Is the new National Minimum Wage enough?

The National Minimum Wage increased by 8.5% from R25.42 to R27.58 per ordinary hour worked on 1 March 2024. But is it enough in a country where the cost of living is keeping nutritious food off the plates of low-income consumers?

“It is definitely a step in the right direction but still does not allow workers to live a dignified existence. Although 8.5% sounds like a decent increase, you must remember that it translates to just R2 per hour,” Professor Ines Meyer from the University of Cape Town, who also chairs the Living Wage South Africa Network, says.

Meyer is a staunch promoter of the Living Wage concept that is gaining popularity in many countries. She recently returned from India where she attended meetings with living wage proponents from around the globe.

Among these were members of the International Labour Organisation (ILO), whose governing body just endorsed living wages as central to economic and social development. It means that ILO employer, government and worker representatives agree that living wages must be part of labour standards in ILO member countries. South Africa is a member of the ILO.

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Big difference between living wage and National Minimum Wage

However, there is a big difference between a living wage and a minimum wage. Meyer says a living wage is remuneration that is sufficient for someone to provide their family with the basic necessities of life and allows them to save and therefore cover unexpected emergencies. The required amount should be based on evidence.

While legislated minimum wages compel companies to pay workers not less than the prescribed amount, they seldom satisfy Living Wage criteria.

“Someone working at minimum wage for nine hours a day over the typical 22 working days per month earns less than R5 500 per month, which is hardly enough to survive and affords little chance of a decent, healthy or happy lifestyle.”

Meyer points out that a job paying minimum wage keeps people in poverty and employers must be aware that they actively prevent people from living a dignified life if they pay the national minimum wage.

Over the past decade, corporate sustainability reporting has been gaining momentum, with the core focus typically on environmental, social and governance (ESG) concerns. This kind of reporting allows organisations to be transparent with the public about their impact on people, the planet and prosperity within their operational ecosystem, as well as their integrity as a going concern.

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Companies care about communities, but what about own workers?

Meyer says ESG frameworks assume that prosperity not only refers to the profit a company makes but also to how it improves or degrades the economic conditions of the community where it operates. This includes the financial well-being of its workers.

“While some have decried the latest minimum wage increase as too costly and likely to raise unemployment, paying employees humanely attracts investment.”

Meyer says in a world where tempers run high on social concerns, a good report can work in an organisation’s favour while a bad report can adversely affect their share price and investors.

“A company cannot be serious about good ESG while its workers remain living in poverty although they are employed.”

She says unlike the legally enforced minimum wage, a living wage is meant to be adopted voluntarily by employers as an act of human decency.

“It demonstrates that the employer is genuinely concerned about their workers’ constitutional right to dignity and not just checking a compliance box.

“Pay is not just an amount, it also communicates to the employee how they are seen and valued as human beings by their employer.”

Meyer says this demands a mindset shift from profits at all costs to profits resulting from recognising workers as fellow human beings whose personal economic enrichment contributes to the national economy’s sustainability.

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The benefits of a living wage

“Living wages increase buying power and therefore creates a stronger market. Research suggests that offering decent working conditions, including decent pay, leads to economic growth. Unlike often believed we do not require economic growth first to create jobs.”

Living Wages have been successfully implemented in other countries, such as the UK and New Zealand, with little impact on profits or employment opportunities, she points out.

Meyer started conducting independent research to determine a living wage range in South Africa. For the past two years, she asked workers across the country about their current income and the degree of choice they experienced in a variety of life domains.

Through this her research group has estimated an ideal living wage for South Africa at between R12 000 to R15 000 per month. She emphasises that this is the cash amount required, exclusive of potential non-monetary contributions made by an employer.

“We realise this is quite a leap and that organisations need time to gradually implement it, but when approached as a strategic imperative, it is as possible as any other business endeavour. There are companies in South Africa that have started doing so.”