Business 24.8.2016 08:52 am

Some minimum salaries are much higher than you think

Picture: Tracy Lee Stark

Picture: Tracy Lee Stark

South Africa already has minimum wages – just too many, writes chief economist at Economists.co.za Mike Schüssler.

The recent appointment of a seven-member panel of experts by Deputy President Cyril Ramaphosa, has the nation debating the value and relevance of a proposed minimum wage for all workers. In this debate, it would be helpful to consider sectors that are already paying their workers well above minimum wage.

More than eight million formal sector workers in South Africa are already protected by some form of ministerial sectoral determination, union agreement or bargaining council agreement.

If one assumes that the informal sector and self-employed workers are not going to be influenced by any determination on minimum wages, then it is clear that about 80% or more of all employees are already covered.

Sectoral determinations

South Africa already has sectoral determinations that cover the minimum wages of vulnerable workers, (such as domestic and farm workers) as well as some informal sector workers (such as taxi drivers and rank marshals). It is estimated that sectoral determinations – as announced by the minister of labour – cover about 5.1 million employees.

Sectoral determinations have minimum wages that range from R1 813 per month to a high of R9 991 per month for qualified artisans in the civil engineering business sector. Sectoral determinations offer few benefits, but about 124 different minimum wages are set in these determinations.

Bargaining council agreements

Apart from sectoral determinations, minimum wages also apply in over 44 subsectors and micro-sector bargaining council agreements, which cover approximately 2.6 million employees. With extended agreements that cover non-union and non-participants in 23 out of the 44 bargaining councils, it is estimated that about 3.3 million employees are covered by these agreements.

There are at least 150 different minimum wages set by bargaining councils.

Bargaining council minimum wages range from R1 200 a month for hairdressers in more rural areas, to R12 974 a month for highly-skilled new artisans in the tyre industry. One should consider that in this instance, and unlike sectoral determinations, bargaining councils negotiate additional benefits that form part of the agreements.

While it is difficult to calculate the value that additional benefits offer employees, they seem to add between 10% and 25% to the overall wage bill in sectors that have a bargaining council.

‘Private agreements’

The third group of agreements with minimum wages, are those that a union and at least one employer or a range of employers, that sit opposite them to discuss wages, arrange. One could call them ‘private agreements’.

These set an estimated 1.7 million employee wages in this third category. While these agreements are private, they have contractual minimum wages that seem higher than either the bargaining council or sectoral determinations.

These private agreements negotiate minimum wages between only an employer and (a) trade union(s), although it may cover more than one company or even the majority of companies in a sector.

Here there are more minimum wages than either of the other two types of agreements – we have counted at least 80, but the real number is at least double that.

In total there are at least 420 different minimum wages in SA at present.

Negotiated minimum wages outweigh national wage

Negotiated minimum wages have huge benefits and are far higher than the current proposed national minimum wages.

The private agreements between unions and employers have surprisingly-high minimum wages and include sub-sector wages that range from about R7 081 a month for certain workers in the coal sector, to a high of R22 978 a month (without benefits) for artisans in the motor vehicle manufacturing industry.

Generally, the private-style agreements have higher wages than either sectoral determinations or those set by bargaining councils.

Private sub-sector agreements with unions usually include a range of benefits, such as medical insurance, pensions and housing allowances. These benefits seem to range between 20% and 45% of the total monthly wages in these private agreements.

With this in mind, the motor manufacturing sector’s artisan minimum wage shoots up from R22 978 to R33 318 a month.

The lowest minimum wage in the motor industry also has benefits, taking the actual wage from R9 668 to around R14 019 a month. The lowest minimum wage in this sector therefore gets a further 45% in benefits!

Similar numbers are evident in gold mining, where the cash wages without overtime are approximately R9 210 a month. Benefits take this wage to R11 142 a month, while additional bonuses takes this figure to over R12 000 per month.

The sector with the biggest minimum ‘wage package’ for entry-level workers appears to be the auto manufacturing sector, which has a current agreed monthly minimum package of R14 019 for its lowest-paid employees. The mining industry is not far behind and neither is the broader chemical industry.

Source: Economists dotcoza

Source: Economists dotcoza

The above rates are for entry-level workers in each of the industries mentioned. They are monthly and do not include benefits such as medical insurance, housing, travel and pension fund contributions. The top six industries shown here would all have extra benefits that would make the entry-level income higher.

For example, the transport sector often offers meal and sleep-out allowances and in the hospitality sector, workers often receive free meals. These ‘benefits’ and ‘in kind’ payments are not included in the calculation.

To put the higher-end skilled minimum wage into perspective: the vehicle manufacturing industry’s salary is 60% more than a teacher with a master’s degree and four years’ experience!

In summary, it is clear that most formal sector minimum wages are already above the R3 000 a month mark, but some entry-level salaries, including benefits, are already about five times what one would expect the minimum wage to be. This is especially prevalent in the vehicle manufacturing and gold mining sectors.

The vehicle manufacturing and mining sectors seem to have minimum wages which, even at their lowest earners’ level, would escalate these employees into the top 20% of all South African salary earners. Higher skilled minimum wages in many sub-sectors show that some minimum wages would place employees in the top 5% of salaries. To get into the top 5% one needs a salary of R24 000 a month. Skilled artisans in the vehicle manufacturing sector, for example, earn well over R33 000 with benefits.

Many minimum wages in South Africa – in both the public and private sectors – are already many times that of the typical wage earner who receives an estimated R3 200 a month, although this minimum figure may be slightly higher as not all respondents are truthful about their income. It nonetheless indicates that many sectors have minimum wages that are many times that of the proposed minimum wage – whatever that is likely to be.

– Brought to you by Moneyweb

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