The Lonmin deaths are a result of the economics we subscribe to. If you were the president and could choose between two policies – one that would increase the wealth of both rich and poor but increase the divide between the two, or another that would increase the wealth of each slightly less but in equal proportions – which would you choose?
This is the question I frequently posed to my first year economics students and most rushed to the first option arguing that it maximised the greater good to all – a net benefit to society.
To their shock and horror I would disagree and I was then left to explain, with vague and intangible justifications, why unequal growth is worse than slower growth. Now the explanation is far simpler: August 16, Marikana platinum mine, 34 dead.
The first sign of inequality’s role in this is the huge salary increase demanded by mineworkers: an increase from R5 000 to R12 500 a month, which equates to a 150 percent raise. While the reasons behind the exact numbers are complex, it is clear that this has no resemblance to a standard inflationary adjustment of earnings.
When seeking remuneration for our work, we demand not only sufficient reward but also fair reward and mineworkers do not feel that rewards are being fairly distributed.
While a wage gap between mineworkers and senior managers can be accepted based on the need for incentive for self-improvement, reward for education and innovation, responsibility of operations and influence on results, it is in no way justified that workers can earn less than R10 000, while top management can take home more than ten times this amount.
Many studies have shown that while chief executives have a large role to play, they have a limited influence on a firm’s success and results are more strongly determined by market factors and the work ethic of the employees.
The Lonmin incident has shown that low inequality is not just a “nice to have” but a crucial building block of a healthy economy. South Africa frequently tops the list as the country with the greatest income inequality in the world, and the result is public and economic unrest.
In the case of the Marikana mine it was unnecessary deaths.
Everybody is searching for blame – a needless process that will get us nowhere as a nation. There is nobody that threw the first stone but rather a socio-economic structure behind this that we have allowed ourselves to accept as the norm. Inequality is a crippling disease born out of our inability to align work with fair reward.
The unproductive, disinterested worker should not try and claim excessive wage increases based on an ideal that everyone has a right to a high quality of life. Such things need to be worked for.
Equally no chief executive or company director should be allowed to grant themselves a bonus hundreds of times larger than that of their employees and drive home guilt-free with a pat on the back that at least they have created employment.
The market mechanism of reward in order to incentivise hard and innovative work is an important one.
But excessive earning gaps should not be allowed to separate us. The financial division of society is not an unfortunate side-effect of a working system that is working well, it is a fatal separation that will eventually implode into conflict.
Pierre Heistein is the convener for UCT’s Applied Economics for Smart Decision-making course.