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A National Minimum Wage of R3 500 is too low and could trap millions of workers in continuing cycles of poverty

Table 1: PACSA Affordability Tables: Income and expenditure for households of various socio-economic scenarios: October 2016. See Household H for National Minimum Wage of R3 500.
 
Table 1
 
After a number of years of debating in NEDLAC whether South Africa requires a legislated national minimum wage covering all workers and if so, at what level should it be set, a panel of experts advised that the level should be set at R3500.00.
PACSA engaged in this debate informed by statistics emerging from our household affordability research as well as general labour market data. We consistently argued that the minimum should be set at a level that would narrow wage inequality and provide the possibility of moving our low wage trajectory towards a living wage. This we believe would provide some space for worker and their households to begin to live a decent life.
 
In response to the announced level of R3500.00 we issued the following media statement entitled, ‘A National Minimum Wage of R3 500 is too low and could trap millions of workers in continuing cycles of poverty.’
 
The low proposed National Minimum Wage of R3 500 per month is not enough for workers to support their families, nor does it address our historical racial wage structure. We have analysed the proposed figure from two angles: South Africa’s latest statistical data disaggregated along racial lines and through the cost of goods and services required for a worker to support his/her family. In both cases, we find that R3 500 is far too low.
 
South Africa’s statistical data
• The labour absorption rate for Black South Africans is 39%. It means that only 4 out of 10 Black South Africans of working age are employed.
• The wages of 11.5 million Black South Africans must support 45.1 million Black South Africans. It means that most Black South African households rely on only one wage earner and this wage must support 3.9 persons.
 
Because our unemployment levels are so high and our labour absorption rates are so low, and because most Black South African households rely on one wage earner; the level of the wage becomes important. When R3 500 is dispersed through a Black South African household of 3.9 persons it becomes R897.44 per person. This is below the current upper bound poverty line of R1 077. It means that the National Minimum Wage of R3 500 will still remain a poverty wage.
 
Affordability of goods and service data
Workers work to support their families. Supporting families requires the securing of goods and services to live at a basic level of dignity.
 
• The cost of a basic but nutritionally complete food basket for a household of 4 is R2 398.32 per month, for a household of 5 is R3034.20 and for a household of 7 is R4 197.31.
• The food costs for a family of 4 is 69% of the proposed National Minimum Wage of R3 500 and 87% for a family of 5 persons.
• Water and electricity services cost R573.70 per month; and transport for a worker to get to work cost R720.
• Together food, water and electricity, and transport costs, add up to R3 692.02 for a household of 4 and R4 327.90 for a household of 5.
• If we include other important goods and services, such as education; clothing and food wear, domestic and household hygiene items, burial insurance, communication and media and cultural obligations, these add up to R6522.63 per month (see Table 1 over page).
 
In light of South Africa’s racially disaggregated statistical data and PACSA’s affordability figures, the proposed figure of R3 500 is far too low. This figure has not dealt with South Africa’s peculiar labour market dynamics. After this figure has been legislated, we suspect that it will institutionalise South Africa’s low-wage trajectory and deepen income inequality. Wages are typically increased per the Consumer Price Index, headline inflation figure. Low-income households tend to experience inflation at a higher level than reflected in headline inflation and this will continue to trap working families in poverty. Unless the National Minimum Wage is set at a level which takes us out of this low-wage trajectory; it might be better not to have a National Minimum Wage of R3 500 because it will put back the struggle of workers for decades.

According to the Bloomberg Survey on global CEO salaries South Africa tops the ranking in the CEO pay-to-average income ratio and the average CEO in South Africa earned 541 times more than the average income. It is only when workers average wages begin to bring down the wages of CEOs will we begin to make a dent in wage inequality.
 
What we require now is bold moves to transform our economy beyond the low-wage trajectory that it finds itself in. This would require a higher National Minimum Wage; one which would mean certain sacrifices at the level of the employer but for the national good and a future economy that can provide equitably for all citizens.