National Minimum Wage not enough to reduce inequality

WARMING UP: Speakers Ayabonga Cawe and Jane Barrett share a quick chat about youth unemployment ahead of their discussion at the dialogue held at the Origins Centre on Tuesday, July 22. Photo: Lameez Omarjee

WARMING UP: Speakers Ayabonga Cawe and Jane Barrett share a quick chat about youth unemployment ahead of their discussion at the dialogue held at the Origins Centre on Tuesday, July 22. Photo: Lameez Omarjee

A national minimum wage will not make a difference in inequality and poverty in South Africa, it must be combined with other solutions.
Speakers at the policy dialogue hosted by Young Economists for Africa last night at the Origins Centre agreed that a national minimum wage rate alone would not be enough to reduce inequality.
A “national minimum wage should be accompanied with other social protection measures,” explained Rethink Africa chairman, Ayabonga Cawe.

Combined solutions

These include a social wage subsidised by government to provide free housing, free health care and free education. This would affect savings, investment and consumption.
Asset transfers are another option through the restoration of the ownership of land, the economy and access to markets in the economy for the previously disadvantaged.
“People can’t build (their) lives without assets,” he said.

People are employed but they are still caught in a poverty trap.

He also said that the national minimum wage will never be effective unless we deal with the backlogs in development. An increase in minimum wage should go with an increase in productivity. He stressed that people needed an incentive, possibly even a stake in profits, to be productive.
Despite arguments that a national minimum wage would give the country a bad image and may deter investments, Cawe defended the proposal. “People are employed but they are still caught in a poverty trap”. A national minimum wage will allow for social reproduction he said.

No pull down effect
Jane Barrett, policy research officer at the South African Transport and Allied Workers’ Union told Wits Vuvuzela, “We want one minimum wage but (with) substantial increase” as this will “have a major impact to reduce inequality and a whole range of socio-economic factors.”
Barrett agreed that employers fear a possible pull down effect by a national minimum wage. “If it is handled properly it shouldn’t have a drag down,” she said.
Barrett added that a national minimum wage is necessary “to bring simplicity and regularity to the regulation of wages at the bottom.”
It would also give employers a moral and legal obligation to pay a minimum wage. A national minimum wage is more effective to reduce inequality, than reducing pay for executives, according to her.
Other changes include interventions in the manufacturing sector, “[If] more money is put into the hands of workers, it will be spent on locally produced goods.”

Transparent policy
Taku Fundira, senior researcher at Studies in Poverty and Inequality Institute, suggested that “social protection policies should be strengthened”. He told Wits Vuvuzela that South Africans should consider a basic income grant as an option.
In South Africa there is an “unemployed generation aged between 18 and 59” that will never receive a certain or reasonable income until the age of retirement, when they would qualify for a pension grant. He explained that a minimum wage could absorb unemployment.
Fundira also encouraged good infrastructure, a powerful labour force and a flawless trade flow to attract investment. “This is a redistribution policy, we take away from business to empower lower income earners. The policy should be clear and transparent and enforceable.”

This post was featured in the Wits Vuvuzela

 

 

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