The real minimum wage in South Africa

Economist Mike Schüssler says that South Africa’s formal sector is already paying well above the minimum wage as the department of labour debates the level at which it should be set.

The government is set to implement a national minimum wage in the country in 2016; however, it is looking for guidance on what that amount should be.

Currently, wage regulation in South Africa takes place through collective bargaining and direct regulation of pay for vulnerable workers via the sectoral determinations.

The average minimum wage is a monthly wage of R2,731.74 across all the private-sector bargaining councils; and in the region of R2,362.36 across all the sectoral determinations.

Union Cosatu has called for a national minimum wage of between R4,500 and R6,000 to be set for workers in South Africa. This echoes the call from the Economic Freedom Fighters (EFF) to establish a national minimum wage of R4,500 in 2016.

The DA meanwhile, says that while it is not against minimum wages, it needs to be sector specific to avoid job losses.

In an opinion article on MoneyWeb, Schüssler, who is an economist at Economist.co.za, pointed to research indicating a median wage in the formal sector of approximately R5,100 per month.

This, he noted, is above a median figure of R4,800 per month cited by Statistics South Africa (Stats SA) in its Labour Force Survey (LFS). This figure has been at the centre of debate over the implementation of a minimum wage.

For all workers in SA, the median wage is approximately R3,200 a month, according to the LFS.

“The fact is that the formal sector is already paying well above the minimum wages, although there are a few sectors such as agriculture, retail and security industries that pay less,” Schüssler said.

He pointed out that domestic workers and informal sector employees also receive wages below R3,000 a month. However, in the formal sector, monthly wages are significantly higher than the proposed minimum wage.

Read: What the national minimum wage will cost SA

According to Schüssler, at least three sets of data appear to ‘debunk the low wage myth’ in SA when it comes to the formal sector.

He said that data from the National Credit Regulator indicates that the national median personal income is R8,134. The data is gathered from approximately 20 million applications every year for loans from a variety of credit providers.

Schüssler also alerted to ‘useful data’ compiled by debt councillors showing  that in the year ending in March last year, the typical individual with a debt repayment problem earned between R7,500 and R10,000 per month.

“The sample is also significant as about 90,000 individuals were placed into debt counselling in the year to March 2015,” Schüssler said.

Recent tax statistics showed that over 7.1 million people paid personal income tax, “which means that they earned more than R6,000 a month. This is the majority of the 10.8 million people working in the formal sector,” Schüssler said.

More on minimum wages in SA

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