We need a definition of a living wage

Trenton Elsley and George Mthethwa
Taking inflation into account, real wages for low paid work have barely increased in 20 years, according to the Labour Research Service Picture: LRS.
Trenton Elsley and George Mthethwa

Instead of focusing on percentage increases, wage negotiations should be based on a clear definition of a living wage, write Trenton Elsley and George Mthethwa.

It may sound shocking, but if 34 workers had not been shot dead on August 16, 2012 in Marikana, no one would be talking about the platinum strike. It would be as if nothing had happened. The strike would have ended as all strikes eventually do.

But the massacre did happen, and the event has undoubtedly had an effect on collective bargaining in South Africa.

Trade unions and employers use collective bargaining to negotiate workplace conditions. These can include health and safety rules, childcare provision, training and other issues, but the main concern is with wages.

Ultimately, collective bargaining in South Africa is highly stylised and resembles haggling. A lot of energy is spent on making offers and counter-offers. But – and this is an important point – wage settlements across the economy are on average within 2% of one another, often less. Why is it that collective bargaining yields such low returns?

In the period 1997 to 2013, median wages for low wage work in South Africa progressed from about R1.300 in 1997 to just over R3.300 per month in 2013.

Median pay for low wage work increased by 154% during this time. This sounds like a lot. But this tells us nothing about the purchasing power represented by this increase.

It’s different if we look at real wage development over the past 20 years or so.

Real wages refer to wages after price increases are taken into account, and provide an assessment of purchasing power. After all, it hardly matters if you earn more than you used to, if you can’t buy anything more than you used to.

The data shows that real median pay for minimum or low wage work in South Africa has remained stagnant over the last 20 years. Real median low pay in formal, unionised workplaces increased by only 2.95% between 1997 and 2013. There has been no democratic dividend for low wage workers in South Africa over the last 20 years and the Apartheid wage structure remains largely unchanged.

Demands and offers in wage bargaining are mainly expressed in percentages. Percentages are useful in allowing us to compare things that are often quite different, but can also obscure some inconvenient truths.

One such inconvenience is the very low level at which many wages are set in South Africa. We can talk about a 10% wage increase, but we should remember that 10% of R1000 and 10% of R10 000 are very different realities.

The dominance of percentage talk and the use of inflation rates as a benchmark in collective bargaining has prevented a substantial shift in wage rates.

The protest by farmworkers in the Western Cape in late 2013 displayed an unexpected unity of purpose and demanded an increase in the daily minimum from R69 to R150. Ultimately wages were increased to R105 per day. It is reasonable to suggest that these events derive some of their energy from the events of Marikana, as did the strike in the platinum sector in 2014, which picked up on the demand for R12 500 and was reportedly the longest in the history of the country.

A new national minimum wage has been mooted as a possibility and will be hotly contested in the coming months. Although the empirical evidence on the effects of a national minimum wage on employment is messier than one would like, there is no evidence to support claims that a national minimum wage simply destroys jobs. In fact there is some evidence that it can do the opposite.

There is a risk that a national minimum will be set so low that it will bear no relation to what is required by a working family to live a life of dignity and material well-being. This is partly because we do not have a decent measure of a decent living level. And here we come to the crux of the matter.

We need a clear definition of a living wage. The living wage campaign ostensibly “belongs” to COSATU, but its main thrust resonates with the broader trade union movement in South Africa along with anyone interested in the transformation of our socio-economic landscape. And the campaign has been neglected. We must revisit our conception of the living wage. A clearer understanding of the constituent parts of a living wage is likely to provide guidance on where, how and with whom the different elements can be negotiated.

A scientifically grounded measure of a decent level of living, which takes into account needs, would give meaning to existing benchmarks like the wage levels set in sectoral determinations and bargaining councils or median wage earnings in South Africa. Such a measure would lend much needed context to wage setting generally, be it at the level of the enterprise, the industry or a national minimum wage.

Broadly speaking, a measure of a decent living level would provide context for social dialogue and policy formulation. It would tell us what the numbers really mean.

This is the glaring omission in our analysis and our thinking on issues of incomes and livelihoods. We know a great deal about wealth, including who has it, how much they have and how it is reproduced. We also know a great deal about poverty, the extent and the depth of poverty. What we know precious little about is what constitutes a decent level of living. We do not have a robust measure of what it is to live, not merely to survive better, but to truly live.

If such a measure had been established before Marikana, it is possible that the negotiations there might not have broken down in the way that they did and that the massacre might have been averted.

Trenton Elsley is Director of the Labour Research Service (LRS). George Mthethwa is a Researcher at the LRS.This is the second article in a series based on the LRS 2014 Bargaining Indicator which can be found at http://www.lrs.org.za

The opinions expressed in this article are solely those of the authors. No inference should be made on whether these reflect the editorial position of GroundUp.

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