Zwelinzima Vavi, General Secretary of the Congress of South African Trade Unions, COSATU House, Johannesburg, 5 April 2013
The case for a national minimum wage
"The issue is not just jobs - Even slaves had jobs, the issue is wages." - Jim Hightower
Thank you for giving me the opportunity to say a few words on such an important issue - why we need a statutory national minimum wage.
This question has hit the headlines following COSATU's successful conference on Collective Bargaining, Organisation and Campaigns in March 2013, which came out strongly in favour of the demand for a legislated National Minimum Wage.
This call is not new. 58 years ago the Freedom Charter called for "a national minimum wage". The justification for this is clear: the levels of poverty which existed in 1955 are still with us today, and inequality is even worse, in what is now the most unequal society in the world!
This rate of inequalities, together with poverty and unemployment, is acknowledged by all as forming a formidable triple crisis as we call it, or triple challenge as others prefer to call it. The debate on minimum wages is a debate on unemployment and its impact on society, poverty and deepening inequalities.
South Africa has no coherent incomes policy. The apartheid wage structure has not fundamentally changed. The majority of black workers, particularly in the private sector, continue to live in poverty, not only in the most vulnerable sectors, but also among most blue-collar workers.
Why a minimum wage in South Africa? Half of South African workers earned below R3033 per month in 2011. Yet rough estimates for a national minimum level (MLL) are about is about R4000 a month. Those living below this figure are living in poverty - that is more than 60% of workers. Minimum wages set through sectoral determinations fall way below the MLL - at R2118 - and the minimum wages set at the Bargaining Councils are R2725.
The South African Race Relations Institute, analysing Statistics South Africa, show that the median salary for Africans in 2011 was R2 380, Coloureds earned R3 030 and Indians earned R6 800 whilst whites earned R10 000. This is the story of inequalities in South Africa.
To COSATU the demand for a national minimum wage is seen as a springboard to protect all the low paid workers
We acknowledge that the national minimum wage alone will not address poverty and inequalities. We are calling for a coherent wage and incomes policy as an integral part of an overall strategy to address economic fault lines. This to us is at the centre of the second phase for a radical economic transformation.
In addition to a minimum wage we are calling for a comprehensive sectoral bargaining to improve on that minimum wage floor, for comprehensive social protection and a universal social wage to provide workers with a non-wage income, and for a national wage and incomes policy to be combined with an appropriate macroeconomic and industrial policy.
The lesson we have drawn from Latin America is that for a decent wage policy to be more effective, it must be driven by a developmental state, as part of a comprehensive strategy. In Brazil this strategy was combined with increase in domestic productive capacity so that income would drive the creation of large-scale formal employment.
We are not calling for a minimum wage as a final destination but rather a vehicle and springboard towards a living wage for all workers, as part of a growth path that will restructure the current crisis-ridden growth path.
We are not calling for a minimum wage in order to substitute collective bargaining. We don't want to demobilise workers. Workers must battle in the sectoral bargaining structures to improve on the national minimum wage.
International experience
Dr Patrick Belser the ILO Expect on told us the minimum wage was developed in New Zealand and Australia at the very end of the 19th century. Britain adopted its first minimum wage in 1909. It was way back in 1928 that the ILO adopted a minimum wage-fixing machinery convention. The US introduced its Fair Labour Standards Act in 1938 and France in 1950.
Today about 90% of the ILO member states have a minimum wage system in place.
Minimum wages does not mean job destruction
The ILO has told us that the perception of minimum wages has changed. Studies have shown that if minimum wages are set at a "reasonable level" they will have "no significant employment effect one way or the other" on employment. In the UK after 10 years of monitoring, the UK Low Pay Commission had not found any significant effect on employment.
True minimum wages raises costs to employers but increase consumption.
In Brazil, under the Lula administration, minimum wages played a key role in reducing poverty, unemployment and inequalities. Between 2002 and 2010, national minimum wage increased by 81%. In the same period 17 million jobs were created. The proportion of formal employment in economy increased dramatically outpacing the informal jobs by 3:1.
Between 2003 and 2008 poverty came down by 20 million from 61.4 million to 41.5 million. Inequalities are came down - the Gini coefficient fell from 0.57 in 1995 to 0.52 in 2008, and salaries rose from 58% of GDP in 2004 to 62% in 2009.
Even in South Africa, a Development Policy Research Unit study found that, after introduction of higher minimum wages through sectoral determinations, employment increased by over 650 000 workers, from 2001 to 2007 from 3,45 million to 4,1 million, despite a large drop in farm worker jobs.
Likely response of South African employers
Many employers are sure to reject this whole idea. They are already taking up arms against the principle of collective bargaining, notably through the Free Market Foundation's attempt to get a court ruling that the Minister of Labour's enshrined power, under the Labour Relations Act, to extend bargaining council collective agreements to non-party employers, is unconstitutional.
This follows an earlier attack by the FMF on the extension of legitimately negotiated collective bargaining agreements in the metal and clothing industries. Their aim is to allow employers to pay even less than the already low minimum levels of pay negotiated in bargaining councils.
It would effectively make collective bargaining agreements purely voluntary. Employers could ignore them and pay workers whatever they liked. This effectively means the death of collective bargaining, since the non-complying employers would undercut the collectively negotiated wages and force even those firms who signed the agreements to renege on them in order to compete in a race to the bottom and poverty wages for all.
This is undoubtedly the FMF's intention, and I am sure they will fight equally hard against a national minimum wage.
They have failed to see the warning posed by Marikana and the farm workers' strikes, which dramatically highlighted the importance of centralised bargaining, and the danger of scrapping it - to the employers and country - as well as to the workers.
A free-for-all on wages, and a race to the bottom, would not only be a disaster for the employees, and all their dependents, but for the whole economy.
One of the key problems in an economy with such levels of poverty as we have is the low levels of effective demand. Far too many South Africans have little or nothing to spend on goods and services.
Cutting wages still further, which is the FMF's aim, will make this problem even worse, with even less money in circulation, less being spent in the shops, fewer goods being produced and therefore even more unemployment, which completely demolishes the FMF's argument that their policies will create jobs. It will destroy them.
Let us emphasize that the national minimum wage is not our ultimate destination, but a powerful vehicle and springboard towards a radical restructuring of our economy, driven by a developmental state, to create more decent and sustainable jobs, a faster growing economy and a more equal society.
Issued by COSATU, April 5 2013
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