The agreement by social partners to introduce a national minimum wage by 1 May 2018 realizes a key demand of the Freedom Charter on the Rights and Conditions of Workers.
It also fulfills a commitment made by the ANC in its 2014 Election Manifesto to examine the modalities for the introduction of a national minimum wage.
Its introduction is a great victory for working people and for COSATU, in particular, which has consistently championed the national minimum wage over many years.
The agreement that has been reached owes much to the hard work of COSATU, together with its Alliance partners, to improve the lives of South Africa’s lowest paid workers.
It is a demonstration of the practical gains that the Alliance can achieve when working together in a collaborative and united manner.
The introduction of a minimum wage gives real substance to the ANC’s working class bias.
Building on such achievements as the Constitutional guarantee of the Right to Strike, the Labour Relations Act and Basic Conditions of Employment Act, the minimum wage reaffirms the movement’s determination to place the poor and working class at the centre of its policies and programmes.
Significantly, the minimum wage agreement reflects a recognition even by business that income inequality is a major obstacle to economic growth and development.
The Ekurhuleni Declaration, which was adopted by all social partners in November 2014 and which laid the basis for the current agreement, notes that legacy of low wages is among the biggest causes of poverty and inequality in South Africa.
It has been more than 60 years since delegates to the Congress of the People in Kliptown resolved that: “There shall be a forty-hour working week, a national minimum wage, paid annual leave and sick leave for all workers, and maternity leave on full pay for all working mothers.”
Yet while working conditions have improved immeasurably and the rights of workers are entrenched in the Constitution, millions of workers are paid less than what is considered a living wage – the amount needed to ensure a decent standard of living.
There is a huge gap between the highest and lowest earners in the economy. It is estimated that in 2014, the average income of the top 10% of full-time employees was 82 times the average income of the bottom 10%.
The wage gap reinforces the severe economic inequality that persists more than 20 years after the end of apartheid and, together with unemployment, accounts for our high levels of poverty.
The introduction of a national minimum wage of R20 an hour by 1 May 2018 will have a profound impact on the lives of millions of people. Currently, around half of all people in employment – which amounts to roughly 6.6 million workers – earn less than R20 an hour. This includes around 90% of domestic workers, over 80% of agricultural workers and around half of all construction workers and wholesale and retail workers.
While this is not yet what may be considered a living wage, the national minimum wage will have a huge impact on the lives of these workers, lifting their incomes and improving the living conditions of their families.
The impact is likely to be most profoundly felt by women workers. The 2015 Labour Market Dynamics in South Africa Report finds that the median wage for employed women among the bottom quarter of wage earners was 75% of that for men.
Which means that these women earn around a quarter less than men. The national minimum wage will help to correct that.
This is likely to improve further with time as the minimum wage for domestic workers, the majority of whom are women, is steadily increased from 75% of the national minimum wage to full parity. (Agricultural workers, the other ‘tiered’ category, will start at 90% of the national minimum wage.)
The benefits of the minimum wage will be felt across the economy. With more income, the buying power of these workers will improve and increase demand for certain goods and services. This will contribute to greater economic activity, increased production and more jobs.
Poor families will enjoy better living conditions, have a chance to acquire assets and improve prospects for the next generation. It will contribute to the development of more stable and sustainable communities.
The national minimum wage could help to address the triple challenge of poverty, unemployment and inequality. International experience suggests that a national minimum wage can reduce levels of poverty and inequality, particularly when accompanied by other poverty alleviation and job creation measures.
There is a growing body of international evidence that when set at a reasonable level national minimum wages have no significant employment effect one way or the other.
In their deliberations on the level of the national minimum wage, the social partners were conscious of the need to agree on a level that would make a meaningful difference in people’s lives and would contribute to the reduction of wage inequality, while ensuring that it was affordable to employers. There was a concern that if the level was set to high, companies may be forced to shut down, would refuse to comply or would lay off workers.
The agreement therefore makes provision for the impact of the national minimum wage on jobs, poverty and economic growth to be regularly reviewed. This will be done by a National Minimum Wage Commission, which will also have responsibility for the annual adjustment of the level of the minimum wage.
In addition, businesses that are unable to afford the national minimum wage may apply for an exemption for up to 12 months. Any fragile sectors that are having difficulty in complying with the NMW will be considered for assistance within the available means, including through incentives.
The social partners will finalise discussions over the next few weeks on issues such as the Commission’s institutional arrangements, minimum daily working hours and the status of Expanded Public Works Programme (EPWP) participants.
The discussion on the inclusion or exclusion of EPWP is particularly important, given the role of this and other public employment programmes in poverty alleviation. In contrast to regular jobs in the economy, public employment programmes provide work opportunities for specific periods to unemployed people so that they can receive a basic income – in the form of a stipend – and gain skills and work experience.
Government has argued that if the stipends were to be set at the level of national minimum wage, it would, given the current constraints on the budget, be able to fund far fewer participants. It is estimated that over 300,000 such work opportunities could be lost a year. Labour and the community sector have taken a different view, arguing that these work opportunities should be considered the same as regular jobs. This matter will need to be resolved before the national minimum wage is finalised.
The social partners will be undertaking extensive public consultation on the introduction of the national minimum wage ahead of the finalisation of the necessary legislation.
The introduction of a national minimum wage is seen as a step towards reducing wage inequality in South Africa.
However, there is much more that needs to be done to make a lasting and meaningful impact. The social partners have therefore agreed to continue with deliberations on other measures to reduce wage inequality and to address the needs of the poor, including through the introduction of comprehensive social security.
The agreements reached by the social partners demonstrate how all sectors of South African society can work together to give effect to our vision of economic transformation and the promise of a better life for all.
The manner in which these agreements were reached, following many months of intense negotiations in which social partners had to reconcile quite divergent positions, signal a willingness by all constituencies to find workable solutions to even the most intractable of our challenges. These agreements could be the genesis of a broader social compact on the key economic tasks we need to undertake to decisively move South Africa forward.
CDE. CYRIL RAMAPHOSA IS ANC DEPUTY-PRESIDENT