted in relation to the level of the NMW: a minimalist, maximalist, or medium term transformation strategy. The minimalist or lowest common denominator approach, which would tend to have support from business, was to propose that the NMW was set around the lowest level of the current wage structure. This, of course, would have no impact, and it was regarded internationally as being of no value to set a NMW too low. Labour therefore had rejected it. The maximalist approach, which would have support of many workers, would be to set the NMW immediately at a level which would meet the criteria above. The danger of this maximalist approach was firstly that it would deadlock negotiations, as it had no real prospect of being agreed to, and secondly that it would not be feasible to make such a massive jump from the current low wage structure, no matter how much labour may desire it. In practice, if the NMW was set at say R6 000-R7 000, this would need almost a tripling of the wages of millions of low paid workers.

Therefore labour has argued in Nedlac for a third scenario: a medium term strategy, or road map, for transforming the wage structure in a managed way. This would start with a level of the NMW which significantly improved the income of low paid workers, and progressively increase the value of the NMW in line with achieving the average wage within a reasonable time. This would be a bold but managed approach, in line with the Latin American experience, of systematically increasing the value of the NMW at a significantly faster rate than other wages in the economy. The NMW would also deliberately aim to transform the wage structure, in combination with other strategies to reduce wage differentials. Labour was seeking advice from progressive economists on how best to structure this package.

The setting of a NMW and other forms of minimum wage setting should be required by government, to achieve certain targets in terms of reducing wage inequality (see ANC 2014 Manifesto), and meeting nationally set minimum living levels. The achievement of sectoral and company plans to promote wage solidarity should be a condition for access to certain state incentives. For example, the Greater London Council requires payment of living wages by companies to be eligible for procurement by the GLC. The Employment Equity Act S27 should be strengthened, requiring companies to reduce income differentials. The minimum wage sets a floor, and assists in compressing the wage structure. Collective bargaining improves on this wage floor in different sectors, and negotiates a wide range of benefits and improvements for workers. The ILO for this reason supports a unified NMW, and warns against proliferation of government fixed sectoral minimum wages.

Discussion

Ms Carmon Simpson, CEO: Corporate Career and Management Solutions, said the labour presentation was exemplary. Now was the time for a NMW. The biggest elephant in the room was not the NMW, but how to increase profit to pay for the NMW. The problem was whether job descriptions determined outputs. She did not think business necessarily disagreed with the NMW, but they had to be innovative, put their houses in order and monitor performance agreements, regular personal development and motivation of workers.

Mr Jeremy Marillier, Director, Fish SA, asked if labour was looking at executive capping, what informed the suggested R7 000 and the view on section 27 of the Employment Equity Act.

Mr Coleman agreed with Ms Simpson that businesses must operate in a more innovative, efficient and creative way. Part of the protection of inefficiency in the apartheid era was the creation of hierarchies, and extensive inequality in the job structure. The public sector had been better structured in wages by removing unnecessary grades. This could also be done in the private sector. An increase in wages did not mean decrease in productivity. A society where workers received better wages enabled them to spend and create a virtuous cycle of demand for products and greater productivity. Section 27 provided for the submission of reports in terms of the Employment Equity Act, and if income differentials were identified, the company had to submit a plan to deal with such income differentials. This section had never been implemented and the Employment Commission had never provided guidelines on income differentials. The argument was that there was a need to review this to make it not voluntary to submit one’s report. Wage differentials between the executive and lower wage workers were extremely out of control, and something needed to be done about this. The figure of R7 000 had come from public hearings, with workers saying it was the minimum needed in order to survive for a minimum living level. It was not an unreasonable figure, and very few could support a family of five with R7 000.

Mr Janek Wilimiec, FEDUSA, said vulnerable workers were the one who suffered the most if draconian measures were put in place. In other countries, customs officials were responsible for arresting those who failed to comply. Whatever figure be agreed upon would be just and equitable for all.

Mr Coleman said the Malaysian submission noted that they went for a year on road shows explaining how the system of minimum wages would work. Once everybody was aware of their obligations, there was no room for not implementing it. Employers were in favour of consistent implementation, because if one did not comply, it became unfair competition.

Ms Van Schalkwyk said the presentation had been well researched, extensive and well-presented, and suggestions for compliance with the NMW were welcome. Labour must play a prominent role in mobilising the vulnerable.

Mr Plouamma said labour had limitless experience working with intransient businesses. The Latin American countries referenced had nationalised most of their resources.

Ms Simpson asked what would happen in the case of extraneous variables, like domestic workers and gardeners who were called to work once a week at one family, and walked to the other.

Mr Coleman replied in that Germany the rate was €8.5 per hour. The NMW would be structured hourly, weekly and monthly. Someone once said it must be firm and principled, yet flexible in approach.

The Chairperson thanked the guests for responding to the call of the Committee. Labour had participated since the start of the workshops in August last year. The Committee was at a stage where it would come with a conclusive report to be shared with NEDLAC or the Deputy President, leading discussions on minimum wages. If there were other things that could contribute to this discussion, the doors were open to communicate with the Committee.

The meeting was adjourned.

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