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The great wage debate

SHAUN SMILLIE | 2016-07-26 06:19:25.0
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A MINIMUM wage of reaching up to R5,000 could be just what SA needs to boost its economy.

This is according to a new report titled "A National Minimum Wage for South Africa", released yesterday at Wits University.

Researcher Gilad Isaacs, who authored the report, suggests that a minimum wage starting at between R3 500 and R4 600 and reaching between R3 900 and R5 100 five years later would be sustainable for the economy.

But other economists worry that that is too high and will cause job losses. Political parties are also concerned about the implementation of a minimum wage.

The ANC has said it intends to introduce a minimum wage this year.

Isaacs' report examined the experiences of other countries and the effect a minimum wage had on inequality and poverty reduction.

He argues that South Africa would benefit from a minimum wage and that the economy would be stimulated by the increased buying power.

Isaacs predicted that if South Africa introduced a national minimum wage of R3500 to R4600 a month, average GDP growth would be 2.8% to 2.9%.

"Shifting income from high earners to higher wages would encourage more spending," he said.

In South Africa minimum wages have been set sector-by-sector and have been negotiated between trade unions and employers.

Isaacs believes that a national minimum wage would be easier to implement and enforce.

In his report, he said that usually a national minimum wage in middle-income countries was set at 48% of the average wage. In South Africa, as of April 2015, this was R4,161.

This range is what labour federation Cosatu is pushing for at the National Economic Development and Labour Council (Nedlac).

Business leaders have called for the wage to be set at R1800.

"In many countries, for example Germany, and in some parts of the US, there is evidence the national minimum wage has improved the buying power of people who have fallen through the cracks in the economy," said Cosatu president Sdumo Dlamini.

Dlamini said that business and the unions would have to "converge on an amount".

Economists fear that R4,500 to R5,500 would be too high and cause job losses.

Economist Mike Schussler believes a high minimum wage would drive jobs from the formal sector into the informal sector.

"Take someone who earns R25,000 a month: they are paying their domestic an average salary of R2,000. A minimum wage of R4500 would double her salary and make [her services] unaffordable for them," he said.

Isaacs said in his research that national minimum wages had a marginally negative or neutral effect on employment.

Both Schussler and Dlamini suggested a sector-by-sector approach, with Dlamini saying the minimum wage should be reduced for small businesses.

Economist Dawie Roodt feels that any minimum wage. irrespective of the amount, would cause job losses.

"You need to grow the economy to force companies to employ more people and then they have no choice but to pay higher wages," Roodt said.

Political parties support a minimum wage but differ on how much it should be.

DA labour spokesman Ian Ollis said the party would support a minimum wage "under certain circumstances".

"A national minimum wage does not create jobs, it merely puts money in the pockets of people who earn below the level at which a minimum wage would be set ," said Ollis.

He said the party would support a national minimum wage if it were set by "an independent panel of academics" and determined sectorally.

The EFF wants a national minimum wage at R4,500.

- Additional reporting Olebogeng Molatlhwa

 

Note: In a previous version of this article Gilad Isaacs, co-ordinator of Wits University’s National Minimum Wage Research Initiative, was quoted as suggesting a national minimum of between R4 500 and R5 500. The report does not make this suggestion. Instead it provides internationally agreed-upon benchmarks and the results from statistical modelling exercises. The report concludes: “That a national minimum wage beginning between R3 500 and R4 600 and reaching up to between R3 900 and R5 100 after five years is feasible.” The Times regrets the error.

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