Wage debate: Band-aid or revolution?

2014-10-09 07:00

The biggest intervention in the labour market in 20 years could be the solution to SA’s flailing bargaining system

The political implications of a national minimum wage are strangely absent from the heated debates about what could be the biggest labour market intervention in two decades.

The higher the national minimum wage gets set, the more it will encroach on sectoral determinations and the bargaining councils that already set minimum wages for much of the formal economy.

That is no small thing when these structures are the major battleground of economic ideas between unions, business, academics as well as increasingly activist outside parties like the Free Market Foundation.

Parliament hosted workshops on the national minimum wage this month after the ANC promised that it was a done deal, with only the “modalities” left to be sorted out.

The debate centres almost entirely on real and imagined trade-offs between jobs and better wages. The crucial question of what happens to the existing wage-setting systems seems to be a “modality” being left for a later stage.

When the national minimum wage re-emerged as a union demand in 2010 (it was shelved in the 1990s), there was an assumption that it would only cover the several million working people for whom there still isn’t a minimum wage at all.

That makes something less than R2?500 a month the most obvious target for the national minimum wage – the level where the sectoral determinations converge.

That is if you assume that the intention is to not fundamentally alter the institutions where the economic battles around living wages are taking place.

Anything approaching the much-cited living wage standard of R4?800 or even R3?500 would have infinitely more far-reaching effects.

It would mostly eradicate the whole sectoral determination system and practically overtake the wage-setting function of bargaining councils for all the lower-paid occupations.

Cover the uncovered

Many staunch proponents of the national minimum wage still see “covering the uncovered” as fundamentally the point of the whole exercise, while leaving the sectoral determinations and councils alone.

Figures from 2011 put workers with sectoral-determined wages at 3.5?million. Those with bargaining council-set wages are about 2.5?million – largely in the public sector.

Many more workers are covered by collective bargaining at company level, but it is clear that the formal wage systems are far from universal.

Professor Ingrid Woolard, chair of the Employment Conditions Commission (ECC), says: “I’m not sure that anyone knows exactly [how many people fall outside the system].”

The ECC sets the sectoral determinations.

From her perspective, the major goal of a national minimum wage would be to “catch the employees who fall through the cracks” and replace only the lowest existing sectoral minimums.

That solves another problem with the wage system – it is confusing.

Knowing what to pay

“I think small employers in particular don’t necessarily know what they are supposed to be paying,” says Woolard.

Workers are also often unaware of what, if any, minimum wage applies to them.

“If you work in civil engineering, you are covered by a bargaining council agreement, but if you work in construction, there is no minimum wage,” she says.

The way things are turning out indicate this option is the furthest thing from the role players’ minds.

“The national discourse seems to assume a [much] higher national minimum wage than current sectoral determinations – this is coming both from organised business and organised labour,” says Woolard.

If a blanket national minimum wage overtook sectoral determinations, it is hard to imagine what mechanisms would get called on in a situation like the farm workers’ strike three years ago.

That was resolved through public hearings and submissions around the sector-specific sectoral determination.

Roger Ronnie, former general secretary of municipal union Samwu and now tied to the Social Law Project at the University of Cape Town, says: “The general thrust of the support [for the national minimum wage] is for it to be a floor. I would support a single minimum wage. The problem with the current system is myriad wages.

“The discussions now should involve the sectoral determinations, the ECC and their future role.”

Shore up bargaining councils

The practical importance of the national minimum wage would be infinitely greater if the wage was high enough to affect how the bargaining councils operate.

Cosatu sees the national minimum wage as fundamentally tied to an overhaul of central bargaining, not just a method to cover the uncovered.

That would require a national minimum wage closer to R3?500, which would overtake the lowest wages set in major bargaining councils like the Metals and Engineering Industries Bargaining Council (MEIBC).

South Africa’s post-apartheid labour system was premised on wall-to-wall collective bargaining through bargaining councils covering every industry.

That did not happen and the push for a national minimum wage is partly a compensation for this failure.

Today, the sectoral determinations are by far the bigger wage-setting mechanism, while bargaining councils in the private sector are flailing.

Employer groups are trying to undermine the councils that they feel are the instrument of only the largest employers and unions.

On the other hand, the council system is struggling to accommodate developments like outsourcing, which blur the lines between “sectors”.

In a detailed report written late last year, Cosatu strategist Neil Coleman emphasised that the national minimum wage must go hand in hand with a reform of the councils.

Coleman argues for “statutory” councils as opposed to the voluntary ones South Africa has today.

The fact that employers need to volunteer for a bargaining council to exist, as well as the lack of a basic minimum floor for wages in sectors that are covered by councils, lays the ground for “concessional” bargaining, says Coleman.

This is when employer groups use the continued existence of the bargaining council as a bargaining chip during wage talks.

This is what led clothing union Sactwu to agree to wage cuts in 2011, Coleman says.

Demands for a more severe wage cut are now at the centre of a battle in the MEIBC where the National Employers’ Association of SA is making ever more credible threats to indefinitely deadlock the council.

A national minimum wage could remove the whole issue of “entry-level” wages from the picture and leave the councils to get on with the really transformative negotiations around working conditions, says Coleman.

In effect, the government would be drawing a line under all the current efforts to lower unskilled wages in individual sectors.

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