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Minimum wage and salaries: what is a fair wage?

‘It’s very likely that in the formal sector already more than half of the people earn over R6 000’ – Mike Schüssler – Economists.co.za.

HANNA ZIADY: We are talking salaries this evening with the chief economist at economists.co.za, Mike Schüssler. Do you think you are being underpaid, maybe overpaid? I’m not sure if any South Africans feel that way at the moment.

Mike, good evening and welcome to the show.

MIKE SCHÜSSLER: Thank you, Hanna.

HANNA ZIADY: It’s good to have you with us. Now, Mike has done some research this week, revealing that South Africans may be earning a bit more than we thought, certainly at the lower level, at the median level.

And we did of course earlier this week have the National Minimum Wage Symposium taking place in Johannesburg, where the idea of a minimum wage and the impact this might have on the country were discussed – just what that impact would be. Siki Mgabadeli, my colleague, spoke to someone from the International Labour Organisation on the show earlier this week who said a minimum wage does help to lift people out of poverty and reduce inequality – two problems that we know we face as a country.

Mike, before we look at what people actually are being paid – because I think your research is very telling – do you agree in principle with a national minimum wage, or think it would help in the South African situation?

MIKE SCHÜSSLER: Let’s put it this way. I think it depends on the level of the minimum wage and what you determine is within that minimum wage. For example, I think domestic workers could be very vulnerable if we do put in a minimum wage that’s too high. Certainly families will not be able to afford that person and some of them may then either get short time – i.e. they’ll work say two days a week instead of three or four – and others will just simply lose their jobs. And that’s something that we in South Africa cannot afford, with such a high unemployment.

So in principle I don’t have a problem with a minimum wage. I think we need to be a bit more sophisticated in how we do it, and that is probably more to do with the sort of level that we settle at.

HANNA ZIADY: Mike, the annual labour force survey done by StatsSA finds that the median salary among formal-sector workers is R4 800. That is what has been published in the LFS. What does other research show that you have been looking into?

MIKE SCHÜSSLER: Well, if we look at the formal sector, that would be anybody that is registered. So if you are paying taxes you are registered and what we know is that 7.1 million people have paid income tax. And that indicates that those people are probably earning in excess of R6 000 a month because, remember, a taxable income would exclude something like pension, which is also part of your income, and maybe a tool allowance and the like.

But income tax this year starts at about R6 300 a month, and in that sense a few years ago when we got the data from the SARS, tax statistics showed that over 7.2 million, or far above half of informal people in South Africa, earn that.

While we know that StatsSA excludes from that definition workers in agriculture, it’s very likely that in the formal sector as such already more than half of the people earn over R6 000. It’s quite clear that that is the case.

And if you look at the National Credit Regulator data, although we don’t know which is formal and informal, it indicates that out of the 20-odd million times that there is a request for credit – and we know people make about three to four credit applications each, not per year – that also gives us an indication that that is about R8 000.

So that includes he informal sector, obviously. But the fact of the matter is I think this median wage that we’ve been talking about is far, far higher than we think. And that is perhaps something that we need to look at.

HANNA ZIADY: Just mentioning some of those numbers– R6 000, R8 000 according to the National Credit Regulator’s data, and here we have talk of bringing in a salary of around R4 000 to R5 000 – is that possibly why big business is not throwing its toys out of the cot around a national minimum wage? It isn’t really saying anything at all because it’s paying people more than that already.

MIKE SCHÜSSLER: Yes, I think that is a fact. I think there are perhaps some businesses like the lower end of the security business, certainly something like the taxi business, might be a problem. But big business generally speaking I think is already paying above those levels.

Certainly government is. We know that from the bargaining councils’ data that we have from both the national and the provincial government and local government bargaining councils. We know from bargaining councils and other sectoral agreements that many, many people in the formal sector – and let me make this clear, in the formal sector – that work for say, firms with 50+ people or maybe 150+ people, are certainly already above the R4 500 mark, or very shortly will be.

HANNA ZIADY: Mike, is there any indication as to which sectors are paying significantly less or significantly more than a median – let’s say around R5 000, R6 000? You did mention earlier workers in agriculture and certainly domestic workers perhaps falling far below a minimum wage, and then other sectors that may be paying a lot more.

MIKE SCHÜSSLER: Well, yes. We know, for example, the civil engineering sector pays more. Most of the bargaining councils, where you find people negotiating between unions and some which are not seen as vulnerable – that would be even things like drivers in the transport sector, state-owned enterprises, government, all those – are paying above that sort of suggested minimum; whereas the retail, hospitality sectors, all those with sectoral determinations by the minister, have probably still generally speaking got minimum wages that are below the R4 500 mark.

But if I may say, Hanna, I think if you take a step back and you look at where they are, in many cases those industries are already close to R4 000 or just over, and therefore within a year or two will be at R4 500 – R5 000 in some. And the majority of their workers are already far above the proposed minimums. Maybe not far above, but above them.

And then I would suggest that in many cases we are already looking at the poorer industries’ pay, such as the taxi and the security industry. But even the security guard who has a few years of experience is probably already at the R4 000 level quite easily. So we are looking, I’d say, at within the formal sector probably in excess of 75% of people already receive over R4 500, if not much more than that.

HANNA ZIADY: We did get an SMS from a listener in Sunward Park, Cindy, saying that in her view in South Africa qualifications do not equal high wages and in some instances a qualification is not even a necessity. I’m not sure if that’s a political comment, Cindy, but thanks for that comment.

That raises an important point, Mike, because I think that it’s very true that people with the same qualification and similar experience who are working in different industries might be paid very different salaries, depending on I guess the scarcity of skills, the size of the company they are working for. So there are often discrepancies in salaries, even with people who have the same qualification.

MIKE SCHÜSSLER: Well, that’s very true. And we also have regional differences. We have, for example, sectoral determinations that allow about an 8 or a 10% difference between rural and metro areas in many cases in some industries. So, if you are in a coastal area, generally speaking I would say people with degrees and that type of thing – because there is also a lifestyle thing involved – will probably be earning less.

We also know that from the tax data generally speaking. And in the inland areas the people are earning a bit more. There are more government employees, there are a lot more people in the sort of utility field, where they also get paid, in telecommunications and banking. So you’ll find a percentage of people in a place like Johannesburg who are involved in those industries such as banking and telecommunications and so on will get paid quite a bit more, and will push up the average of that region.

So yes, qualifications are not everything. Regions are something and the size of the firm is definitely. We also know that very often the smaller firm is paying less. We are not now talking about, say, a legal firm or something, but we are saying someone in the security industry with ten employees is very likely to pay a lot less than somebody in the security industry with 300, 400, 500 employees.

HANNA ZIADY: Absolutely. And I think for listeners who would like to check out where they are on the wage scale, there are platforms such as mywage.co.za, and payscale.com, which enable you to get data on what people working in the same industry as you with similar work experience, qualifications, etc, are earning at other organisations and where you stack up in comparison.

We do have a caller on the line, Anonymous from the Eastern Cape. Good evening. What is your question for us?

ANONYMOUS: I’m a very small employer, OK. If I had to start paying those real minimum wages, then I’d have to cut my workforce by about 50%. I deal with the public directly in many cases and what we find is that the public, my niche market, just doesn’t have the money. So I’d have to – and I’ve only got ten people – reduce my staff by five and then I would be out of business. So it’s very nice for people up in Joburg, computer people earning 10, 50 [thousand].

Your government employees are the highest-paid people in this country. For a normal person in the government employ a minimum wage is upwards of R10 000 a month to be a clerk, just to say hello, good day. It’s really, really scary. The government is paying more than other people can afford to pay. Even street sweepers are being paid R4 500. It’s very difficult.

HANNA ZIADY: Thank you so much, Anonymous, for your call. Unfortunately we are out of time, but I do think you make a very important point, And it is a point that Mike was making earlier, just that some companies cannot afford to pay their workers a national minimum wage and we would see job losses as a result of that. So it is something to bear in mind, to keep employment up.

Ntokozo from Melville makes the point that if we grow entrepreneurship perhaps we can end the minimum wage discussion and that should perhaps be our focus.

Thank you for listening this evening. Thanks to Mike Schüssler.

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This is really nonsense. A fair wage is that which adds more to bottom line of the employer in his estimation (whatever measure he uses) than doing without the additional labour will cost him, on the one hand, and, on the other, provides sufficient incentive for the employee to undertake the tasks to be performed that will make him better off (in his opinion), than he would be if unemployed. The benefits that accrue to both parties will always include some that are not measurable in money terms but are considerable. A minimum wage is a substantial obstacle to increased employment as is the red tape inherent in our labour legislation. What should be acknowledged by both parties is that, the lower the wage, the higher the mobility of the labour which is generally to no one’s advantage. Let’s stop the nonsense and get down to basics please. Our governors are fiddling while Rome burns buying votes with these false promises.

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