The pay gap between skilled and unskilled workers is narrowing – but it’s not helping
Next year South Africa will implement a minimum wage of R3,500 per month in an effort to help close wage gaps and to help reduce inequality in the workplace.
However, the current quoted minimum wage of R3,000 is not necessarily telling the full story, according to economist Mike Schussler, who was speaking at the launch of trade union Uasa’s annual South African employment report on Tuesday.
As part of its employment report, Schussler and Uasa looked at a number older wage reports, as well as data from the Labour Research Service AWARD, the Department of Labour, bargaining councils, unions and business chambers – all to create a very rare and interesting historical view of salaries and income gaps in the workplace.
According to Schussler, the first trend to stand out is that the wage gap between the skilled and the unskilled has closed significantly in most cases.
“For example, the lowest skilled grades in the motor trade went from less than a fifth of the wage of a skilled grade to over a third between 1979 and 2017,” he said.
“The semi-skilled grade improved from just below a third of the skilled grade to 44% of the skilled trade in the motor Industry. In effect this means that the unskilled person now has less of a wage gap in relative terms than the semi-skilled grade had in 1979.”
Schussler said this trend is similar across a number of sectors including mining, metal, vehicle, trade, motor trade, clothing and government.
“In the metal industry, for example, the lowest minimum for an unskilled grade increased from less than a third of the skilled artisan to well over half the rate of an artisan.
“The same trends are evident in bilateral and multi-lateral agreements in the mining industry over the last 25 years. In gold mining, for example, the lowest paid grade went from a fifth that of a junior manager to half that of a junior manager,” said Schussler.
Other benefits
In total 14 different sector agreements and determinations (plus two confidential sectors agreements not counted) covering at least 40% of the formal workforce were researched.
These sectors provided at least a decade of wage settlements or determinations.
Almost all show a trend of the lowest earners closing the wage gap with the skilled grades and junior management and supervisor levels, said Schussler.
In addition these workers saw an increase in a number of other benefits including increased pension funds, the number of holidays and time off given, and monthly allowances.
“Subsistence, travel and bonuses are all part of wage settlements and rarely get included in the percentage increase by which wages increase,” said Schussler.
“In many cases the allowance makes up more than 20% of the pay package.”
Unemployment
While South Africa’s unskilled workers are continuing to close the gap on their skilled counterparts, it hasn’t helped reduce inequality in the country.
This is because of continuously high unemployment rate, said Schussler.
“Unemployment has been a crisis in South Africa for more than two decades,” he said. “No other country in the biggest 100 economies in the world has had more than two decades of unemployment above 20% constantly.”
According to Schussler, this is what has significantly impacted the Gini coefficient and has further skewed the Palma Index which measures the ratio of what the top 10% of the population earn compared to the bottom 40%.
“In South Africa that ratio was the highest by far, namely 7.1 times the income of the bottom 40%,” said Schussler.
“What is frightening is that the bottom 40% of households receive more income from other sources than from work. On average, the bottom 40% of South African households receive less than 40% of the total income from work. They get more income from social grants, rent and family than they do from work.”
Read: South Africa’s government wage dilemma: pay up, or face more strikes
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