Defend Truth


The minimum wage: More than just a price for labour


Saliem Fakir is Executive Director of the African Climate Change Foundation

The minimum wage can be treated simply as a technocratic thing: its effects on economic growth, inflation, profits and employment creation. These are important but it is an issue that deserves a moral consideration in a world with growing inequality. It raises fundamental questions about the purpose of the economy as it seems that some people’s happiness matters more than others.

The political-economy of our times does not want moral contemplation. It wants efficiency and forcing labour – meaning humans with no other means than their bare physical labour and sometimes the use of their minds – to submit to a zero-sum game.

The extent to which a minimum wage is secured represents too the relative power of labour to have a right of claim over national income share. Historically, labour-power in developed economies has been on the wane and the insertion of “free labour” from China and India has globalised the problem of wage suppression all over the world.

While there has been employment growth in low-wage countries, there has been somewhat of a decimation of labour’s share of income and rate of employment in high-wage countries. One just has to look at the utter destruction of Detroit in the US rust belt with the off-shoring trend.

The minimum wage debate must also be located in the context of the moral outrage ordinary people feel when the top echelons of the corporate world take the magnitude of salaries, bonuses and other benefits that defy common sense.

There is hardly a good reason why CEOs should earn several hundred multiples more than the lowest-ranking worker in a firm. Even the High-Pay Commission in the United Kingdom makes this observation in its own detailed report.

CEO exceptionalism has its logical limits. They cannot be at the same time performers of miracles or seers of the future, their singular individual abilities determining the fortunes of a company. What about the rest of the people in the firm?

All such notions are bound to be in the same league as shamanism or esoteric powers. But management consultants and renumeration committees want to convince us that we must not look to reason but to the mysticism of the CEO.

You would think that the story simply ends there. The situation is made worse when corporations take advantage of tax havens where on one hand they show in high tax jurisdictions losses or high expenditure and then in low tax jurisdictions healthy profit margins.

The whole scandal and revelations following the leaking of files from the law firm Mossack Fonseca, based in Panama, has led some observers of economic affairs to retort that tax evasion is not out of the system, it has long become part of the system. It is the system.

The truth is that the minimum wage debate in South Africa, like it is in the UK, the US or anywhere else is a recognition that labour’s power is asymmetric and that nothing changes if the system’s operators do not want to change the system itself.

Only intense pressure can either bring reform or radical change.

This process of attrition – between labour, business and government over fair income share – will continue to involve little battles all over the place as grinding inequality will churn social-foment. In the South African context minimum wage marks an important win and shift in the labour relations but it will always be insufficient if two other issues are also not addressed.

The minimum wage has to be complemented with the delivery of social welfare (a form of subsidy from society). It matters that public services are such that good healthcare systems, credible and quality education, cheap transport, affordable energy and proper disposition over the grant system enhance waged labour.

The second issue is that due to high unemployment that has been persistent for years, the dependency levels in poorer households are high. This is why to assume that the minimum wage does the trick is not to appreciate the structural construct of poverty in South Africa at the household level and which affects predominantly certain members of our society.

Structural shifts in the South African economy preceded 1994 and have continued well past the post-1994 era. These shifts have thrown out much of the unskilled and semi-skilled workforce as labour intensity in mining and agriculture was increasingly on the decline, and will continue to be so, as South Africa’s economy has become more service orientated, financialised and mechanised.

Whether the minimum wage will further blunt job prospects for this marginalised labour force is still to be seen as they have long been out of the system anyway. To deal with this intractable problem we may need more radical and innovative solutions.

On the question of the telos (the end) of economic activity I am reminded of a wonderful Ph.d thesis a friend of mine, Tristen Taylor, completed last year reflecting on Aristotle’s views on ethics, politics and economics. Why? Because reflections on Aristotle’s idea of Eudaimonia (happiness) in his Nicomachean Ethics make us think of the telos (the end) of economics. And, if we contemplate that, we are in search of a new economic paradigm to fulfil the innate human desire for happiness.

For Aristotle’s The Pursuit of Happiness, which is a life of contemplation, is the greatest virtue. The pursuit of happiness as an end itself can only be achieved if we create the conditions for the actualisation of full human potential.

As Taylor suggests, Aristotle’s vision requires that the polis (political system) and the economy are aligned in ways that make human potential actualisable for all and not just a few. Happiness can only be attained if economic well-being supplies the means, the material necessities and not necessities as ends in themselves, to live true freedom: a life of contemplation in which democracy is nourished through robust participation.

To think of the minimum wage as a simple technocracy of what is the right number is to limit its scope and not see it, as Aristotle would want us to, as a means to enabling economic well-being that nurtures the growth of full human potential and contemplative public life. DM


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