National Minimum Wage will improve lives of millions - Zwelinzima Vavi

COSATU GS says it will also increase demand for goods and services and thereby create jobs

Speech by Zwelinzima Vavi, General Secretary of the Congress of South African Trade Unions, to the CCMA Commissioners' Indaba, Durban, December 4 2014

Tomorrow will be exactly one year to the day when we lost our beloved leader, Comrade Nelson Mandela, and it would be wrong not to briefly pay tribute to the unique role he played in transforming the lives of all South Africans, most especially the workers.

May I also take this opportunity to congratulate the CCMA and all its commissioners on the magnificent work they do every day to resolve problems in our workplaces.

Thank you for giving me the opportunity to speak to you on such an important issue - why we need a statutory national minimum wage (NMW).

COSATU's support for this was mandated by our successful conference on Collective Bargaining, in March 2013, which came out strongly in favour of a legislated NMW, which is turn echoed the Freedom Charter's call for "a national minimum wage" nearly 30 years ago.

The biggest argument in its favour is the high levels of poverty and unemployment, and particularly inequality, which is even greater than it was in 1955 when the Freedom Charter was adopted.

South Africa currently has no coherent incomes policy and there is no officially accepted definition of what constitutes poverty or a living wage. Academic studies however concur that the acceptable minimum that you need to escape poverty in South Africa should be about R4000 a month and a recent study of the University of Cape Town claimed that 58% of African household live in poverty.

A survey in 2011 revealed that half of South African workers earned below the then median wage of R3033 per month. It also revealed the extent to which the apartheid wage structure has not fundamentally changed, with a clear racial bias in the distribution of poverty, the median salary for Africans being R2 380, for Coloureds R3 030, for Indians R6 800 whilst for whites it was R10 000.

We can surely agree that anything below the R3033 median level constitutes poverty, and yet that is what the majority of workers receive, not only in the most vulnerable sectors, but also among most blue-collar and even many white-collar workers, as well of course as virtually all the unemployed. 

Yet we are now number one in the world in terms of inequality. The Gini coefficient which measures inequality has worsened from 6.4% to 6.9% in just ten years, the highest in the world.

While so many of us live in poverty, the latest Sunday Times Rich List published this week shows that the best-paid chief executive last year, Old Mutual boss Julian Roberts, took home R73-million, 2 000 times that R3033 median wage.

Anglo American Platinum CEO, Chris Griffith, who retrenched many workers last year, took home R12.9-million, including a R4-million bonus - 86 times the R12500 which his own skilled mine workers have been demanding.

Shoprite CEO Whitey Basson, who made R49.6-million last year - 1350 times more than the current sectoral determination wage for a shop assistant.

Sectoral determinations are the closest thing we have to a minimum wage policy at the moment, but most of their wage levels fall way below even the median wage levels, as low as R1813 a month for domestic workers in non-metropolitan areas. Expanded Public Works Programme workers earn even less - just R71 a day! In my view these levels come nowhere near addressing poverty pay in these most vulnerable sectors.

They are also too complex, covering 11 different sectors, each of which covers a multitude of employment categories. A single minimum wage level across all sectors would be far easier for workers to grasp and thus help them to secure that it is paid. 

An NMW alone will not address the big problem of poverty and inequalities, but it will be an essential component of a coherent incomes policy, which must also include a comprehensive social security system and basic income grant to cater for those unable to work, and a ‘social wage' to provide workers with a basic services like healthcare, education and public transport.

It is also important to stress that an NMW will not replace collective bargaining. We don't want to demobilise workers, who must be free to battle in the sectoral bargaining structures to improve on the national minimum wage and ensure that recognition is given to factors like qualifications, skills, experience and danger.

The NMW will however improve the quality of life for millions of South Africans, who are currently struggling merely to survive and feed their families. The NMW will give them dignity, enable them to become consumers, savers and tax-payers and to play a role in the country's economy.

This is not just good from a humanitarian perspective, however, but good for society as a whole. By putting more money in the pockets of the poorest, the NMA will increase demand for goods and services, thus leading to more sales, greater production to meet the new demand and therefore more jobs, which will on turn put more money into circulation.

This is the answer to those economists who argue that an NMW will lead to higher unemployment, as employers will retrench staff because they cannot afford to pay the higher wages - a very blinkered view that sees the problem only from the viewpoint of the individual employer rather than the impact on the whole economy.

Others opposed to a NMW or to any form of incomes policy or collective bargaining system based their argument on the false belief that "only the market should decide the level of wages", which would mean a free-for-all on wages, in which employers could pay the minimum amount that a desperate unemployed worker will accept.

Such a race to the bottom would not only be a human disaster for the workers and all their dependents, but for the whole economy. As economist John Maynard Keynes argued in the slump of the 1930s, the ‘classical' market theory of wages does not work in times of high unemployment, as growth will never take off when there are high levels of poverty, stagnant demand for goods and therefore no incentive for companies to take on new workers however low the wages.

South Africa is a classic example of this. Because of the levels of unemployment and poverty pay, far too many South Africans have little or nothing to spend on goods and services.

International experience has also disproved the theory that a NMW mean job destruction and shown that it can actually create jobs.

Today about 90% of the ILO member states have a minimum wage system in place and studies have shown that if they are set at a "reasonable level" they will have no significant 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.

In Brazil, under the Lula administration, minimum wages played a key role in reducing poverty, unemployment and inequalities, and creating jobs. Between 2002 and 2010, the national minimum wage increased by 81%. Between 2003 and 2008 the number of people defined as living in poverty fell by 20 million from 61.4 million to 41.5 million, salaries rose from 58% of GDP in 2004 to 62% in 2009, as inequality narrowed, as the Gini coefficient fell from 0.57 in 1995 to 0.52 in 2008.

Yet in these years 17 million jobs were created!

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 drop in farm worker jobs.

A minimum wage is not the a final destination but rather a springboard towards a better life for all and a new growth path, driven by a developmental state, to create a faster growing economy, more decent and sustainable jobs, and a more equal society.

Issued by COSATU, December 4 2014

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