Between two worlds

2016-11-27 09:37
Imraan Valodia

Imraan Valodia

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Does nobody understand this thing?” asks Professor Imraan Valodia, head of the expert panel that last week revealed the “magic number” for the proposed national minimum wage: R20 per hour.

“Conceptually, I think people don’t get the floor idea. That’s actually all that this is: a floor. There is this idea that [everyone] should now be paid R3 500,” he says.

“It could be that a very small proportion of people actually earn that.”

The big release was less than two days before our interview, when journalists were summoned to the National Economic Development and Labour Council (Nedlac) on a Sunday afternoon.

We ended up waiting several hours while union and business groups argued about the wage report Valodia and six co-panellists had just presented to them.

There had been a need to work in isolation from the people in Nedlac, who will now be scrutinising the report.

“The worst thing would have been to get captured by one of the constituents.

“The politics of this thing was such that ... it would leak,” says Valodia – something amply demonstrated that Sunday.

While we waited, someone in the know told me that it was going to be R3 500.

That someone was impressed – people who had been part of the battle of ideologies and economic modelling this past year know how strong the push for something much lower had been.

“It is kind of interesting that most of the flak that we are taking is that it is too low,” Valodia says when I meet him at his office at the University of the Witwatersrand (Wits) two days later.

“Now that the numbers are out, I don’t see why we shouldn’t be open to changes if it makes the proposal better. There is no reason we can’t increase it if needed.”

So, why this specific number?

Valodia and his co-panellists were roped in to come up with an independent recommendation to solve an intractable ideological dispute where both sides are backed up by large and irreconciliable bodies of research.

They’ve been called sellouts from the left and job marauders from the right.

One stream of research, partly coming out of National Treasury, has predicted catastrophic job losses no matter how low the minimum wage is set.

Another stream says higher wages transform profit into consumer spending, growth and employment.

It is an old argument and Valodia’s panel was wary of both holy cows.

“We don’t really know whether this will be the case, this argument that raising the income of low-waged workers will lead to consumption-led growth,” he says.

“We have good reasons to believe that lots of markets in South Africa are not competitive.

"For example, if retail markets are not competitive, this consumption-led-growth argument could actually lead to higher food prices and higher profits for retail companies – not to more employment.”

The actual proposal is already muddied, with R3 500 per month and R20 per hour getting used interchangeably.

I point out that for part-time and casual workers the hourly rate comes to less than R3 500. He points out that the country’s average working hours are more than 40 a week, so it comes to more.

As dean of Wits’ faculty of commerce, law and management, Valodia has been involved in the insourcing process that sprung from the #FeesMustFall movement.

“The security guards at Wits work incredible hours and they are happy when you throw more at them.

“There is a hell of a lot we don’t know about what that adjustment process is going to be,” he says.

The hallmark of the proposal is that it represents the path of least resistance for those parts of the economy that already have regulated wages.

It won’t affect many unionised workers directly and it won’t fundamentally hike the wages already set by sectoral determinations for things like contract cleaning, farms or domestic work.

As a member of the Employment Conditions Commission, Valodia has a hand in those determinations.

At the rate they are going, they all more or less reach the proposed minimum wage by 2019 anyway.

Politically, the minimum wage can become a new rallying point for everyone else.

As an economist, Valodia’s published work has zoomed in on the informal sector and those who work in it.

That is where of lot of the interesting effects could be felt as the figure of R20 – or whatever it turns out to be – gets hammered into the national consciousness.

It is called the lighthouse effect and it is the reason the panel wanted a “nice round number” – something easily hammered into the national consciousness. Something you can campaign around. R20 is better than R20.12, says Valodia.

“What is going to happen could be quite interesting. Think about someone like the Economic Freedom Fighters saying, we are going to organise these guys and demand a higher wage,” he says.

“The problem is that our unions have forgotten how to organise. This type of work is also largely services, a hard sector to organise.

"It would be easy to have one symbol.

“You are giving those workers there a bit more power by setting a kind of reference price. Everyone has to accept it. That is how you change those power relationships.”

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Read more on:    nedlac  |  minimum wage  |  labour

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