- The National Minimum Wage Commission has proposed a 1% above inflation increase in the national minimum wage.
- But a minority view from three Commissioners is proposing a 1.5% increase above inflation.
- The current minimum wage is still below the upper-bound poverty line in SA.
Domestic workers will be the biggest winners in 2022 if the proposed minimum wage adjustments pass.
The Department of Employment and Labour has gazetted and is seeking public comment on the National Minimum Wage Commission's proposals.
The Commission reviews the national minimum wage annually, and this year it has recommended that the minimum for domestic workers be equalised to the national minimum wage in 2022.
Currently, domestic workers earn R19.09 per hour, while the national minimum wage is R21.69 per hour. That's because the Minimum Wage Act set the rate for domestic workers at 75% of the national minimum wage in 2020 and 88% in 2021. But the idea was always to equalise it to 100% of the national minimum wage in 2022.
President Cyril Ramaphosa also promised women voters a better minimum wage for domestic workers ahead of the November 2021 municipal elections.
The 2022 wage proposals
For 2022, the majority of Commissioners recommended that the national minimum wage be increased by 1% above inflation. But a minority view from three Commissioners was that the wages should increase by 1.5% above inflation, in line with the adjustment made in 2021.
Although the inflation growth rate, as measured by the consumer price index (CPI), reached 5.5% in November, the National Treasury projects that CPI will average 4.5% in 2021. But the Department of Employment and Labour said the actual amount of increase will depend on the inflation in the month in which the adjustment takes effect.
So, if the CPI stays at 5.5% in December and the recommendation by the majority of Commissioners pass, the current rate of R21.69 per hour will increase by 6.5% to R23.09.
For domestic workers, this would translate to a 21% increase. This means that a domestic worker who used to earn R3 360 for an eight-hour shift over 22 days could take home R4 063 in 2022.
But the Minimum Wage Act provides exemptions for employers who truly cannot afford the adjustment.
The department has invited people to submit comments until 14 January 2022.
The rationale for a 1% above-inflation increase
The Commission said the majority of its members considered the current economic state of SA, given the impact of the Covid-19 on employers and employees, when recommending a 1% above-inflation increase in the national minimum wage for 2022.
It added that it was conscious of job losses caused by Covid-19 as many businesses closed down. But because the annual minimum wage adjustments are taking place under the Covid-19 cloud, it was difficult to evaluate and isolate the impact of an increase in the national minimum wage from the effects of the pandemic.
Nevertheless, it believes that "the modest" 1% increase would not be disruptive to the labour market, especially because studies carried out by the UCT's Development Policy Research Unit and the internal research unit of the Department of Employment and Labour in the past year found no evidence of job losses caused by the increase of the minimum wage.
The rationale for a 1.5% increase above-inflation
On the other hand, the three Commissioners who submitted the 'minority report' recommending an increase of 1.5% above inflation said poverty has increased significantly in SA because of the Covid-19-related economic shutdowns.
Therefore, the minimum wage needs to make sure it doesn't live more people below the poverty line than in 2017 when Stats SA estimated that 25% of people lived below the Food Poverty Line, and 55.5% lived below the upper-bound poverty line.
Furthermore, the minority report noted that while the CPI for October 2021 was 5.2%, it was 7% for food inflation, an item on which the poorest households spend the bulk of their income.
"We believe that the National Minimum Wage should consciously address this reduction of the purchasing power of minimum wages by increasing above inflation, and hence we argue for 1.5% above headline CPI increase for 2022," read the minority report.
The minimum wage is not yet a living wage
Statistics South Africa put the lowest food poverty line at R624.00 per person per month or R2 188.00 for the average-sized household of three to four people in April 2021.
With that in mind, the proposed minimum wage seems adequate in ensuring that workers and their families don't go to bed hungry.
But many workers spend the lion's share of their wages on transportation costs to and from work, leaving considerably less to spend on food, especially where the household has one breadwinner. The Commission even acknowledged that inflation for low-income households is significantly higher than for the upper-income group.
Furthermore, when one considers the upper-bound poverty line, which includes non-food items typically consumed by households that can afford the basket of foods utilised in setting the food poverty line, the minimum wage falls even shorter to alleviate poverty.
In April, Stats SA put the upper-bound poverty lines at R1 335.00 per person or R4 673.00 for the average-sized household of three to four people a month.
The Commission said while the national minimum wage was about 21% above the lower-bound poverty line in 2021, it was below the upper-bound poverty line.
Even when looking at the lower-bound poverty line, the Commission acknowledged that the national minimum wage would be insufficient to sustain a larger household of five or more members.
The 2021 minimum wage was also significantly less than the hourly median wage for employees in the formal sector, where the median wage was R 34.87.
"These findings suggest that the current minimum wage remains below the upper-bound poverty line for many households. By extension, a gradual real increase is needed to lift employees earning the minimum wage out of poverty," read the gazette.
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