- The National Minimum Wage Commission has proposed an increase in the national minimum wage by 1% above the inflation rate.
- However, a minority opinion of three commissioners suggests an increase of 1.5% above the inflation rate.
- The current minimum wage in South Africa is still below the upper poverty line.
Domestic workers will be the biggest winners in 2022 when the proposed minimum wage adjustments are passed.
The Ministry of Employment and Labor has published a public opinion on the proposals of the National Minimum Wage Commission and is asking for public comments.
The Commission reviews the national minimum wage annually and this year recommended that the minimum wage for domestic workers be brought into line with the national minimum wage by 2022.
Currently domestic workers earn ZAR 19.09 an hour, while the national minimum wage is ZAR 21.69 an hour. That’s because the Minimum Wage Act sets the rate for domestic workers at 75% of the national minimum wage in 2020 and 88% in 2021. But the idea has always been to adjust it to 100% of the national minimum wage in 2022.
Also President Cyril Ramaphosa promised female voters a better minimum wage for domestic workers ahead of the local elections in November 2021.
The wage proposals for 2022
For 2022, the majority of commissioners recommended raising the national minimum wage by 1% above the inflation rate. However, a minority opinion of three commissioners was that wages should rise 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 predicts that the CPI will average 4.5% in 2021, depending on inflation in the month the adjustment is made takes effect.
So if the CPI in December remains at 5.5% and the recommendation of the majority of the commissioners is accepted, the current hourly rate will increase by 6.5% from 21.69 Rand to 23.09 Rand.
For domestic workers this would mean an increase of 21%. This means that a domestic worker who used to earn R3 360 for an eight-hour shift over 22 days could take R4 063 home with them in 2022.
However, the Minimum Wage Act provides for exceptions for employers who really cannot afford the adjustment.
The department has invited to submit comments until January 14, 2022.
The rationale for a 1% rise above inflation
The commission said the majority of its members had taken into account the current economic climate in South Africa, given the impact of Covid-19 on employers and workers, when it recommended increasing the national minimum wage by 1% above the inflation rate for 2022.
It added that it is aware of the job losses caused by Covid-19 as many companies have closed. However, with the annual minimum wage adjustments happening under the Covid-19 cloud, it has been difficult to assess and isolate the impact of a national minimum wage increase from the effects of the pandemic.
Still, she believes that “the modest” 1% increase would not disrupt the labor market, especially as studies by the UCT’s Development Policy Research Unit and the Ministry of Employment’s internal research unit over the past year have shown no evidence of job losses Increase in the minimum wage.
The reason for an increase of 1.5% above the inflation rate
On the other hand, the three commissioners who tabled the “Minority Report” recommending a 1.5% rise in the inflation rate said that poverty in South Africa had increased significantly due to the Covid-19-related economic shutdowns.
Therefore, the minimum wage must ensure that no more people live below the poverty line than in 2017, when Stats SA estimated that 25% of people lived below the poverty line and 55.5% below the upper poverty line.
The Minority Report also found that while the October 2021 CPI was 5.2%, it was 7% for food inflation, an item on which the poorest households spend most of their income.
“We believe that the National Minimum Wage should deliberately address this decrease in the purchasing power of the minimum wage by rising above the rate of inflation, and therefore advocate an increase in the CPI of 1.5% above the total value of the CPI for 2022,” it says in the minority report.
The minimum wage is not yet a living wage
Statistics South Africa reported the lowest food poverty line of R624.00 per person per month or R2 188.00 for an average household of three to four people in April 2021.
With this in mind, the proposed minimum wage seems sufficient to ensure that workers and their families do not go to bed hungry.
But many workers spend the lion’s share of their wages on transportation costs to and from work, and there is far less left for food, especially when the household has a breadwinner. The commission even acknowledged that inflation is significantly higher for low-income households than for the upper-income group.
Also, if one looks at the upper poverty line, which includes non-food items typically consumed by households who can afford the basket of groceries used to set the food poverty line, the minimum wage falls even shorter to alleviate poverty .
In April, Stats SA set the upper limit of the poverty line at R1 335.00 per person, or R4 673.00 for an average household of three to four people per month.
The commission said that while the national minimum wage was around 21% above the lower poverty line in 2021, it was below the upper poverty line.
Even with regard to the lower poverty line, the Commission acknowledged that the national minimum wage would not be enough to support a larger household of five or more members.
The 2021 minimum wage was also well below the median hourly wage for workers in the formal sector, where the median wage was R 34.87.
“These results suggest that the current minimum wage remains below the upper poverty line for many households. In addition, a gradual real increase is needed to lift minimum wage workers out of poverty, ”the newspaper said.
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