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The case for a national minimum ‘living’ wage — it’s a matter of survival

The case for a national minimum ‘living’ wage — it’s a matter of survival
(Photo: Waldo Swiegers / Bloomberg via Getty Images)

The supposed trade-off between higher wages and unemployment is a smokescreen. The real trade-off is between wages and profits, with structural unemployment resulting from the pursuit of profits, not high wages.

Each year when the National Minimum Wage Commission issues its final determination for the National Minimum Wage (NMW) adjustments, the pro-market organisations and analysts bash the commission.

Recently, Xolile Mpini of the Langeberg Unemployed Forum (LUF) denounced the NMW as a “damning of the unemployed” on BusinessLIVE. The DA’s labour spokesperson, Michael Bagraim, joined in the attack on the NMW Commission.

Both agree that the NMW hinders employment creation as the wage bill becomes expensive for business owners, while a mainly white conservative trade union, Solidarity, said in February 2022 that “the National Minimum Wage Act belongs in the trash bin”.

The DA speaks for business and the rich (while pretending to speak for the workers), Solidarity speaks for employed workers and Mpini speaks for the unemployed. However, they are all joined in their attack on the NMW by bourgeois economic lenses. That is, the price of labour (wages of workers) must be determined by supply and demand in the labour market.

Mpini’s opinion piece, influenced by bourgeois textbook explanations, attempts to drive a wedge between the employed and the unemployed sections of the working class. The theory is that an NMW distorts the market by prescribing the minimum wage below which employers cannot pay workers. For Mpini, Bagraim and Solidarity, everything must be left to the all-knowing “invisible hand of the market”, and if the latter prescribes poverty wages, workers must stoically acquiesce without so much as a groan.

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During a slump, continues the theory, wages must be allowed to fall enough to reflect the demand for labour versus its supply unhindered by NMW. As wages continue to fall, a point will be reached when it is profitable for businesses to invest and as they invest, demand for labour will rise and with it, wages. It’s a see-saw that must be left to the market to regulate without government or trade union intervention.

For businesses, labour is a cost, and like all costs, it must be reduced to the barest minimum if a business is to thrive. Put differently, millions of workers’ livelihoods rest on whether their bosses can make profits with the going rate of wages. If the level of wages threatens profit margins, capital ceases to invest, retrenchments result, and the market becomes flooded with unemployed workers — with the effect that wages fall.

Hence, Mpini et al blame the NMW for high levels of unemployment. For them, employment creation depends on the trade-off between high wages and unemployment.

Moreover, according to them, the NMW interferes with a freely negotiated contract between two contracting parties: by putting the NMW at R25.50 for instance, the government prevents workers who would otherwise accept wages below the set minimum wage, and businesses eager to hire such workers, from contracting with each other.

Thus, the NMW, in addition to violating the principle of a freely negotiated contract, prices most workers out of a job, further exacerbating unemployment. Below we counter these myths to reforge the unity of the working class. 

Supply and demand, unemployment and wages

The bourgeoisie and their lieutenants in parties like the DA, civil organisations, NGOs and disappointingly, even trade unions, peddle the dogma that workers’ wages must be subject to supply and demand. And in times of less unemployment, the wages will improve (supposedly, though it is not the case usually).

However, a shortage of labour supply is unlikely in neocolonial, neoliberal capitalist South Africa. Structurally, mass unemployment is a constant feature in South Africa. Proving this is the Quarterly Labour Force Survey (QLFS) showing that long-term unemployment rose from 3.2 million in 2012 to 6.1 million in the fourth quarter of 2022.

This excludes the legion of discouraged job seekers, who are estimated to be more than 3.5 million. Since mass unemployment is a long-term feature, the South African labourer will always be low-waged per demand and supply.

If the logic of the DA, Solidarity and Mpini’s Langeberg Unemployed Forum were to hold, and thus workers’ wages be determined by supply and demand, then multitudes of workers would be sentenced to extremely low wages now and in future, as the QLFS shows.

Value of labour power and wages

As shown above, the position of Mpini et al on the NMW is based on cheapening labour power (wages) for businesses to maximise profits.

The supposed trade-off between higher wages and unemployment is a smokescreen. The real trade-off is between wages and profits, with structural unemployment resulting from the pursuit of profits, not high wages.

In August 2022, the Bureau of Market Research showed that 75% of employed adults earn below R5,800 per month. This revelation demonstrates that most of the workers in the economy do not earn high wages.

What must determine wages, if not supply and demand?

Well, the value of goods and services needed to reproduce the worker should be the minimum wage. Put differently, the floor of workers’ wages must not be set by the vagaries of the market but by the cost of living.

These necessities include shelter, food, hygiene products, clothes, transport, electricity and accessories such as digital television and cellphones, including data and airtime.

Let us look at the cost of these necessities today.

The inflation rate and the latest Household Affordability Index by the Pietermaritzburg Economic Justice and Dignity Group (PMBEJD) show that life’s necessities have risen. The average monthly household food basket for a family of four costs R3,388; a taxi for that worker to and from work for 20 working days per month is estimated at R1,440; household domestic and hygiene products cost R926.51; electricity costs R787.50; and monthly data and airtime may at a minimum cost R300. The aggregate is R6,842.01.

The child(ren)’s transport fare to and from school, clothes, medical aid, school fees, data and airtime for a child, a specific child goods basket, gym and recreational classes for a child are not included.

In other words, the costs are higher than the R6,842 aggregated only from five items required, let alone the R25.50 per hour NMW (aggregated to R4,248 for those working eight hours per day and 21 days per month.) The costs may well be beyond R12,500.

It is the aggregate of life’s necessities that must determine the worker’s wage, not supply and demand in the labour market. Therefore, we not only need a national minimum wage but one that is also a living wage. That is, a wage that can afford the worker’s life needs.

But even if Mpini et al were correct that workers’ wages must be left to the vicissitudes of the market, it would be more reason for workers, and the working class in general, to band together, get organised and abolish this system which is based on pseudo-scientific laws that are elevated to natural laws like gravity, thermodynamics, and so on. DM

Trevor Shaku is the national spokesperson of the SA Federation of Trade Unions, Saftu. Newton Masuku is the provincial organiser of the Transport, Retail and General Workers’ Union, a Saftu affiliate.


Comments - Please in order to comment.

  • J W says:

    I have traveled extensively, to highly socialist countries like Europe and minimum wages are high, however labour is heavily reduced and automation takes the place of workers.

    We might have 6 employees working at busy city center coffee shop, while in a high wage country there will only be 3.

    South has a problem with an over abundance of unskilled labour, where as Europe has a shortage of unskilled labour, this also causes wages to be higher than even the minimum wage.

    Education and a business friendly environment are what is needed.

  • Gert Heese says:

    Since the introduction of the minimum wage unemployment steadily rose. The evidence is clear that the introduction of a minimum wage results in lower total earnings to the workers. How can unions or government decide whether a economic activity is viable or not. The minimum wage violates one of the most basic human rights namely the freedom of association. It prohibit poor entrepreneurs to associate with with poor workers.

  • Roland Gemmell says:

    Wow – since when did digital TV and cellphone become a necessity and that costs R300 per month. I have an old phone that is pretty much pay-as-you-go at R100/month. Live within your means!!!

    • virginia crawford says:

      I understand- I have an old phone too, but when there are no leisure facilities or even libraries, expensive transport, people living in crowded homes can relax and watch TV. It’s cheap entertainment and what else is there to do? It’s often too dangerous to be outdoors at night, visiting or just going for a walk.. Have you seen the price of Scrabble or other board games? And books are priced as luxuries. I get it and don’t begrudge these small pleasures.

  • Rowan G says:

    “The DA speaks for business and the rich (while pretending to speak for the workers)”

    Stopped reading here. The authors know this should read ANC.

    • Rob Rhodes-Houghton says:

      The tone of this article is tempting me to cancel my Insider support. What is better – R100 per day or R350 per month? 2 people at R100 per day or one person at R203 per day? I do pay my domestic workers well above the minimum wage but have been forced to reduce the number of days per month.

      • Richard Baker says:

        May not agree with everything written or published in DM but that is the whole point of such a journal. We are lucky (at this stage) that there is still freedom of expression and speech in SA. That is why I’m happy to pay as an Insider!

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