1. BUSA PRESENTATION ON MINIMUM WAGES
PARLIAMENTARY HEARINGS
Vanessa Phala: Executive Director
3 September 2014

2. Who we are?
Confederation of business organisations including Chamber of Commerce and Industry.
Voice of business in South Africa
Represent RSA businesses on macro economic issues at national and international levels.
Main aim is to ensure that business plays a constructive role in the country’s economic growth, development and transformation.
We want to create an environment in which businesses of all sizes and in all sectors can thrive, expand and be more competitive.

3. Who we are? We represent Business at NEDLAC
Member of Organisation of Employers
Member of the SADC Employer Group
Member of the B20
Member of the OECD Business Industry Advisory Committee

4. General Comments
BUSA
is committed to participating constructively in this issue
has just commenced with research into the national minimum wage looking at international and national experiences
at this stage, research us being finalised to inform the BUSA mandated position
We have, however, sought guidance from the ILO and the IOE and have some preliminary comments.
World Bank 2008 “Whether such a policy actually achieves its intended outcome has been the subject of great controversy for decades. “

5. ILO Conventions 131 and Recommendation 135
Purpose: to give wage earners necessary social protection regrding minimum permissible levels of wages
Full consultation required with worker and employer representatives
Artile 3: Criteria to determine minimum wages includes
The needs of workers and their families taking into account the general level of wages in the country, the cost of living, social security benefits and the relative living standards of other social groups
Economic factors including the requirement of economic development, levels of productivity and desirability of attaining and maintaining high level of employment.

6. Basic Conditions of Employment Act Provisions
Section 54 (3)
When advising the Minister on the publication of sectoral determination, the Commission must consider in respect of a sector and area …
Ability of employers to carry on their business successfully
The operation of SMMEs and new enterprises
The cost of living
Alleviation of poverty
Conditions of employment
Wage differentials and inequality
Impact of proposed condition on employment or health, safety and welfare of employees

7. Existing Regulation Regulatory system in place
We have a functioning system of sectoral minimum wages through sectoral determinations which provide for minimum wages per job category
Section 55(8) Amendment Act
‘… the Minister may publish a sectoral determination that applies to employers and employees who are not covered by other sectoral determinations’
We already have provision for a default minimum wage

8. Enforcement Enforcement is a major problem
DPRU indicating that in 2007, 45% of workers were paid below the legislated minimum
Of the total labour force,
50% are employed in firms of less than 50 people
Of which 80% are employed in firms of less than 20 people
Problem of enforcement must be innovatively tackled

9. Unemployment, Inequality and Poverty
Minimum wages are a blunt tool to address poverty. There has been significant inroads into poverty, which require sustaining
People living in extreme poverty in million, down 20.2% from 2006
People living in moderate poverty in 2011, 23mil, down 45.5% from 2006
Self reported hunger dropped from 30% in 2002, to 13% in 2011
Social grants recipients rose from 2.5 mil in 1998 to 16.5m in 2014/5
To sustain social grant support we need more people in employment (currently the tax payer base sits at about 5 million people)

10. Unemployment, Inequality and Poverty
Minimum wages set a floor for compliant employment, if set too high it becomes a ceiling for informal employment and can push more people into informality
The IOE states that particularly low skilled workers and youth are negatively affected if the minimum wage is set too high “Minimum wages may drive workers into ‘’uncovered” jobs”

11. Minimum Wage Setting Consist of three aspects
remuneration for work performed
basic income
cost of production
National minimum wages should be set relative to:
Employment rates, productivity, employment of vulnerable groups, inflation, tax and social contributions
Differentiation and decentralisation via a sectoral system is important to take into account different costs of living in different areas, productivity levels and employer’s ability to pay (particularly small business)

12. Concluding remarks Looking forward to engaging further on this matter
Ensure that we do not repeat the mistakes from the Agriculture wage setting at 52% which resulted in about job losses
Look at how to strengthen currrent system and improve compliance through effective enforcement

13. Concluding remarks
Do not set wages too high so as to encourage informalisation.
High minimum wages would result in huge job losses
We need to fully understand the implications of minimum wage implementation so as to avoid unintended consequences.
The real challenge is the level at which to set the minimum wage

14. Concluding remarks
Biggest challenge is achieve a balance between protecting vulnerable workers and limiting potential negative economic consequences