Research & Innovation 2015-16 - Page 37

path. We’re not in that game, unfortunately.”
of minimum wages,” says Bhorat. “These were set
either by sector (such as in agriculture) or occupation
(contract cleaners).”
Socioeconomic parity needs more than a
minimum wage
The third part of the analysis was to explore a feasible
range for a minimum wage.
Those two levels were firstly the median of the existing
sectoral determinations, and then the median South
African wage, set at R2 447 and R3 400, respectively.
From this, the researchers asked how employment –
and job losses – would be affected should minimum
wages be implemented at either of those levels.
Brazil is often cited as a poster child for what a national
minimum wage can do to boost productivity and
increase employment, says Bhorat.
The research shows, however, that a minimum wage
played only a minor role in the Brazilian growth miracle,
he says.
“Leave aside the fact that the growth miracle is now
over. The massive poverty reductions and stalling of
inequality that you saw in Brazil was primarily a function
of two things: one is the conditional cash grant system,
and the other improvements in the quality of the
education system, which led to an increase in the supply
of school graduates.”
So, is it worth it?
In the R2 447 scenario, around 281 000 jobs could be
lost, the paper concludes. In the R3 400 scenario, this
number rises to 566 100 – that’s 4.3% of employees.
“There’s significant sectoral variance in the potential
job losses, with many of the jobs lost in sectors such
as business services, domestic work and agriculture,”
explains Bhorat.
That drove down the wage premium, and with more
people competing for higher-skilled jobs, inequality
went down, and the massively improved quality of the
labour supply fuelled growth and created an aggregate
demand kick for growing employment, says Bhorat.
“So the real question for me is: Can we find a creative
way to set a national wage that recognises it is going
to bite some low-wage sectors much more than
These strategies are workable in South Africa, then, if
sectors like education come to the party.
“You can find situations where you want to improve
the quality of the schooling system precisely so that it
acts as a trigger for unlocking this cycle of inequality,
because what you’re then doing is reducing the
wage premium on skilled workers.”
Could the economy eventually reabsorb workers
who lose their jobs?
In a perfect world, a higher minimum
wage would mean higher productivity
and potentially you could cope
with an increase in labour costs,
says Bhorat.
And that’s the crux of the
argument put forward by
Bhorat and his research
“That’s an incredibly hard
thing to measure. It’s an
uncertain outcome. We’re
almost forced into a
very defensive position
because we’ve got very
high unemployment rates
– so an excess supply of
labour – and you’ve got a
low-growth environment.
“Labour markets with low
unemployment, economies
that are growing fast and that
are dynamically competitive; this
is where those arguments come into
play,” says Bhorat. “The national minimum
wage is used, if you like, as a mechanism for
increasing productivity, for extracting creative value
out of labour for the production of goods, which then
can be exported and it builds on a particular growth
“For internal labour
markets, obviously if
you raise the national
minimum wage, you’re
going to reduce
wage inequality in
a workplace. But
it’s not clear that for
combatting societywide inequality, it’s the
best or most appropriate
instrument in South Africa.
“One has to take a broader
approach and locate the inequality
and poverty cycle within all of these
Story by Yusuf Omar. Image by Solidarity Center, Flickr.
No poverty, economic growth and reduced inequalities 32

Solidarity Center, Flickr

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