National Minimum Wage: Committee Report on National Minimum Wage

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Labour

08 March 2017
Chairperson: Ms L Yengeni (ANC)
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Meeting Summary

The issue of minimum wage was brought to life when the President Zuma first mentioned it in the 2014 State of the Nation Address. Following the address by the President, the Committee embarked on an information gathering exercise in order to ascertain what the nation’s views were. A total of 12 organizations made presentations to the Committee between 20 August and 19 September 2014. Academic and employer organizations made presentations during this period. There was a second round of consultations with the public which was held between 23 and 24 June 2015. A total of nine organizations made representations to the Committee during the second round. The organizations which participated in the later consultations comprised of organized labour, organized business and small individual business. Findings were to the effect that there was a decrease in employment in the agriculture sector, after the introduction of the sectoral determination legislation, and even though there was a decrease in numbers of workers, those who managed to retain their jobs received increases in their salaries by approximately 18 per cent and that between the years 2002 and 2003 there was also an increase in the working hours of labourers to 49 hours from 42 hour per week. It was recommended that public consensus be obtained in the determination of an amount to be fixed as a minimum wage and that a comprehensive wage policy be developed which fell in line with the International Labour Organizations’ Decent Work Programme. Another recommendation was that the new minimum wage should make provision for the creation of new employment at an affordable cost to employers.

It was also stated in the presentations that some developed nations such as the Scandinavian nations did not have or need a national minimum wage, that Mexico did not utilise the national minimum wage in an attempt to tackle unemployment and inequality and that the use of a minimum wage would not of itself address inequality. It was highly recommended that Members be aware of South Africa’s peculiar situation and avoid a best practice copy and paste approach in adopting the regulations. In that regard, it was submitted to the Committee that the triple challenges of poverty, inequality and unemployment remained a concern to South Africa.

Unfortunately, an application to go on a fact finding mission in various countries and to conduct research on the suitability of the introduction of a minimum wage was turned down and that played a role in compromising the quality of the report that was delivered. The minimum wage should be used as a mechanism to enforce socio economic reform and the minimum wage should be constantly reviewed in order to prevent it from failing to sufficiently address socio economic issues in the country. Other reports that were presented to the Committee during last week’s meeting were joined in the present report and consolidated to be one.

The Committee was not obliged to accept the whole report and considered discarding portions that it did not consider relevant to its opinions. It came strongly recommended that a quantitative approach be adopted in the strengthening of labour inspector capacity and careful consideration to a ratio procedure should be given when considering staffing requirements for labour officers. Government was called on to finance the inspectorate’s mandate. It was also recommended that a ceiling in the form of a maximum pay should be given effect to in order to eliminate inequality. It was also recommended that minimum wages be tailor made to address requirements of specific sectors and the adoption of a blanket minimum wage should be avoided. The various reports presented to the Committee had a direct impact on several statutes that dealt with labour issues and the Committee was urged to focus on minimum wage issues.

It was suggested that the minimum wage be set at R20 per hour by Members of the ANC. The DA’s position advocated a specific amount for each and every sector after careful consideration of each sectors’ peculiarity. The economy was growing at 0.4 per cent and a blanket minimum wage might be detrimental to job security. Government would provide for exemptions to employers that were unable to meet the minimum wage requirements to deviate from it. Such organizations would need to submit an application to the Department of Labour for such an exemption. Employers were reminded that they were not allowed to unilaterally downgrade employees’ conditions of employment as that would amount to unfair labour. The exemption system was criticised as being too idealist and having the potential of creating an administrative nightmare for both employers and employees.

 

Meeting report

After the agenda for the meeting was adopted, a report from the research work conducted by both Mr S Ngcobo (the Content Advisor) and Ms S Mkhize (the Committee Researcher) was presented to the Committee.

Committee Report on National Minimum Wage

Mr Ngcobo started the presentation by highlighting that the issue of minimum wage was brought to life when the President Mr J G Zuma first mentioned it in the 2014 State of the Nation Address. After the address by the President, the Committee then started an information gathering exercise in order to ascertain what the nations view was. A total of 12 organizations made presentations to the Committee between 20 August and 19 September 2014. Academic and employer organizations made presentations during this period. There was a second round of consultations with the public which was held between 23 and 24 June 2015. A total of nine organizations made representations to the Committee during the second round. These organizations participated in the later consultations comprised of organized labour, organized business and small individual business.

Mr Ngcobo highlighted the findings of the workshops which were found on page 8 of the “Report of the Portfolio Committee on Labour on the Workshops and Public Hearings on the National Minimum Wage”. Of particular note was that there was a decrease in employment in the agriculture sector after the introduction of the sectoral determination legislation. He further highlighted that even though there was a decrease in numbers of workers, those who managed to retain their jobs received increases in their salaries by approximately 18 per cent and that between the years 2002 and 2003 there was also an increase in the working hours of labourers to 49 hours from 42 hours per week. The sectoral determination legislation was also responsible for facilitating the reduction of engaging employees on a permanent basis. In addition, there was an increase of about 57 per cent in the number of employees that were awarded with written contracts of employment in the year 2007. Generally, employment levels decreased significantly in this sector.

The report made a recommendation that labour inspectors be sufficiently equipped in order to enforce compliance. It was also recommended that the new minimum wage should make provision for the creation of new employment at an affordable cost to employers. A further recommendation was that public consensus be obtained in the determination of an amount to be fixed as a minimum wage and that a comprehensive wage policy be developed which fell in line with the International Labour Organizations’ Decent Work Programme.

Mr Ngcobo also noted that oral submissions made to the Committee pointed to the fact that the majority of those who participated in the consultations consistently asked for a minimum wage of R5 000. During the consultations, the participants reported that a significant number of employees were subjected to poor working conditions in violation of the Basic Conditions of Employment Act and most workers felt they were not sufficiently represented.

Ms Mkhize presented to the Committee the international perspectives of a minimum wage. The research was conducted with a focus on jurisdictions such as the United Kingdom, Germany, Sweden, France, United States, China and Botswana amongst others.  It was observed from the research that some developed nations such as the Scandinavian nations did not have or need a national minimum wage. It was also found that Mexico did not utilise the national minimum wage in an attempt to tackle unemployment and inequality and that the use of a minimum wage would not of itself address inequality. She recommended that South Africa adopt the United Kingdom model which involved the inclusion of all stakeholders involved in labour issues. It was also found that academics generally held the position that modest increases in the prescribed minimum wage did not necessarily destroy employment but might in fact eradicate inequality.

The Chairperson reminded Members that this report was previously sent to members on 27 February 2017 and that Members should be prepared to engage in convincing discussions around it.

Discussion

Ms F Loliwe (ANC) requested Ms Mkhize to highlight specific practices from the various jurisdictions in order for the Committee to engage in a critical discussion of the report.

Mr I Ollis (DA) asked whether this report would be adopted by the Committee and this was answered in the affirmative by the Chairperson.

Ms Mkhize attempted to highlight the specific practices in the various jurisdictions. Her focus was on the United Kingdoms’ practices because she was of the opinion that the application of the minimum wage there was conducted with relative success. The UK, she said, presently had a low pay commission that was made up of academics, trade unionists and other advisors which was responsible for devising policy around minimum wage. In her discussion of Germany, she mentioned that some business wanted to lay off workers as a result of the minimum wage regulations. She gave as an example the employers in the butcher sector that started charging employees to use the equipment in the butchery in order to mitigate the expenses associated with the minimum wage.

Brazil was mentioned because she opined that South Africa shared some similarities with Brazil when observed from a political perspective. Ms Mkhize also mentioned that although Brazil had a larger economy, it still was a good country to compare South Africa with. She noted that Brazil had in place a holistic social protection system that contained minimum wage regulations as an element. She recommended that Members be aware of South Africa’s peculiar situation and avoid a best practice copy and paste approach in adopting the regulations.

Mr T Rawula (EFF) said he was disappointed with the report because he anticipated that it would discuss specific aspects of the South African situation, such as the protection of vulnerable employees in a comparative context. The triple challenges of poverty, inequality and unemployment remained a concern to South Africa, and as such reference to the Scandinavia region, which had not implemented minimum wage regulations and whose levels of inequality were low, became irrelevant. He said he was interested in hearing about the Korean experience because it was a country that managed to reduce inequality as a result of the implementation of minimum wage regulation.

He also lamented that another issue that ought to have been considered in the report was what the impact of a maximum wage was on the reduction of inequality. He acknowledged that although maximum wage was not a subject matter of the meeting, it should be seriously considered if the ultimate aim was to reduce inequality.

Mr Ollis said he was happy with the report and he thought it was a good report because it took into consideration all the comments that were expressed in the country.

Ms Loliwe said that an application to go on a fact finding mission in various countries and to conduct research on the suitability of the introduction of a minimum wage was turned down and that played a role in compromising the quality of the report that was delivered. She suggested that the Committee should consider making another application to travel to other countries in order to research on the issue. She stated that it remained necessary to do that because legislation would soon be passed. She further stated that she viewed minimum wage to be a tool that would assist when it came to collective bargaining agreements. The organizations whose salaries were higher than the proposed minimum wage should not downgrade in order to meet the wage. The minimum wage should be used as a mechanism to enforce socio economic reform and the minimum wage should be constantly reviewed in order to prevent it from failing to sufficiently address it.

The Chairperson proceeded to ask the Committee Members to make recommendations as a result of the findings presented in the reports.

Ms Loliwe said she would focus on the second part of the presentation that was the presentation delivered by Ms Mkhize because that part demonstrated a specific focus on the minimum wage issue.

Ms Van Schalkwyk (ANC) said the report was a good report and it was a clear reflection of the strides made by the Committee up to the present point. She did, however, note that some recommendations with regards to sectoral determinations should not have been incorporated in the report and the focus should have remained the minimum wage. She suggested that the report be agreed upon by the National Economic Development and Labour Council (NEDLAC) and a comparative study be made between the information received during the public hearings and the agreement at NEDLAC after consideration was given to the fact that the report was considered by the committee of experts when they tried to conclude on the minimum wage at NEDLAC. She also said that she was not sure whether the understanding was clear on what she just said.

The Chairperson asked someone to explain their understanding of Ms Van Schalkwyk meaning.

Ms Loliwe volunteered to do so and explained her understanding to be that in order to discuss any further recommendations, the other reports that were presented to the Committee during last week’s meeting should be taken into consideration as well.

Mr Ollis stated that he did not have an objection to incorporating the other reports. However, the report that was just presented was not approved as yet and he wanted clarification on how NEDLAC discussed it before its approval.  He also stated that he was happy to get into a discussion on recommendations.

The Chairperson cleared the air by stating that the report that was presented to NEDLAC was a compilation of findings and these were open findings which were not subject to any confidential issues.

Ms Loliwe then weighed in and suggested that the first point in the conclusions contained on page 84 of the report should be adopted by the Committee. She also suggested that the other two points be adopted.

Mr Ollis noted that there were recommendations on pages 29, 30, 39, 40 and that pages 40 onwards contained mere summaries of research. He did not consider the three points on page 84 to be recommendations from the Committee as they resembled mere comments. Although useful input, they constituted mere observations. The Committee was thus tasked to come up with its own recommendations.

The Chairperson said the Committee was not obliged to accept the whole report and was permitted to discard portions that it did not consider relevant to its opinions.

Ms Loliwe agreed with Mr Ollis’ stated observations.

Mr Rawula noted that the recommendation on page 29, which addressed the capacity of inspectors from the Department of Labour did not specify whether the capacity sought to be addressed was a qualitative or a quantitative capacity or both. He strongly recommended that a quantitative approach be adopted after careful consideration of a ratio procedure. He also made a recommendation that there should be a maximum pay for executives because the absence of a maximum pay for top executives would give rise to inequalities. He also wondered whether the recommendation to strengthen the sectoral determination regulations included an expansion of the covered sectors or was limited to a focus on improving the determinations of the sector currently affected. He further advocated for the protection of those who were employed in terms of the Skills Development Act, regardless of the skills they sought to acquire.

 

Mr M Bagraim (DA) suggested that the nation needed a much more equipped inspectorate with regards to the recommendation on page 29 and 30. He further added that there was a need to capacitate the inspectorate. To that end, he called on government to finance the inspectorate’s operations. He went further on and countered Mr Rawula’s opinion that a ceiling in the form of a maximum pay should be incorporated in the recommendations and advocated its deletion. His justification was that the issue would need to be investigated separately and the Committee should not try connect the concepts of maximum pay to minimum pay as they were fundamentally different. He also advocated for the strengthening of collective bargaining which should be emphasised in conjunction with the Ministers efforts so far. He also acknowledged that vulnerable workers should be protected in accordance to specific sector analysis and separate recommendations should be made in terms of the specific sector addressed.

He also stated that the DA recommended minimum wages be tailor made to address requirements of specific sectors and the adoption of a blanket minimum wage should be avoided. He also noted that the Committee needed to strongly consider striking a balance between the imposition of a minimum wage and the negative consequences that may arise as a result thereof. This would invariably mean that the interests of the unemployed should be taken into consideration as well. He expressed his disappointment for the fact that the report was silent on Treasury’s finding that there would be a loss of at least 700 000 jobs as a result of the imposition of a minimum wage. He appreciated the fact that it might be necessary to subject new entrants to the job market to a separate and distinct minimum wage in order to facilitate their absorption to the job market. He further expressed his displeasure of the fact that the so called experts that were assembled were put together by the Deputy President and he considered this to be unacceptable.

He motivated for the clarification on what the tax experts’ opinion was on minimum wage. He told the Committee that it was unrealistic to try and get public consensus on what the minimum wage should be. He recommended further that the focus on any changes should be done on a sectoral basis and the suggestion of a minimum wage of R5 000 should be considered in line with NEDLACs recommendations.  He also stated that he did not think that there should be any criminal sanction for the non-observance with minimum wage regulation.

Ms Loliwe reminded the Committee that a discussion of sectoral determination was not an agenda item of the meeting and cautioned the Committee to avoid a discussion on that aspect. She pointed out that the majority of the recommendations on page 29 discussed sectoral determinations simply because members of the public addressed them during the outreach programme but they remained relevant to the present agenda.

The Chairperson agreed with Ms Loliwe and reminded the Committee to focus on its own research and craft recommendations which focused on the minimum wage issue only. She acknowledged that whilst sectoral determination issues were linked to the minimum wage discussions, the Committee should remain focused on crafting recommendations which dealt with minimum wage.

Mr Ollis stated that he was ready to accept one document that came from the Minister and he would like to amend the other three. He suggested that recommendations be the focus of the meeting as those would reflect what the Committee’s position was.

Mr B Mkongi (ANC) noted that the various reports presented to the Committee had a direct impact on several statutes that dealt with labour issues. His suggestion was that the Committee create a document that synthesized all information that had a direct focus on minimum wage and recommendations be drawn from there. He noted that that would assist in eradicating the confusion that was exhibited during the meeting.

Mr Ollis weighed in by suggested that three documents i.e. The accord on Collective Bargaining, The Declaration on Wage Inequality and The Agreement on the Introduction on a minimum wage be fused with the document that was presented to create one document and once that was done, the Committee would either adopt, add or subtract recommendations.

The Chairperson agreed with Mr Ollis’ suggestion.

Mr D America (ANC) did not see the need to discuss and adopt any recommendations because in his view, they seemed to be contradicting to other documents and contributing to a great confusion. Nevertheless, in the final analysis he supported Mr Ollis’ proposed procedure.

Mr Mkongi added that his recommendation for a minimum wage for South Africa should be R3 500. This was seconded by Ms van Schalkwyk

The Chairperson reiterated that the Committee would add recommendations, disagree with other recommendations and if necessary the Committee might have to “agree to disagree” on other issues. 

Mr Ollis stated the DA’s position was that a minimum wage must not just be a currency amount but should be a package of measures which should invariably include the recommendations as found in the Accord on Collective Bargaining and Industrial Action. The DA believed that the solution was found in a sectoral minimum wage formula which covered all sectors individually, and not a blanket national minimum wage. He argued that this was safer for the economy which was growing at 0.4 per cent. He noted that job losses would occur once a minimum wage was introduced. He called for an independent panel to be involved in determining what that minimum wage would be and that no politicians should be involved in the panel. He categorically explained that the DA did not agree with the R3 500 suggestion as a minimum wage because that did not cover sectors such as Information Technology. He acknowledged that this amount might be relevant to other sectors but could not be applied to all sectors. He gave an example of the hairdressing industry which was currently remunerated at a rate of R6 per hour. He noted that if the rate was pushed up to R20 per hour, which was what R3 500 translated to, many employees in the sector would lose their jobs because this amounted to over a 100 per cent increase in salaries. He noted further that many employers would not be able to afford such a huge hike in one go. He added that the R3 500 per month was in any event not a good reflection of the Committee’s intention because some people worked 40 hours a week and others worked for 45 hours per week. A better indication of intention was R20 per hour.

 

The Chairperson weighed in by questioning why the DA was jumping to conclusions without affording the rest of the Committee an opportunity to clarify why it adopted the position it adopted.  She further asked whether the DA was open to being convinced of the ANC’s position. She further said that the amount was there to protect vulnerable people and not for everyone including those with academic qualifications and decent jobs. She stated that the ANC was not advocating for everyone to be subjected to a minimum wage of R3 500 but only those who were generally victims of exploitation.

Ms Loliwe also asked whether the DA was open to convincing or whether it was a closed matter for them or not.

Mr Ollis said the DA was open to changing its view as it previously did with regards to employment equity. However, this current passion on the national minimum wage was not lightly taken. It was a thoroughly investigated position. He reiterated that people would lose jobs when the minimum wage was introduced and not when slight adjustments were made. He promised that the textile sector would be heavily affected. He based this promise on the fact that there were a lot of cheap textiles that were imported and a sudden increase would end up in expenses in the form of salaries which would wipe out what was left of the sector. He also acknowledged that whilst the hairdressers that earned R6 per hour were indeed grossly benefited if Parliament made a huge adjustment from R6 to R20 per hour, lots of jobs would be lost. In order to protect these jobs Parliament would need to enforce a gradual increase of salaries that was customized to each sectors peculiarities. The job losses that happened in the agriculture sector when the huge increases in salaries happened would be duplicated in other sectors as well. The DA was not looking to score cheap political points and their focus remained on making things better for the employees.

The Chairperson stated that she understood the DA’s position and that there was nothing wrong with objecting to various opinions. She did however state that the organisations that would not be able to raise the R3 500 to meet salary demands would have to apply for an exemption with the Department of Labour.

Mr Rawula stated that the EFF did not agree with this R3 500 as well. This was because the State was not playing a meaningful role in developing the economy. He argued that this amount would not make a difference because the whole structure of the economy needed to adjust. The EFF asked for R4 500. The amount proposed by the ANC would not make a difference to the employees’ lives he added. He also supported a sectoral approach as well.

Mr Mkongi agreed to adjust the amount from R3 500 per month to R20 per hour. He noted that emphasizing a sectoral approach to the minimum wage would undermine labour rights as found in the Constitution. He stated that there should not be discrimination between vulnerable workers and that they should be treated the same. The issue of exemptions should be strongly enforced and came in highly recommended. He promised that the minimum wage would be reviewed annually with the main aim of increasing it.

Ms Loliwe suggested that the number of hours worked should be regulated as well because some employers would cut employees working hours.

Ms Van Schalkwyk said that employers could not unilaterally downgrade conditions of work because that would be tantamount to unfair labour practices. This was an issue that employees would have to be educated on.

Mr Bagraim stated that the exemption system would not work. This was because it involved expenses on the employees. The current exemptions applications that were made to the various bargaining councils was not a success and there was no indication of who would be setting up the exemption institution. He stated that the Department of Labour was currently incapacitated with the existing workload. It was not justified to increase its workload by adding exemptions proceedings.

 

The Chairperson in response said that it was up to the individual Members of Parliament to make the exemption system work. She said that there was a commission that would be set up which would focus on considering what the minimum wage ought to be on an annual basis. This commission would be composed of members from labour, the community at large, business and government. The amount that was currently suggested was a result of consultation between all stakeholders in labour. Business people agreed to this figure as well.

Mr Ollis stated that NEDLAC only represented less than 15 per cent of business; the small businesses were not represented at NEDLAC. Only big organizations had representation at NEDLAC.

Mr Rawula reiterated that he did not agree to the proposal of the Minister and Government. He said any figure that should be given precedence to should be measured against the impact that the amount would have on the employees’ life. The amount proposed would not have any impact at all. He further suggested that the minimum wage be reviewed annually.

Ms Loliwe reminisced that during the consultations, the domestic workers were happy with R3 500 because they were of the opinion that that amount would meet their needs. She also said that previously as a teacher, she was underpaid and she imagined that teachers would go and ask for an exemption. She was confident that the requirement that at least 75 per cent compliance with the minimum wage would accommodate them. She was also of the view that discussion was exhausted and a resolution should be made.

The Chairperson asked that the report be adopted in conjunction with the NEDLAC reports. She asked whether the only issue on which no agreement was reached was the R3 500 and the imposition of a uniform minimum wage as opposed to a sectorial approach.

Ms Van Schalkwyk reiterated that the amount should read R20 per hour and not R3 500 per month.

The Chairperson stated that the recommendations by the researchers were to be removed from the report presented today. She also suggested that the NEDLAC documents be adopted as they were.

Mr Ollis said that the Committee made a comment on the NEDLAC documents with the individual parties’ specific views.

Ms Loliwe suggested that a paragraph be added stating that the reports were joined and were to be read as one, that there were divergent views on the specific amount on the minimum wage and parties failed to reach an agreement on what the amount should be thus the issue was taken to a vote.

Ms T Tongwane (ANC) supported Ms Loliwe’s proposal.

The Chairperson said that the Committee report should contain one view and if there was no agreement then the views should be subjected to a vote.

Mr Rawula stated that the other views as expressed by the Minister should be incorporated. That was the views on implementation.

The Chairperson stated that the root of the confusion was not that Members did not go through the documents and if they did, they did do a thorough job. She identified the root of the confusion being the unpreparedness of the Members of the Committee.

Mr Ollis requested that the minutes of the Committee reflected the different views of the Committee even if they did not appear in the final documents as the Committees views.

The Chairperson reminded the Committee that all the documents would be merged as one and it was not possible to separate the documents.  The adoption of the report would be subjected to a vote. The divergent views of the various parties would be noted in the minutes. However, they would not appear in the report.

The vote went as follows: six members, all from the ANC voted for the adoption of the reports without amendments, three members (two from the DA and one from the EFF) voted for its non-adoption and one member abstained (DA). 

The meeting was adjourned.

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