Minimum Wage Question 3
A dozen questions about the National Minimum Wage
Question 3 of 12
List of questions
1. What, exactly, is being proposed?
3. What does the Panel hope the NMW will achieve?
Although the NMW is intended to achieve a number of goals, the most important is to raise the incomes of the working poor. According to Panel figures, the average per capita income of the poorest 29 million South Africans who live in the poorest 40% of households is about R500 per month. And, while poverty in these households is largely because so few people work (on average, each has only 0.6 members in employment), even those who do work earn very little: the Panel estimates that wage earners in this group earn on average less than R1,500pm.
The Panel’s report includes a series of tables estimating how many people are employed at wages below various levels, both in aggregate and per industry. It should be noted that there are some serious methodological concerns with the way data on income is captured in SA, with some evidence that gross wages (especially among those in the formal sector) are often underestimated. This is because people report their incomes after deductions (for tax, pension and medical aid contribution, UIF and even garnishee orders), rather than the value of their wages before those deductions. This creates an upward bias in estimates of the number of people earning less than any given monthly wage.
These deficiencies notwithstanding, according to the figures used by the Panel: 4.6 million people (35% of all employed people) earn less than R2,000pm; 5.5 million (42%) earn less than R3,000; 6.2 million (47%) earn less than R3,500, and 6.7 million (51%) earn less than R4,000. While the precise figures differ for each cut off line, the industries in which the largest proportions of all workers earn low salaries are, domestic work (where 91% of employees reportedly earn less than R3,500pm), agriculture (85%), construction (55%), and trade (48%). At the other end of the; scale, it is only in utilities (24%) and mining (18%) that fewer than one in four workers earn less than R3,500pm.
The Panel acknowledges that an NMW cannot be expected to reduce poverty by reducing unemployment. It accepts the general proposition that there is a trade-off between wages and employment. Even so, it argues that by raising the statutory minimum wage, households in which there are employed people will be better off. This is contingent, however, on their remaining in employment, an issue to which we turn in (see Questions 8 and 9).