Above inflation minimum wage hikes are coming
The National Minimum Wage Commission has published – and withdrawn – its medium-term goals for minimum wage increases in South Africa.
The group gazetted its mandate in terms of the National Minimum Wage Act, which required the commission to set thee-year medium-term goals for the wage, and to also promote these targets.
The gazette was later withdrawn, but gives a glimpse into what the commission is targeting in the years to come.
Previous minimum wage increases have been done in consultation with various stakeholders and included considerations for the wider economy and the cost of living. While these factors will still be at play, the commission has now explicitly linked the minimum wage to economic indicators.
Specifically, future minimum wage increases will be linked to the consumer price index (CPI) as well as the median wage level in the country.
The minimum wage should increase at rates above inflation, so that wages grow in real terms and don’t lose value, the commission said.
“All wage-earning employees (should) earn enough to maintain a decent standard of living, defined as sufficient to support themselves and their families at a level that is both socially acceptable and economically viable. The target should ensure that the value of the national minimum wage does not decline relative to the median wage,” it said.
In practice, to achieve this target, the commission said it will increase the value of the minimum wage gradually over time in real terms relative to CPI.
Warnings
Even though the medium-term target is now explicitly tied to CPI, the commission has already hiked the minimum wage above inflation.
The latest increase, announced in February, saw the national minimum wage hiked by 9.6% bringing it up to R25.42 per hour.
While unions and labourers welcomed the increase, employers and labour organisations were less enthused. Specifically, the latter raised alarms over the increase being far above inflation, pointing out that the wage was hiked around four percentage points higher than expected inflation for the year.
This makes the cost of labour higher in a business environment already under pressure due to the prevailing economic conditions.
Business groups acknowledged that the hardships faced by many minimum wage earners in South Africa and the dire economic circumstances they find themselves in could not be ignored, and the purpose of the NMW is to ensure a living wage.
However, the challenging environment in South Africa has created hardships for wage earners and employers alike.
Legal experts have argued that the national minimum wage itself is mostly smoke and mirrors. Firstly, the wage is not a living wage in South Africa – and secondly, it disincentivises businesses from hiring new employees due to the cost and the stringent labour laws that often protect workers over employers.
As the wage increases, costs go up – and businesses, particularly SMEs, that can no longer afford the overheads cannot easily let workers go.
Another issue with the minimum wage is that South Africa’s unemployment rate is so high that almost half the population is without any wage at all.
The Department of Labour said that the national minimum wage has not impacted employment levels or raised unemployment in sectors it has assessed.
Loading ...
