Confronting the reality of labour’s income

2008-12-01 00:00

If my mother had read this column over the past three weeks she would have commented, “You’ve been a silly bugger, Frank!”

And well I may have been. However, asking you to imagine Barack Obama as our next president gave me the opportunity to look at government priority and strategy from an idealistic perspective.

Why I have such confidence in Obama, I don’t know. After all, he is just another U.S. president-elect. Time will tell whether I am correct.

The point I have been trying to put across is that governments and presidents do not tend to do things that could be described as genuinely helpful for and supportive of the people. They do a lot of talking, but don’t really do anything. The reality of this shortcoming in South Africa needs to be underlined 50 times over.

Equally, my purpose has been to highlight the fact that so many of our problems, needs, wants and opportunities come back to money, and in particular the money earned by employees and shareholders. I would even go so far as to say that you, the business owner, hold the key to making our country a socio-economic success.

Over the three weeks, I have made a number of statements about labour productivity and motivation. Three of these I believe are critical in respect of producing a truly successful economy.

First, if the amount we get out of a process such as coming to work is fixed, we optimise the process by minimising the input to achieve the same output.

Second, labour should earn in proportion to its collective ability to grow turnover and its value while doing all in its power to reduce the all-up costs associated with the manufacture and supply of that turnover.

Third, we pay our workforce an inadequate wage for an inadequate performance. It does not matter if the business is successful — if the worker goes to work, he receives his week’s wages.

I also reflected on the fact that all businesses large and small are full of costs that add not one cent of value to either their products or services.

Our need is to find a remuneration system that liberates all this waste to the benefit of both employees and shareholders. Next week, I will outline such a remuneration system.

The advantages of being able to improve both shareholders’ and employee incomes dramatically, funded entirely through ongoing productivity improvement (meaning inherent from within the system by which we pay our people), cannot be overstated.

Higher earnings mean more PAYE collected. More income leads to increased savings and spending.

More spending — fulfilling wants and needs — results in more VAT and GDP growth. Economic growth means more employment. Companies become more cost-effective and therefore more competitive. The list of advantages is almost endless.

None can be successfully realised if we do not change the methods by which we pay our workers.

Of course, this cannot be achieved through government legislation — we are not a communist state. But just as government works with industry and commerce to promote exports, it needs also to work with business to bring about conducive changes to the ways in which people are remunerated.

If you read this and have difficulty in identifying with the needs and priorities I have suggested, look at your own business — the way your people are paid. In truth, people earning R700 000 and more a year are working only an arm’s length away from a person who earns R22 000 a year (and he or she could be considered lucky).

I am not saying that the poor must become rich at the expense of those who are already rich. I am saying that we need to find new ways of paying our people that give opportunity to correct the gross imbalance reflected across much of South Africa’s industry and commerce.

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