Give and take: Labour and business given key demands for minimum wage

The national minimum wage (NMW) will be R20 an hour, but not the R20 an hour proposed by an expert panel last year.

The panel, led by Professor Imraan Valodia, the dean of commerce, law and management at Wits, had in effect called for R20 in 2019 rand terms, so that would be more like R17 an hour.

The final agreement made public this week calls for R20 in 2018 rand terms, which leads to a roughly 7% higher minimum wage in real terms.

This seemingly minor change will, however, make the NMW a bigger intervention.

The panel’s proposal would have intentionally left most of the existing sectoral determinations for low-wage sectors unaffected because their minimum wages are set to reach R20 by 2019 anyway. Now, the lowest wages in sectors including domestic work, farm work, security, retail and hospitality may actually get bumped upwards.

This is one of few concessions the labour union constituency at the National Economic Development and Labour Council (Nedlac) seems to have been able to secure out of a laundry list submitted late last year.

The NMW agreement sets May 1 2018 as the implementation date, which is much sooner than the expert panel had envisaged.

“Our sense in the panel was that you are going to need two years to set up the machinery and get it all done,” Valodia told City Press this week.

“I think it is ambitious, but if government thinks it can do this, let’s wait and see. It has accepted the bulk of what we suggested. The only substantial change is really the time frame.

“There are things in there that we did not deal with,” he added.

A win for business

One of the things not dealt with is the inclusion of references to “tax incentives” in the agreement.

City Press reported late last year how the business negotiators at Nedlac were pushing for the ever-expanding Employment Tax Incentive (youth wage subsidy) to be used to partially pay for the NMW in “fragile sectors”.

The final agreement states that “tax incentives” may not only get used to help “fragile sectors, but may also be used to support employers that apply for exemption from the NMW”.

Deputy President Cyril Ramaphosa this week said the Employment Tax Incentive as well as other kinds of business subsidies would be considered.

Tanya Cohen, the CEO of Business Unity SA, said the potential scale of subsidies the NMW could trigger had not been quantified, but “Treasury is working on it. They want to know if it is fiscally feasible.”

Cohen said there were, however, areas identified where the tax incentives might play a role, including small to medium-sized enterprises and start-ups, as well as subsectors such as furniture manufacturing.

Valodia is, however, sceptical of supporting the NMW with the Employment Tax Incentive.

“You have to be in the tax net to begin with. You have to be paying taxes to benefit from an incentive,” he said.

“Many small businesses, especially in that start-up phase, are making losses and are not likely to be paying taxes. It is not unlike individual taxes. When you use the tax system for benefits, you are only getting the benefits to the rich,” he said.

“On the other hand, the state can subsidise something else to enable them to meet the commitments.”

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