The Congress of South African Trade Unions has updated its briefing document on the national minimum wage (NMW) to include reference to the report by StatsSA on 3 February 2015, which exposed the shocking extent, and continued persistence, of extreme levels of poverty, which greatly strengthened the argument for a NMW.

COSATU briefing document, 17 February 2015

Outline

This document covers the following issues:-

1. Evidence of how so many workers work to stay poor

2. Why we can't leave wage setting to collective bargaining alone

3. Why we want a National Minimum Wage instead of just an additional Sectoral Determination to cover those workers not currently covered

4. Would we consider more than one National Minimum Wage?

5. Would we consider an exemption system?

6. What level should a National Minimum Wage be pitched at?

7. Could a National Minimum Wage undermine collective bargaining?

8. Will a National Minimum Wage have a negative impact on jobs?

9. What else do we have to put in place to ensure a National Minimum Wage has a positive impact?

1. Evidence on how so many workers work to stay poor and how a NMW set at a decent rate would lift millions out of poverty AND address inequality

StatsSA's third "upper-bound poverty level" (UBPL) measures the income people need for essential items after meeting their basic food needs. It has ‘rebased' or recalculated its figure for 2011 from R620 per person a month to R779 pp/pm in 2011, to around R946 pp/pm in 2014, which is still a very basic, minimal amount.

Based on this recalculation, the number of people living below this level increased from 45.5% to 53.8%, more than half the population!

We believe that while this UPBL is still extremely low, it comes closer to a more realistic estimate of the levels of poverty in the country. StatsSA's other two definitions of poverty only measure total destitution and extreme poverty, and are therefore not helpful in measuring the full extent of poverty in the country.

This new information from Stats SA on the UPBL has critical implications for the current national debate around a national minimum wage.

Low income workers in South Africa do not just support themselves but on average four dependants, and in many cases even more. For a family of 5 in 2014 the R946 pp/pm figure would require the breadwinner to earn a minimum of R4730 (or R4966 in 2015, using a CPI of 5%) merely to save his or her family from poverty.

Yet the minimum wage in most sectoral determinations, and even some bargaining council agreements, are way below this broad minimum living level, and even this would only ensure survival and not what would be required to be real minimum wage. There is clearly no commitment to a minimum wage when the levels of sectoral determination are not where near the survival amount.

It is intolerable that so many workers, even those covered by sectoral determinations - which are supposed to protect the most vulnerable workers - are living below this UPBL poverty line, which itself falls below what we regard as a basic minimum living level, supported by the work of university research institutions, which is roughly between R5000 and R5500 a month, in 2014 prices.

In fact the median wage (half of workers earn above this and half of worker earn below) in 2013 was R3033. The majority of workers are therefore working to stay in poverty, unable to afford many of the most basic necessities. If we exclude the agriculture sector, the informal sector and domestic work, the median wage is R4033 - which is STILL below this Minimum Living Level.

Based on this picture of the wage structure, it then becomes obvious that a national minimum wage which is pitched significantly above the level of the current median wage could immediately play a critical role in improving the income of the bottom half of the wage structure. Based on international experience, the national minimum wage would ‘cascade up' the wage structure, and improve the income of other low paid workers. It would also put pressure on companies to reconfigure the wage structure, to reduce the proportion of wages and salaries currently being consumed by top management and the high paid.

The national minimum wage would therefore both play a key role in combating working poverty; and in reducing income inequality. But it must be combined with other strategies to transform the wage structure, including capping the salaries of top management, and a collective bargaining strategy which deliberately negotiates higher pay increases for the lower paid.

2. Why can't we just leave wage setting to collective bargaining alone?

We have approximately 10.2 million workers employed in the formal sector in South Africa. Of these, only 2.4 million workers' wages are covered by Bargaining Council agreements, and 900,000 workers' wages are covered by plant level agreements only. The wages of 3.5 million workers are regulated by Sectoral Determinations, and the wages of 3.4 million workers are not regulated at all.

While we believe in the promotion of Collective Bargaining to set wages, we cannot wait for full collective bargaining coverage. The absence of wage regulation for so many workers creates space for super exploitation.

3. Why do we want one NMW as opposed to just adding a new Sectoral Determination? 

There are currently nine Sectoral Determinations and Ministerial Determinations. The minimum wages for nine sectors are way below both the median wage of R3033 a month, and the Minimum Living Level of R4500 per month.

The minimums range from R1618 for domestic workers in non metro areas to R3063 for wholesale and retail shop assistants. Each Determination has its own figure, and some Determinations have a number of figures pegged to different job categories. This multiplicity of minimums makes it impossible for there to be popular knowledge of the minimums. Only a person with access to the different minimums (as set out below) would be able to make a judgement about compliance in any sector.

If we had ONE National Minimum Wage, linked to a minimum living level, it would help vulnerable workers escape the poverty trap which current SDs condemn them to. The figure could be popularised to workers, employers and government officials. Compliance and enforcement would be much simpler. No worker could earn below the national minimum wage. And no worker whose wage is higher than the NMW could have their wages reduced to the amount of the NMW.

The introduction of a National Minimum Wage would not necessarily mean the end of Sectoral Determinations, as they also cover other conditions of employment. We would consider discussing a new role for Sectoral Determinations over and above the NMW.

The majority of countries that have minimum wage systems (60% of them) are based on a single National Minimum Wage. A simple system has proved appropriate in both developed countries and developing countries. Examples of countries that have a simple National Minimum Wage system include the United Kingdom, USA, Brazil, China, the Netherlands, Portugal, and most countries in Francophone West Africa 

Table of Sectoral Determination & EPWP minimums as at 1^st January 2015

*Where an SD does not express the wage in monthly or daily terms, the hours of work are not necessarily guaranteed. The Cleaning SD expressly states that pay must be for a minimum of 6 hours per day, regardless of whether the worker is employed to work for less than 6 hours. For ease of comparison this column has consistently used a 9 hour day (which is then converted to monthly in the next column). If a worker's pay slip reflects less than this, then the SD must be checked for the details around hours of work and guaranteed pay.

4. Would we consider more than one National Minimum Wage?

We have yet to receive a mandate on whether we can be flexible enough to consider say one national minimum to begin with, plus sectoral determinations for a couple of sectors, and then moving towards one. But we are very clear that we must get away from multiple minimums. The ILO is in favour of doing away with multiple minimums.

5. Would we consider having an exemption system under a NMW?

In principle everybody should be covered and exemptions should be avoided as far as possible, otherwise the national minimum wage will no longer be a floor but a structure with gaping holes.

6. What level should the national minimum wage be pitched at?

We do not have a mandate yet for a figure for a NMW but we can draw on some international experience to show what we would not be prepared to go below.

There are two international benchmarks which are sometimes used to gauge the level at which the national minimum wage should be pitched. While not cast in stone, these are useful benchmarks which should be considered. Namely a Minimum Living Level and the ratio of the national minimum wage to the average wage.

-  The minimum living level- when the university calculations were updated to 2012, the rough calculation was that a MLL would be around R4500 to R5500.

-  The ratio of the minimum to the national average: Internationally, the yardstick is that the national minimum wage should be 40-50% of the national average wage. The national average is around R15 000. So 40-50% of the average wage would be R6000 to R6750

We will be talking to our members about what an acceptable figure would be for a NMW. There must be a process of serious engagement under Nedlac to reach agreement on a final figure. The process must be backed up by mandating and research. We may need to agree to a process of phasing in our target figure. But there needs to be boldness in raising the current very low minima.

7. Could a National Minimum Wage undermine collective bargaining?

We do not believe that a NMW would undermine collective bargaining. A NMW will not prevent bargaining on top either on wages or on other employment conditions, where representivity is proven. International research indicates that where a NMW gives rise to increased real wages in the bottom half of the wage structure, this has a positive knock on effect collective bargaining. We will of course have to be vigilant in preventing the employers from abusing the NMW as a benchmark to drag down actual wages.

8. Will a National Minimum Wage have a negative impact on jobs?

There is no evidence that rising minimum wages by themselves have a negative impact on employment. Employment performance is explained by various economic factors. Sectoral conditions, industrial strategy, trade dynamics & broader economic conditions, have a key role in determining how sectors perform. Wage policy must therefore be combined with appropriate macro & sectoral policies to have the desired employment impact.

In fact under certain circumstances a NMW can have a positive impact on employment, as seen in Latin America, by raising the level of effective demand for services and for locally manufactured goods.

9. What else do we need in place to ensure that a NMW has an overall positive impact?

In order for a National Minimum wage to have the desired effect of lifting workers out of poverty and reducing inequality, it has to be accompanied by appropriate industrial policies as well as trade policies, which help to promote employment. If we introduce a NMW without putting these policies in place, we run the risk of local goods and services being undercut by producers based in other countries where wages are lower.

COSATU's demand for stronger intervention and support in the manufacturing sector, and for more protective trade policies remains.

The following measures are also necessary:-

Stronger enforcement of all labour laws including of the Employment Equity Act provisions that require all employers to report on disproportionate income differentials at all wage levels and submit plans for their progressive reduction.

Steps to ensure that collective bargaining takes place in all sectors of the economy - in particular through the active promotion of the establishment of bargaining councils in all sectors

Greater protection for workers and employers in the informal sector.

 Measures to eliminate abusive work practices in atypical work and labour broking.

Statement issued by COSATU, February 18 2015

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