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The minimum wage debate

May 16 2016 07:28
Mandi Smallhorne

HERE we are again, having the same old same old conversation about a minimum wage. On the one hand, indignation that people don’t earn a ‘living wage’ and live with dignity; on the other hand, indignation at the demands made of employers and the incipient loss of jobs an increased minimum wage would mean (or so the indignant claim) …

Everybody quotes stats and experience and Nobel prize winners and I get a bit lost in the morass. But I have a few practical questions to ask:

1. Let’s start with this: if there was no minimum wage, would people really exercise their freedom of choice and take on jobs at low figures, as is so often claimed by economists and such-like: “Who are we to dictate what people should do? Would they not rather have a job at R1 200 a month than no job at all?”

Well, I’m here to tell you, No. No, not necessarily. 

I had a friend (bright, presentable, articulate, good Matric) who searched for a job for years after she left school, so when she was employed at R800 a month to work a till at a big garage, everyone was thrilled. But she only lasted a couple of months.

You see, apartheid geography meant that she had to take two taxis to get to the garage, so her transport bill ate up half her wage. She had money taken off for a range of petty little costs like tea and uniform cleaning. In the end, she was working and travelling long hours to bring home about R220 a month, some of which she had to give to the auntie next door to watch her toddler while she was working…

She took a day off to go to her local state hospital about the tension headaches that were unsurprisingly plaguing her. They gave her paracetamol, which didn’t help; and she gave up. The game was not worth the pathetic little stump of candle-end.

2. I understand the argument that if a company is not required to pay a minimum wage, it would be able to offer jobs to more people. But would they, really?

Let’s say we have a milliner whose company makes those fashionable little fascinators that perch on the heads of glamorous schlebs. They employ a machinist and a finisher. Each of them is paid the current minimum for their industry (I don’t know what it is, but let’s use the R3 000 that’s being tossed around recently).

Minimum wage is removed; the company can now pay four people R1 500 each. But will they? Has the market for fascinators doubled overnight? Of course it hasn’t. So you have two possibilities: a decent employer will simply continue on the old basis, paying R3 000 a month; an unprincipled employer will take advantage and reduce his wage bill, but without employing any more people – or perhaps employing a cleaner, but not two more people.

The result of the bad and worst scenarios is that no more, or only slightly more people are employed – but there’s less money going into the economy, being circulated. How does this trickle down? The communities which provide the labour for the milliner see less rands and cents – so a pavement hawker goes out of business, as demand for his onions and tomatoes has dropped. Stagnation. Regression. How does this work to create jobs? I just don’t get it.

3. So the Big Question, for me, is how do we drive the demand for products and services that creates employment? And at least part of the answer, surely, is that we put some extra cash in the hands of the workers. I’ve actually experienced this over a period of about ten years – in a community I know, which gained access to grants as it started to formalise, and became clearly more economically active.

The injection of tiny little amounts of cash supported phone services in containers, hair salons with hand-printed signs and people selling kotas and other food. At least some of the people used that little bit of leeway to – in one case – do a course which earned a job; in a couple of other cases, to fund the set-up for a hair salon, with a cleaner and dogsbody helping out. Jobs. Movement. Progression.

Persistent and increasing inequality (yes, it’s got worse since 1994) is fuel for a dangerous anger. Consider this: there are about 12 million black African households in South Africa, from census figures, each of them comprising four people – yes, four, that’s right. With a fertility rate of 2.4 births per woman in South Africa, what did you expect? The median income (the income earned by half these households) is R34 078. That’s R2 839 a month, or around R700 a person. Could you feed yourself on R700 a month?

We have to do something about it. A reasonable but significant increase in minimum wages is a good tool with, apparently, minimal impact on unemployment. “Estimates from the OECD and various academics, show that increases in wages and changes in the distribution of labour earnings in Brazil accounted for between 40% and two thirds of the fall in income inequality in the 2000s.”

Let’s have a serious conversation about how to make this work – for the sake of our future.

*Mandi Smallhorne is a versatile journalist and editor. Views expressed are her own. Follow her on Twitter.

mandi smallhorne  |  opinion  |  minimum wage


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