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Minimum wage could lead to abuses

Jul 02 2017 06:00
Dewald Van Rensburg

Johannesburg - Turning the national minimum wage into an actual law has raised new problems, including opportunities for “all sorts of abuses” if state projects such as the Expanded Public Works Programme (EPWP) are exempted from the wage.

It appears the department of labour intends to do exactly that, said Shane Godfrey from the University of Cape Town’s Labour and Enterprise Policy Research Group.

The national minimum wage was designed by an expert panel appointed by Deputy President Cyril Ramaphosa and was then turned into an agreement at the National Economic Development and Labour Council.

Godfrey said both processes left too much undetermined.

The department is having a bill drafted in the hopes of reaching a deadline for implementation next year.

“A whole set of policy decisions have simply been delegated to the department due to a lack of detail in the agreement,” he said.

Officially, it has not been decided whether the EPWP would be exempt from the national minimum wage, but the department has already asserted that this was the case in public roadshows, said Godfrey.

“The problem is that the EPWP wage is at R11 now. Raising it to the national minimum wage would involve a considerable amount.”

The minimum wage is meant to come into effect next year at an initial rate of R20 an hour.

If wages under the EPWP are not at least moved nearer to this level, the incentive to convert forms of work into EPWP projects becomes stronger.

Godfrey said that municipal unions in particular had complained that work at local government level was getting shifted into the EPWP to lower labour costs.

At least lifting the EPWP wage to a less extreme discount to the R20 national minimum wage, as will be the case with domestic work and farming, could help, said Godfrey.

Godfrey and his colleagues have been documenting all the problems that could crop up if the national minimum wage is slotted into the existing mesh of labour laws.

At a workshop on their findings this week, Godfrey advocated all the state-subsidised forms of employment to be part of the national minimum wage.

This includes the EPWP, learnerships and jobs that are being subsidised by the divisive youth wage subsidy.

The learnership system has been a bone of contention in the long negotiations around a minimum wage, and applying it to this system could have consequences for the funds collected by the 1% skills development levy.

“Most of them would earn below the minium wage, so does the national minimum wage also affect Sector Education and Training Authority funds?” asked Godfrey.

The employment tax incentive (ETI) will also undergo a dramatic transformation unless specific rules around it are part of the national minimum wage bill.

The subsidy has grown far beyond the initial intentions and has become a multibillion-rand expense – and an important prop for many companies’ profits.

Organised business has been advocating the enlargement of the subsidy to pay for the minimum wage in “distressed” sectors.

Even without an expansion, the national minimum wage will automatically lead to higher subsidies.

The ETI covers young workers earning between R12.50 and R37.50 an hour, and all the subsidised jobs under R20 will have to adjust to this minimum.

According to Treasury’s report on the subsidy, released last year, more than half the subsidised workers earned less than R2 809 in 2014/15.

Adjusted for inflation, that would still leave more than half of ETI-subsidised jobs under the national minimum wage if it gets implemented on time next year.

The design of the ETI gives the maximum R1 000 subsidy only to jobs paying more than R2 000. Those paying less get either R750 or R500.

If all jobs get paid the R20 national minimum wage, all the current subsidies that are less than R1 000 will have to become R1 000, potentially further escalating the cost of the ETI.

Another major concern is what will happen to the existing system for setting sectoral determinations in unorganised sectors such as contract cleaning, domestic and farm work.

“Our sense is that the sectoral determinations will become dormant with seemingly no way to update them,” said Godfrey.

“They will be cast in stone and become increasingly irrelevant over time.”

The determinations do not just set a minimum wage per sector, but also a whole hierarchical schedule of wages per occupation. If these are not updated and only the national minimum wage is regularly reviewed, it would compress the other wages towards the minimum.

Determinations are set by the Employment Conditions Commission, which will apparently cease to exist when the national minimum wage bill is enacted.

Instead, a national minimum wage commission will be created to review it.

There is a fear that it will mostly be the minister of labour who ultimately decides what happens with the commission’s recommendations.

“Arguably, reviewing the national minimum wage will be as important as setting it,” said Godfrey.

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