Economists and unions have criticised the government for its 3.8% increase to the national minimum wage, saying it condemns workers to poverty and is a missed opportunity to grow the economy.

Minister of Employment and Labour Thulas Nxesi has announced that the national minimum wage will increase by just 76 cents on 1 March 2020.

Some worker organisations say this increase will have little impact on workers’ lives. The Izwi Domestic Workers Alliance says it is not enough and meaningless.

“A 3.8% increase on a decent wage might be meaningful, but 3.8% of R2 600 per month is meaningless and insulting. For those domestic workers working 40 hours a week, this is less than R100 per month difference,” says Izwi cofounder Amy Tekié.

The National Minimum Wage Commission initially recommended a 5% increase.

Representatives of labour unions at the National Economic Development and Labour Council (Nedlac) in January rejected the proposed adjustment of 5%.

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“Considering that the NMW [national minimum wage] has not been increased for three years, the proposed increase is totally unjustifiable and totally insulting to the noble ideals of the legislation that was expected to eject millions of workers out of the poverty trap,” said the Congress of South African Trade Unions, the Federation of Unions of South Africa and the National Council of Trade Unions.

The 5% recommendation to the minister of labour would have taken the R20 per hour minimum wage to R21 for a general worker. The new proposed 3.8% minimum wage only takes the hourly wage to R20.76 for general workers, R18.68 for farm workers, R15.57 for domestic workers and R11.42 for workers employed in the Expanded Public Works Programme.

Unions have come out strongly to dismiss the adjustment the commission recommended. They say R20 an hour was agreed upon in 2017 and has not been adjusted since, adding that the value of R20 in 2017 is not the same in 2020. By failing to recognise this, workers’ lives will remain stagnant or get worse.

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The Pietermaritzburg Economic Justice and Dignity Group says that on the wage of R20.76 per hour, workers will experience a deficit of 20.6% in their wages. And this shortfall is only limited to three core expenses: electricity, nutritional food and transport. To cover the shortfall, an increase of 30.7% is needed.

Izwi says the state has entrenched centuries of discrimination against domestic workers and black African women who, historically, have earned the lowest wages and suffered the worst forms of exploitation in the workplace.

The union alliance says there was no meaningful engagement with their demands and that there must be wage parity across sectors. The lack of a substantive response from the commission has kept them in the dark about the process the commission undertook.

Announcement premature

Researcher Julie Smith of the Pietermaritzburg Economic Justice and Dignity Group says the underlying data and rationale behind the increase must be made public. This is because major financial decisions that will have a direct effect on the cost of living for workers have not been made yet, she says.

Ahead of Finance Minister Tito Mboweni’s 2020 budget speech there were indications that levy increases would be announced. This will directly impact the price of transport, food, electricity and other expenses. The budget speech will clarify whether or not VAT is to be adjusted. An increase will affect workers directly. Eskom and municipalities are also yet to announce adjustments and/or increases on electricity tariffs.

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So the Pietermaritzburg-based economists want to know, if major financial decisions are yet to be announced, on what data are the commission and the department basing the increase in the minimum wage? How did the department arrive at 3.8%?

In response to this, the department says the basis for the increase was the law. They are mandated by the National Minimum Wage Act to review the wage at the beginning of each year and not wait for the budget.

Locked into poverty

Union representatives at Nedlac would have found a 12.5% inflationary increase on the national minimum wage acceptable.

But Smith disagrees. “If you increase it just by inflation and the baseline wage is already below the poverty line, what you are doing, you are just allowing people to buy the same things they could buy the year before. You are actually not improving their lives.”

National Union of Metalworkers of South Africa (Numsa) spokesperson Phakamile Hlubi-Majola agrees with Smith.

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“It’s shocking. This is why we were opposed to the national minimum wage in the first place. It will make very little difference in the lives of workers. We said that by making the national minimum wage so low, it meant that any increase would be a very low one, especially when you factor inflation. This is why Numsa has consistently demanded a living wage and not this poverty national minimum wage.”

Smith added: “If national minimum wage is only raised by inflationary-linked increments, then it is fair to argue that the national minimum wage is being used to institutionalise South Africa’s historical apartheid low-wage regime and lock a large proportion of the South African workforce into poverty for generations to come.”

Missed opportunity

By keeping the minimum wage low, Smith says the state is missing an opportunity to grow the economy.

The majority of consumers are low-paid workers and putting more money in their pockets through the national minimum wage would have had an impact on the demand for goods and services, she says.

“With consumer demand lowered, companies already in distress will supply less because they are not going to produce what they cannot sell. Lower production will mean more job losses. With every job lost, more wages will be removed from the economy and less money will circulate. This will dig us even further into the low wage, low productivity, low growth, high unemployment cycle we find ourselves in,” say the Pietermaritzburg economists.