South Africa’s minimum wage problem

The Department of Employment of Labour has called for comments on a new minimum wage target for South Africa in 2022, with the national minimum wage commission indicating that the national minimum wage of R21.69 should be increased by +1% above CPI inflation.

While the final totals still need to be confirmed by labour minister Thulas Nxesi, this would take the minimum wage closer to R23/hour and see domestic workers earn a minimum wage of more than R20/hour for the first time.

This increase will likely be welcomed by the country’s poorest, however new data from the Pietermaritzburg Economic Justice and Dignity Group (PMBEJD) shows that even this increase might not be enough to help many make ends meet, and when factoring in inflation, South Africans are actually getting poorer.

The group considered the country’s current national minimum wage (NMW) of R21.69 per hour and created a number of scenarios that show how far this wage would support a household. The income scenarios also considered the different categories of workers, as well as for the different number of days and hours worked.

“Households do not prioritise paying for food first out of the wage. Instead, households paid low incomes are forced to secure non-negotiable expenses like transport and electricity before food,” the PMBEJD said.

“Other important expenses like debt servicing, scholar transport, education and burial insurances, including household domestic and personal hygiene products also compete viciously on the purse.”

Food poverty line

A reasonable indicator of whether the NMW is improving the lives of workers is whether workers earning minimum wage are able to secure the basic household expenses needed to live at a basic level of dignity and household functionality, the PMBEJD said.

“In the scenarios, we pull out just three core worker expenses: transport to get to work and back; prepaid electricity, and the cost of a basic basket of nutritional food for a family of four persons. We take the NMW in its various scenarios and subtract the cost of transport and electricity. We then look at the money remaining to buy food.”

The first table provides scenarios for the NMW for general workers at R21.69 an hour and the second table provides scenarios for the NMW for domestic workers at R19.09 per hour.

Each scenario provides for the maximum minimum wage for the maximum number of working days and hours: for a 15-day working month (eight hours each day); and for a 15-day working month for five hours.

All scenarios above show that workers paid at the level of the R21.69 NMW cannot meet even the three core household expenses on the minimum wage, the PMBEJD said. This provides a stark indication of the deficiencies in low baseline wages, the group said.

“The NMW set at such a low level does not allow workers and their families the possibility to secure even their most basic expenses.

“Instead it appears from the data above that the NMW has worked to lock workers and their families into even deeper levels of poverty. Workers will have to cut back further on food and go into deeper levels of debt to cover wage shortfalls.”

“The maximum wage of R3,643.92 in December 2021 when disbursed in a black South African family of 4.5 persons is R809.76.”

This is also below the upper-bound poverty line of R1,335 per capita per month. Set at such a low level, the minimum wage works to institutionalise the low-baseline wage regime and lock millions of workers into poverty, the group said.

“Small annual increments off such a low base, and which do not reflect inflation levels as experienced by workers – including not projecting inflation forward for workers in the entire 2021 term – means that workers on the NMW are getting poorer and poorer each year.

“The minimum shortfall on food for a family is 46.5% in December 2021. Put another way, after securing transport and electricity workers are left with R1,568.42. If all of this money went to food, then for a family of 4.5, it would provide R348.54 per person per month. The Food Poverty Line is R624,” it said.

Read: Higher minimum wage proposed for South Africa