Minimum wage pays off abroad

Deputy President Hon. Cyril Ramaphosa addressing the NEDLAC Summit held at Gallagher Convention Centre, Midrand, JHB, 20/06/2015. Siyasanga Mbambani.

Deputy President Hon. Cyril Ramaphosa addressing the NEDLAC Summit held at Gallagher Convention Centre, Midrand, JHB, 20/06/2015. Siyasanga Mbambani.

Published Jun 21, 2015

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Johannesburg - The introduction of a national minimum wage will not lead to mass job losses – as some employer bodies are threatening.

Instead, evidence from across the world shows that while unemployment figures often stay the same or sometimes decrease, there is greater equity in income distribution and a reduction in poverty.

A group of international experts are in South Africa this weekend to attend a workshop by the National Economic, Development and Labour Council (Nedlac) on the plans to introduce a national minimum wage.

Deputy President Cyril Ramaphosa has instructed Nedlac, which comprises labour, business, the state and civil society groups, to give the Presidency its first report-back next month.

While the Nedlac partners are a long way from deciding what the minimum wage should be, there have been warnings of dire consequences from certain quarters, such as the Free Market Foundation, which believes the market should be left to regulate itself.

However, they constitute a small group, according to Eddie Webster, director of the Chris Hani Institute.

Two other schools of opinion have formed among businesses since talk began last year of a minimum wage.

One believes regulation is desirable, but that many jobs will be lost if the wage is pinned too high, such as at R4 000, while the other, most of them unionists, believes it is an opportunity to restructure the labour market and close the ever-widening wage gap.

Although the government is keen to introduce a minimum wage, there has not been any comprehensive research in the country.

To kick-start such research, the international experts have been brought in by the International Labour Organisation (ILO) to share their experiences in introducing a minimum wage in some countries.

Wits University has launched a research initiative that will eventually include statistical modelling and policy papers.

“These debates will now be informed by evidence,” Webster told a discussion attended by the international experts at Wits this week.

According to insiders, exploring the possibility of a minimum wage has not been smooth sailing.

It took longer than expected to set the terms of reference for the process, as business was concerned that they were too wide and it did not want to lock itself into any agreement it could not pull out of.

Tensions will rise the nearer the parties are to discussing a figure for the minimum wage. The sectoral determination – the figure given as a minimum for vulnerable workers in various sector – ranges from about R1 600 a month to more than R3 000.

Patrick Belser, a senior economist at the ILO, said the principle of a national minimum wage had been gaining popularity around the world. China and Russia were also looking into it.

“The debate now is how the national minimum wage is operated… not if we should have it,” he said.

“When considering a national minimum wage, we must take (not only) the needs of workers and families into consideration, but also (what) the economy (can take).”

The experts shared experiences from Latin America, Germany, Africa and Malaysia.

They agreed that for a minimum wage to be truly beneficial, strong bargaining councils needed to be in place to ensure that workers earned more than the base level.

“A minimum wage system cannot live without having some kind of bargaining system,” said ILO member François Eyraud, who focuses on African countries.

“It is for low wages and must protect low earners. That’s why collective bargaining is needed to improve average wages.”

Many South African businesses push for the lowest possible wage.

But unionists will not be easy to convince.

Collective bargaining has come under sustained attack in the past year from businesses which, increasingly, want to negotiate directly with their workers.

Universities have estimated, based on 2013 prices, that R4 500 is the minimum needed for a family of five.

According to Stats SA, 50 percent of workers earned less than R3 033 a month in 2013.

The experts also agreed that setting a minimum wage would be pointless in the absence of institutions to enforce compliance, as companies often did everything they could to dodge paying the amount.

Andrés Marinakis, an ILO expert in Latin America, said research had come up with interesting data.

The higher the minimum wage, the higher the level of non-compliance. However, comparisons among Chile, Uruguay, Costa Rica and Peru had found that, where institutions were developed to enforce compliance, companies stuck to the law, no matter how high the wage.

“We focus on levels, but we don’t focus on the institutions,” he said.

Ensuring compliance will need to be considered seriously in South Africa. There are often criticisms that the labour inspectorate is not up to scratch.

“We are not inspecting effectively,” Webster said.

“It is not just a capacity question, but a lack of political will (by) the Department of Labour.”

Webster suggested that the department and unions should be involved in ensuring compliance.

In Germany, some economists had warned that 4 million jobs would be lost with the introduction of the national minimum wage, said Professor Gerhard Bosch, from the University of Duisburg-Essen.

“There is no negative impact – which is why most employers in Germany accept the national minimum wage.”

Germany’s minimum wage, E8 (R110.50) an hour, came into force this year.

Bosch said one reason the minimum wage worked in Germany was that there was no political interference. An independent commission comprising representatives of business and labour and two independent researchers had decided on the amount and when it should be increased.

No doubt when South Africa does eventually introduce a minimum wage, there will be companies that ask for exemptions for a variety of reasons, among them that they cannot afford it.

Many of the experts agreed that instead of allowing general exemptions, a transition period should be in place to bring companies on board.

In Malaysia, where a minimum wage was introduced in 2013, the requirement began with businesses who had five employees and more.

Shanmugam Thiagarajan, from Malaysia’s Ministry of Human Resources, said micro employers had been given an additional six months to get their houses in order. For the first year, instead of full enforcement, the government “held the hands” of employers.

Employers may apply to the country’s minimum wage council for deferment.

This weekend’s Nedlac meeting is closed to reporters. It is understood that some social partners were concerned that, after hearing the international delegates, they would not be able to debate freely.

Ramaphosa, who opened the workshop, said it was an “important step in the process of considering the modalities of a national minimum wage for South Africa”.

As in other countries, a body similar to the Employment Conditions Commission, which recommends minimum wages and conditions of employment for each sector to the labour minister, would be set up to determine the national wage.

It would include organised business, labour and independent experts, Ramaphosa said.

Labour Bureau

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