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This is what South Africa’s national minimum wage should be – according to research

This is what South Africa’s national minimum wage should be – according to research

The Wits School of Economic and Business Sciences has published a new research report on the minimum wage in South Africa, using international benchmarks to determine how much it should be.

The National Minimum Wage Research Initiative (NMW-RI) is an independent academic research project run by the Corporate Strategy and Industrial Development (CSID) Research Unit in the School of Economic and Business Sciences (SEBS) at the University of the Witwatersrand.

Currently, South Africa does not have a national minimum wage. Instead wages are set on a sectoral basis through collective agreements negotiated at the level of the firm or bargaining council, or through sectoral determinations published by the government.

However, according to research, as many as 2.35 million low-wage workers are excluded from minimum wage coverage, while sectoral wages take into account only a limited range of factors – usually ignoring wage inequality, and broader social issues.

It is argued that a national minimum wage will serve to address these shortcomings.

Drawing from a wealth of statistics and databases (including, but not limited to data from the department of labour, various research papers, surveys, the PALMS series and many others), the researchers were able to determine the average (mean) and median wages across industries, genders and race groups.

Overall, in South Africa, the average salary increased 35% between 2003 and 2012, to R7,443 (median: R3.897), with extremely high levels of wage inequality, where the upper decile of earners command 40% of the wages paid.

The mean and median earnings vary widely between sectors and population groups, but alarmingly, 50% of full-time employees earn less than R3,640. The average for full-time employees is R8,669, the research showed.

The poverty line in South Africa, as of February 2016, is at R1,386 a month for an individual, with the household poverty line (for a family of four) at R5,544. The “working poor” line is at R4,317.

The number of working poor in South Africa is extremely high with just below 54% of full-time employees, close to 5.5 million workers, earning below the working-poor line, the researchers said.

What level should we be at?

Using international benchmarks on minimum wages, the NMW-RI determined that South Africa’s current minimum wage structures are simply not up to standard.

International comparisons show that for different country groups, the average ratio of minimum-to-average wages is typically between 45% and 50%. The middle-income country average of 48% is considered to the “most instructive” for South Africa.

However, South Africa falls well below this, with a minimum-to-mean ratio of 36%.

Similarly, when looking at the minimum-to-median ratio, the benchmark comes in at between 65% and 80% (80% for middle-income countries) – while South Africa sits at 74%.

“We see that the private sector weighted average for bargaining council agreements is approximately R4,350 per month, which rises to just under R5,750 per month when the public sector is included,” the researchers said.

“Using weighted averages is certainly more appropriate if wishing to benchmark a national minimum wage against the current levels of collective bargaining agreements in South Africa.”

Using the methods laid out in the report, the NMW-RI found that the benchmark minimum wage figure ranged between R4,000 and R5,500, which falls in line with the group’s statistical modelling, which put the range at R3,500 to R5,500.

According to the researchers, this band would have an overall positive effect on the economy and is at a level that’s economically sustainable.

National minimum wage fallout

While the research shows that employment will be affected, it said that it would likely be a small bump (a loss of around 45,000 jobs), in line with what has been seen internationally where a minimum wage is introduced.

“Overall there is a very small negative impact with the economy-wide average annual level of employment for the indexation scenarios falling by -0.3%…driven by the service sector, in particular the construction and engineering subsector, and wholesale, retail, catering, and accommodation subsector,” the report said.

However, the benefits would likely far exceed the relatively small numbers of workers who could lose their jobs as a result.

The model also projects that inflation will fall due to strong productivity effects outweighing price pressures from increased wages. Notably, the demand for social grants falls due to higher wages and the tax intake increases.

“A national minimum wage, set at a meaningful level above the current lowest sectoral determination, lifts wages, income, and spending, and increases productivity, investment, output, and growth,” the researchers said.

“This occurs with a minimal effect on employment and sustainable movements in the current account, inflation, and debt-to-GDP ratio.”

“Most importantly, a national minimum wage is projected to reduce poverty and inequality.”

More on the minimum wage

Pacsa says you should pay your domestic worker R8,000 a month – minimum

This is how many domestic workers in South Africa have lost their jobs in 2016

What you need to know about minimum wage in South Africa

We don’t need a single minimum wage in South Africa: Mboweni

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  • Lone Stranger

    There should be one principle. No work, no food for you. Imagine what can be done with all the grant money they save. Probably would be used on el Presidente.

    The other interesting part in the article was “household poverty line (for a family of four) at R5,544”. Firstly, how on earth did you get R5544 and secondly, how dumb are you to start a family on that amount?

    Stupid, stupid, stupid, stupid!!!

    Also MyBB, these articles are getting old. Please report on stuff which we want to read instead of this!

    • WookieJebus

      You mean like “broadband”?

    • Shreez

      Took the words off my keyboard regarding the “family of four” stuff.
      My wife and I would love to have another kid, but we can’t afford school fees and university for both of them.
      If only these idiots would put a damn rubber on instead of making more (innocent) children that they can’t afford.

    • CarterD

      ….But this is Business Tech.

    • Jo

      Just like blacks insist that all whites are racist, and it is impossible for a black to be racist. Similarly they also argue that it is their right to have children, irrespective of the consequences, and totally ignoring their responsibility to pay for the full maintenance requirements of their children.

  • You +Me =Us…. $$$….or not?

    First off, we are not a middle income country, we are a 3rd world country. Second, we are in recession, with what seems an almost certain negative growth outlook.
    So unless the comparison was done with countries in the same situation as us, over supply of uneducated labour, worst education system on the planet, crazy unions and stifling labour laws on top of AA and BBBEE, you aren’t doing SA any favours, as your 45k lost jobs will be surpassed in the domestic help sector alone.

    How bout we rather enforce a minimum standard of decent education across all sectors and make that compulsory?

    • hairyback

      Is there a way to “up-vote” multiple times.

    • Snowlock2.0

      Why is it that every time you turn around BEE has another B on it?

      • You +Me =Us…. $$$….or not?

        They keep adding bandits into the eligibility pool?

      • Blapartheid Zulu

        another B and another few E’s, what is it now? BBBBBBBEEEEEEEEEEEE?

    • Witte Boer

      You may be banned here by M*r*n for making a lot of sense.

    • Fred Johnson

      ,,and fire Govts who don’t meet those need over a 5 year period. Any other party want to take over?

    • Jo

      In addition, minimum wages should also enforce minimum hours of work, especially domestics/garden helpers. They want more money, and at the same time work less hours, demanding more perks. Some only starting at 9, and leaving at 3, even when there is still a lot of work to do. They also insist on being fed with breakfast and lunch, plus taxi money. Anmd they are not satisfied with sandwiches, like I am used to all my working life. They want “cooked” food! Any minimum wages should specifically state that meals and transport is included with the wages, and the hours also set to at least 8 hours per day excluding meal times, tea breaks etc. Most labour jobs are linked to 9 hours per day. If meals and transport is supplied or paid for, then the wage may be decreased accordingly, or the hours increased pro-rata. They can’t have their bread buttered and jammed both sides.

  • Scienide

    Well our interns (and we a government department) are getting R4500 a month

  • Willow

    45000 jobs lost, where 26% of the country is already unemployed, is a small bump??
    South Africa has a largely unskilled or poorly skilled workforce, and benchmarking salaries against first world countries with highly educated and skilled workers..well, it proves it’s own point about the skills of the researchers involved in this report, doesn’t it.

    • MP3

      you’d think the smart researchers would have figured that obvious point out. Alas… not the case.

      • Willow

        Clearly they didn’t see the wood for the trees.

    • Wulvz

      Poorly skilled? HAHAHA you mean LAZY. I would rather employ a foreigner from Mozambique or Zim, they work harder than our fellow South Africans.

    • nicc777

      And I’m sure the 45000 odd households involved didn’t experience it as a “small bump”

  • rouxenator

    France has the highest unemployment rate for 18 to 25 year old because of their minimum wages. It is a bad practice and it comes down to price fixing which is illegal.

    • Nikolaos Spyratos

      You got a source for that? Back in 2013 already Greece and Spain had the highest youth unemployment. In Greece it was 60%.

    • Dave Baker

      Even if they had the highest unemployment… you haven’t shown causality

      • rouxenator

        Minimum wage = price fixing = Cartel

  • MP3

    “Most importantly, a national minimum wage is projected to reduce poverty and inequality.”
    bwhahahahaha ah man, in an ideal world where unicorns exist maybe… this is a 3rd world country and yr pushing 1st world agendas…

  • Dreigorian

    Running country 101, when your population grows, jobs need to be generated, it is common sense (I know we live in sa, so its scarce). I mean even a child could understand this (aka strategic games)…but again not every country is ruined by an entity only having primary school qualifications.

    • Jo

      Are u aware that in SA, you never need to attend any school, and you can still become the president?

  • Konstabel Koekemoer

    While I’m not totally against a reasonable minimum wage I think it is totally the wrong time to consider introducing this. With an economy almost in a recession and unemployment at record levels the last thing you want to do is gamble with something like minimum wage. The impact on job losses in sectors like security, cleaners and domestic workers may be much higher than anticipated as these sectors often employ a lot more people than really necessary if the resources were used more efficiently. I think we first need to get the economy growing again so new jobs are created before considering a minimum wage across all sectors.

    • Mpho Maila

      I fully agree with you, that is a positive comment.

  • nickn4m3

    As small bump (45k jobs) sounds good, unless you are one of the 45k. But wait, what about the dependants. So we are looking at 200k to 250k people without food on the table. That is a lot of hungry people.

    • nicc777

      It’s amazing how quickly we can dehumanise something like jobs – especially the loss of jobs. Little thought or apparent empathy goes toward those directly affected. Everybody is just a number – and each person just hope they remain in the right group of numbers…

      • Hennie

        That is why this government should be ashamed. They have no pride. They cannot say: well I have made a difference. All they’re interested in is to fill their own pockets.

        I’ll never forget while taking my dog for a walk an oldish black man accosted me and asked if I don’t have job for him. He lost his job and suddenly he burst out crying. I couldn’t help him as I’m a pensioner. The jobless is the biggest crime against this government.

  • hairyback

    There’s amazing things and face-palmingly awful things coming out of universities all over the world. On the one hand you have MIT with anything from lithium-oxygen batteries and quantum research to identifying the enzyme linked to Rett Syndrome. Then you also have Trigglypuff and the SJW. Thanks Wits- you’ve just pushed us into the Trigglypuff camp.

  • koos

    Ja no well fine

    I would support this fully if they start by paying all their worthless politicians and municipalities this wage.

  • Hans von Pistov

    ANC, helped with these idiotic research institutions and imbecilic academics are hell-bent to destroy SA economy. And create even bigger unemployment than the one we have. Third world country like SA can barely afford such a luxury as minimum wage.

    The unintended consequence will be that the whole Africa will move to SA. Have these idiots even thought of that?

    Who pays these idiots to come up with the figures (R3500-R5500) like these?

    • germ

      How much of this would get spent on alcohol?

  • It is probably important to realise that the “School of Economic and Business Sciences (SEBS) at the University of the Witwatersrand.” has nothing to do with the Wits School of Business. It is just a refuge for one of the Wits social engineering groups – a group with much in common with the pie-in-the-sky visions of the late Dr. H. F. Verwoerd. (The real practical distinction between Left-wing and Right-wing outlooks is negligible – they both work from a viewpoint of “Be reasonable! Do as I order you!”.)

  • Erlo Muhl

    Any person advising this has not thought of the millions that will be jobless after such a decision. It is much more important to create an environment where private enterprise can operate more successfully by putting tariffs on important goods, which are dumped here and thus are crippling local enterprises through unhealthy competition. The moment you introduce minimum wages especially if they are too high, will only benefit those few that might retain their jobs, the rest will have to be kept alive on dough, by a Government that is already half bankrupt and unproductive. The Government should first see to it of not overpaying people in cushioned jobs and over employing people in administrative jobs of which many just waste the day away without doing a proper days work and then receive salaries that are much too high for what they produce to keep our economy thriving.

  • Richard Savage

    It doesn’t matter how much some liberal researcher or organisation thinks should be a minimum wage the sad fact is that in far too many cases, actually the majority, that wage would be way above the value of the production the individual receiving it is actually delivering.

  • v_3

    Did the “international benchmarks” include productivity, unemployment rate or education levels achieved?

    Did the researchers address inflation (and how it hurts the poor)?

    Just asking

  • Rob Charlton

    Artificial wage fixing is counter-productive to an efficient economy.

  • SouthAfricaFirst

    If set too high , minimum wage will destroy many jobs and leave thousands destitute.

  • Tanya

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    Evelyn 38 year old–078 524 9982

  • OscarWildebeest

    “The fault, dear Brutus, is not in our stars / But in ourselves…” said by Cassius, to Brutus, in William Shakespeare’s “Julius Caesar.”

    That said I, per contract, did zillions of summaries for the national library regarding articles about the various laws, especially those involving the ordinary citizen. Our problem is NOT the lack of laws and regulations: there already are more than enough of those. The fault resides therein that we are both unable and unwilling to apply and execute the already existing laws and regulations.

    Have you ever tried reporting a “valid” crime? Have you ever taken up a “valid” job related grievance with the CCMA? The lethargy you encounter is simply astounding. Now tell me: who is going to, conscientiously, enforce the minimum wage you people are on about?

  • Jaco Rautenbach

    What flippen idiots ! A 8,5 % increase in minimum wage for domestics last year 1 Dec caused a loss of 43 000 domestic jobs (official numbers). WTF do they get a small dent of 45 000 jobs from? This is a wishy washy cooked up number, and idiots publishing crap like this should be prosecuted for industrial sabotage.

  • Reject

    Sadly, while there are many clever people out there and some economists and government officials who all ignore the elephant in the room. That is, what can a business afford to pay? As a very rough guide I try run my payroll at between 10 and 12% of turnover. This works for me in my type of business. Now if the idiots in charge want to increase wage earnings, then they need to stimulate the economy that allows business to grow and either increase labour rates or labour cost.

  • the-TRUTH

    The BIG Question: Why is this issue being punted as the 2016 local election nears? Is the ANC trying to pyschologically buy votes? Eish

  • Marcan

    These bright young, idealistic ivory tower, pie-in-the-sky, head in the clouds academics do not seem to understand that there are two sides to the equation.
    Have they ever ran a company ?
    Labour might have massive human and social sides, but from an economic perspective it is still fully submitted to te irrefutable forces of supply and demand. A global market economy.
    And there is no country on earth any more that is not part of the global economy. we all source certain goods or services from outside, and sell our products or services to the rest of the world.
    Many products, and even services, can, and should be sourced from outside the country when they are produced cheaper or better there. Putting high import tariffs, or giving state financial support to noncompetitive industries can never boost an economy. It just increases inefficiencies, and decreases the economic competitiveness.
    The lesson most economists have learned from the protectionist measures taken by many countries during the 1930s depression is that protectionism only greatly delays an reduces economic recovery.
    Unnatural legislated high wages will only decrease the demand for labour in SA.

    It will just cause more retrenchments in the primary (mining, agriculture) and secondary(manufacturing) sectors of the economy especially, but also in the tertiary, service sector.
    Wages have just exploded in SA over the last 20 years or so, especially and totally unnaturally in the public sector. We are by all means trying to force a short cut to development, transforming the country’s economy to only have jobs in the service sectors.
    It aint gonna work out. About all major economies in the world went through a very strong industrial phase of their development, but here in SA, we think we can do without it. We simply do not have enough capital floating around, and there are major inefficiencies in the private and even more the public sectors of the economy.
    To improve our economy : we must first and foremost improve our global competitiveness, by having market related wages, high productivity, world class work ethics, great flexiblity in labour and business, better education. Gov only has to create the right conditions, the conducive, competitive environment for the private sector and individuals to prosper. And not interfere too much like at present. And stop stifling the economy by thinking that they can run all those parastatals/SOEs very well. They are mostly disastrous.
    The well known economist Dawie Roodt once said on public radio that wages in the public sector are twice that of the private sector. The political economist Moeletsi Mbeki said recently the same, civil servants salaries are grossly inflated to buy patronage, and obedience. Read : BD Live SA’s ‘hidden civil war’ is murdering SA’s economy, Moeletsi Mbeki says

    I by far do not agree in everything with Mbeki, but he is surely dead right about a bloated civil service receiving highly inflated salaries.
    If any thing, salaries should go down in all sectors, to create a more overall competitive economy and employment for the poor. Salaries in the private sectors can be put under pressure by making it easier to hire and fire, reduce the influence of trade unions, reconsider the collective wage agreement model. It should be much easier for skilled and maybe even for unskilled foreign workers to find employment in SA to create a competitive economy.
    Competition authorities and sector regulators should be much firmer on collusion, price

  • bookworm

    I don’t think the economy is “almost in recession” I think it is already in recession and has been for some time. On-going job losses alone are testimony to that, leave alone the staggering increases in basic supplies and food that we have been seeing. I have a lot of empathy for people who are on low income and struggling, and I think the Govt. is doing nobody any favours by dropping the standard of education via low pass marks etc. either. Until this sort of thing is sorted out, we will carry on in reverse gear!

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