Minimum Wage Question 7

 
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A dozen questions about the National Minimum Wage

 
 

Question 7 of 12
 

7. Who is excluded from the proposal and why?

 

At the core of the Panel’s approach to the NMW is the conviction that its coverage must be as broad as possible. At the same time, the Panel recognises that there is a range of sectors in which immediate implementation of an NMW significantly higher than existing wages (see Question 6) will create disruptions and lead to unemployment. In some (but not all) of these cases, it proposes exemptions, exceptions and delayed implementation. Its reasoning in these cases is instructive.

Agriculture and domestic work

The Panel’s wage data show over 90% of SA’s 1.1 million domestic workers and 85% of 560,000 agricultural workers earn less than R3,500pm. As a result, it acknowledges that there is considerable risk of job losses in these sectors if an NMW is set at that level. For this reason the Panel recommends, without substantial justification, that the minimum wage in agriculture be set at 90% of the NMW, while in domestic service it should be at 75%.

There is a degree of ambiguity in the Panel’s recommendations about the phasing out of these sub-minimum wages. On the one hand, it seems to insist that no exceptions of this kind should be contemplated after 2019 and that these differentials should be eliminated by then; on the other, it says that no adjustments should be made to the tiers until after careful study of the effect of these wages on employment levels. The Panel, in other words, seems to be saying that an NMW should be universal unless it has negative effects on employment in these sectors. Why this should be the case in agriculture and domestic work but not in other sectors is left unexplained. It is hard not to conclude that the Panel is seeking to protect itself from two contrasting objections: (i) that it is not really recommending a universal NMW and, (ii) that it is indifferent to job losses that may result from its proposals. As in other areas (see Question 8), the Panel appears to be ducking its responsibility for making the trade-offs between higher wages and fewer job opportunities more explicit.

EPWP and care workers

Another group of vulnerable workers identified by the Panel is made up of those who earn low wages, but whose principal source of direct or indirect employment income is government. They include the large numbers of people employed by the Expanded Public Works Programme (EPWP) and the employees of subsidised early childhood development (ECD) centres. There are no estimates in the Panel’s report on the number of EPWP workers at any given time, but because of the way these figures are compiled, it is likely that all EPWP and low-wage care workers are included in the 1.2 million community, social and personal services (CSP) workers who earn less than R3,500pmand who account for 37% of all workers in the sector.

The Panel’s ambivalence about what to do with these workers is evident. It states that it would prefer an NMW of universal application, but recognises that unless government allocates significantly more money to fund activities like the EPWP and to increase subsidies to ECD centres, the imposition of a high minimum wage will reduce employment and in doing so reduce the quantity or quality of services provided. It notes, for example, that the norms and standards governing ECD centres require that the ratio of teachers to children be no more than 1:19, but that a salary of R3,500pm, which is nearly twice what some teachers in this sector earn, will make the achievement of this impossible unless government’s subsidy is raised considerably.

The Panel’s response to this dilemma will not convince anyone who is aware of the constraints on the national budget:

“The ECD example is illustrative of a large and complex sector. These are essential public services which, in most developed countries and in many developing countries, are provided by government. In the South African setting, NGOs and NPOs provide these services on an agency basis on behalf of Government. The Panel is very concerned about the impact of a national minimum wage at a level of R3,500 on this sector. In essence, Government needs to ensure that this sector is adequately funded in line with its constitutional and legal obligations.”

It is clear from the above that the Panel recognises that there are sectors in which there is a strong probability that employers’ response to the implementation of an NMW at R3,500pm will involve a reduction in the number of people whom they employ. As we will see, the Panel does not accept that this response will be generalised across the economy (see Questions 8 and 9), although the basis for any distinction between the effects in these sectors and those in others is not obvious. Indeed, to the extent that distinctions are drawn, they are not convincing.

 
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