South Africa’s national minimum wage – what it could mean for you

8 months ago

The South African government has been making steady progress towards instituting a national minimum wage (NMW), despite opposition to the policy from the political right (such as the Free Market Foundation, and political left (such as the newly-formed Zwelenzima Vavi-fronted trade union federation SAFTU). It is projected that the NMW will be signed into law in May 2018.

The proposed national minimum wage is set at R20 per hour, or R3 500 per month for those working 40 hours per week. South Africa’s current average minimum wage is R2 340, as calculated from collective bargaining agreements across sectors.

The proposed national minimum wage, when submitted to purchasing power parity, come to US$3.62 per hour, which sits on the lower end of the scale globally, and on par with countries like Turkey and Poland.

Minimum wage and business

Though the productive capacity of businesses depends on labour, many businesses consider labour as a cost to be minimised. From this perspective, the national minimum wage may run contrary to the good of many businesses operations. For companies that employ people at less than minimum wage, they may be forced to reduce the number of staff on their payroll.

The South African libertarian think-tank argues in a hysterical tone that the minimum wage is morally wrong. Their reasoning is muddled, conflating the minimum wage issue with other systemic problems, such as South Africa’s educational crisis. They argue that employers don’t have a responsibility to provide their employees with a living wage (which the NMW, arguably, isn’t even). Instead, they argue that because employment is entered into by consenting adults, that voluntarily agree to the wages offered, that sub-living wages should be acceptable – this is despite evidence that power-imbalances can force low-paid and unemployed workers into accepting deals that are not in their favour.

The argument in favour of a living wage for small business owners is that a business should only grow as much as it can afford to pay its workers. If you employ workers at sub-minimum wage levels, you’re inviting discontent into your workplace and stress into your workers’ lives. Given that you spend most of your day with your employees, you should see if your conscience is fine with letting these people go without basic goods and services every month. Remember, well-paid and respected employees tend to be more productive, more loyal, and more willing to go the extra mile when times are tough in the business. The FMF’s argument convinces from only one dimension – when one is faced with a more dynamic picture of reality, the National Minimum Wage ends up looking like a good deal. It might be handy to consider the difference between the wage that you pay yourself, and the wages that you pay your lowest workers.

The executive summary of the policy and implementation document drafted by the national minimum wage panel to the deputy president provides clear motivation for the proposal. Over 51% of the people in our country live on less than R1,036.07 per month in 2016, which is the current poverty line. When transport costs and rising rent and food prices are taken into account, it becomes clear that the NMW might go some of the way to creating standard conditions of employment that don’t keep most of our people in a poverty trap.

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