Dignity in a World of Poverty – A Realistic Look at the South African National Minimum Wage

Editor’s Note: This article has been published as part of S&S’s partnership with Brightest Young Minds (BYM), a 17-year-old non-profit company that aims to identify, connect and mobilize Africa’s

 

most innovative young people.  One does not have to read very widely to observe that the right to dignity is an internationally recognised human right. In fact, it is one of those cornerstone rights, which found accolade in the Universal Declaration of Human Rights of 1948. How, then, is this famous concept still so complicated to understand? Where do we draw the line between equal opportunity and economic viability, and, more importantly, are these two concepts mutually inclusive or mutually exclusive?

Recently, South Africa has taken up the controversial debate over a national minimum wage. Although some members of the Government have set a target to have this new national wage introduced by 1 May 2018, Parliament hesitated. On 23 March 2018, Parliament indicated that they would not rush the finalisation of the legislation. The Department of Labour reacted to the concerns raised during the public hearings, and on 17 April 2018, announced that the implementation date has officially been delayed, potentially by two months. Most notably, there are still major concerns raised by both the unions and legislatures over this new policy. On Wednesday 25 April 2018, the South African Federation of Trade Unions will aim to bring the “country to a standstill” as they embark on a nationwide protest against the proposed national minimum wage. One could boil the debate down to a conflict between what constitutes a living wage and what the economy can “reasonably” afford. The proposed national minimum wage falls significantly short of the average living wage.

As it stands, under the current National Minimum Wage Bill (approved by the Cabinet on 1 November 2017) workers will receive a minimum of R20 (South African rands), or $1.66, per hour, which translates into an estimated monthly wage of R3,500 ($290.34) for a 40-hour week, and around R3,900 ($323.52) for a 45-hour week. The Cabinet has also indicated the following exceptions to the current approved Bill:

  • The minimum wage for farm workers will be 90% of R20 ($1.66) per hour (R18 ($1.49) per hour);
  • The minimum wage for domestic workers will be 75% of R20 ($1.66) per hour (R15 ($1.24) per hour); and
  • The minimum wage for workers on an expanded public works programme is R11 ($0.91) per hour.

Economists will argue that the true effects of a national minimum wage will create a price floor. The Marginal Revolution University’s sets out this argument in their online economics series, indicating that, according to the law of supply and demand, the demand for labour would simply decrease once a price floor is created within the labour market. Economists further argue that a wage subsidy is more preferred since it, again in the world of supply and demand, will lead to an increase in demand. The argument goes that lowering the cost of labour favours labour over capital, costing the Treasury instead of the business. In this case, it means that business won’t have to bear the cost. A targeted wage subsidy could apply to a specific subset or group of workers though, thereby increasing the relative attractiveness of hiring the targeted group relative to those who are not targeted.

Of course, on the other side of this debate, unions will indicate that the law of supply and demand falls short of realistic, proven theory. It can be proven that South Africa suffers from one of the highest income inequality and wage gaps in the world. Creating an opportunity for the country’s poorest to participate in the economy is a way to start redistributing wealth in South Africa, but if workers still cannot afford to cover basic living needs, how can they actively start participating?

Now, one wonders – so what? – is it not just a political game in the end or is there really space for a humanised argument for a minimum wage?

As the Universal Declaration on Human Rights notes, “All human beings are born free and equal in dignity and rights. They are endowed with reason and conscience and should act towards one another in a spirit of brotherhood.”

In that spirit, even with the new Bill, it seems important to ask whether we are supporting a dignified living with a minimum wage that is below the living wage.

Trade Economics indicated that in 2017, the South African individual monthly living wage was R6,460 ($535.89), which is, again, 54.18% less than the proposed minimum wage of R3,500 ($290.34). For a person to have the opportunity to thrive, or even rise out of poverty, they must be able to cover their basic needs. Similarly, every person should have the opportunity to be a part of the functioning economy, something the Bill also does not provide for. In South Africa’s case, the introduction of a national minimum wage might not meet the requirements for a living wage, but many will still argue that it is “a step in the right direction.”

But is that step enough?

By introducing a national minimum wage, the South African Government addressed a political need that the labour unions forced them to, but it did not take steps to create an equal footing for opportunities in the job market or provide poverty-stricken South Africans the opportunity to earn a dignified living wage and rise out of poverty.

Thus, the “step in the right direction” argument forces the concepts of equal opportunity and economic viability to appear mutually inclusive. However, something has got to give – South Africa can either implement a minimum wage that equates to (or is reflective of) a living wage, or it can implement one that is economically viable, a “good start” minimum wage. But what is certain, is that they cannot have it both ways. In this case, the simple appearance of mutual inclusivity does not endorse mutually inclusive behaviour. These concepts are therefore mutually exclusive, and, in South Africa’s case, a minimum wage that is economically viable will not realistically create an equal footing for opportunities in the job market. Unfortunately, the South African Government has chosen economic viability over dignity, emphasising the argument that in a poverty-stricken country, dignity always seems to play second fiddle.

 

Image courtesy of Flickr. Originally published by S&S on April 26, 2018.

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