Mines need an objective guide to fair living wages

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Wage negotiations in mining have become cancerous – not just in the sense that the situation is bad, but that it is comparable to a set of cells competing with each other to the point that will lead to their own death.

This is the core problem with wage determination: it is based on competition. Competition between unions and firms, among unions, and – what many consider to be the moral guiding principle – competition with inflation.

But if fair wages is the aim of negotiation, then wages should be determined by a measure of fairness, not by a form of Darwinist natural selection. When unions go head to head, with companies or with each other, it is the worker who loses the most from a competition based on the survival of the fittest.

The Association of Mineworkers and Construction Union (Amcu) is into its 13th week of a strike over wages at Anglo American Platinum (Amplats), Impala Platinum and Lonmin. Companies have lost R13.1 billion in revenues and workers have lost R5.8bn in pay. The platinum producers have offered a 9 percent annual increase but Amcu will not budge from its demand for R12 500 a month – more than double the existing minimum wage.

This demand is unrealistic based on other wages in South Africa. Were it to be granted it would cripple the industry. Producers claim the extra costs would cause them to close and the companies and the unions would cease to exist. They’re right.

But producers can’t wipe their hands of the cancerous behaviour. The chief executive of Amplats earns R17.6 million a year, the head of Lonmin R12.9m and the boss of Impala Platinum R7.5m. Some argue this is necessary to attract the right skills, others say it is excessive. Regardless of your point of view, no worker earning a R5 700 entry-level salary (R9 700 with benefits) will heed the warning of loss of profitability when top management is earning these salaries.

Producers say such salaries are necessary for the survival of the business, yet their businesses are not surviving.

Wages based on negotiation between employers and unions are never going to produce an outcome that is fair for both, and will result in disruption and losses along the path to agreement.

Wages based on inflation are biased. First, national inflation rates may not reflect the actual inflation felt by the workers and the company. Second, and more importantly, wage increases based on inflation rates do not take into account the base wage already in place; even if wage increases were to match or exceed inflation rates, the resulting wage may not be a suitable allocation for the work done.

What is needed is a set of independent and objective criteria by which to determine wages that no union nor producer can challenge except under extraordinary circumstances. The survival of the industry and the jobs that the workers are so desperately trying to protect depend on it.

If a fair living wage comparable to that of similar occupations is too high for mines to be profitable, then the structure of mining operations and its other costs need to change. If a union feels its workers deserve more than a fair living wage, they must negotiate this in the courts, not through violent intimidation in the streets.

What’s needed is a non-negotiable measure of what constitutes a fair living wage, and a legal body strong enough to enforce it.

* Pierre Heistein is the convener of UCT’s Applied Economics for Smart Decision Making course. Follow him on Twitter @PierreHeistein


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