Mechanisms for effective implementation of South Africa's National Minimum Wage

Abstract

South Africa’s 1994 transition to democracy is considered as one of the most notable political feats of the twenty-first century. However, the majority of the South African population still live in vast poverty and inequality. South Africa’s poverty headcount is measured at 56.8% based on a poverty line of $1.9 per day at purchasing power parity (PPP) while, based on the Gini coefficient, the country is calculated as the most unequal country in the world. Although socioeconomic policies such as the Reconstruction and Development Programme (RDP), Growth, Employment and Redistribution and the Accelerated and Shared Growth-South Africa (AsgiSA) have attempted to address the issues of poverty and inequality, the two issues remain a great concern. The National Minimum Wage Bill aims to reduce poverty and inequality by implementing a national minimum wage of R20 p/h. The implementation of the national minimum wage (NMW) has been met with opposing views from different parties such as the University of Cape Town’s Development Policy Research Unit. Others such as the National Minimum Wage Research Initiative (NMWRI) at the University of the Witwatersrand argue that the national minimum wage level of R20 p/h is not feasible and estimated that it will result in job losses of approximately 281 000 people. Other parties have used various models such as the United Nations’ Global Policy Model (GPM) and the Dynamically Integrated Macro-Micro Economic Simulation Model (DIMMSIM) developed by Applied Development Research Solutions (ADRS) to argue that South Africa, as a wage-led country, would benefit greatly from such a wage level. The latter models argue that although the NMW will not eliminate poverty and inequality on its own, it can be used as a policy tool to reduce the two issues. This study identifies the mechanisms, or lack thereof, to implement an NMW in South Africa. The study also examines the effectiveness of the identified mechanisms. A qualitative research approach was adopted towards the achievement of the objectives of the study. The case study method was utilised accordingly. The case study countries are Germany, Namibia and the United Kingdom. The use of the case study method was aimed at comparing and contrasting the possible implementation of South Africa’s NMW to that of the international community in order to draw possible lessons for the South African case. The findings reveal that the National Minimum Wage Bill needs to improve the mechanisms before implementation is effective. For example, the role of labour inspectors could be improved by increasing their number in South Africa as well as equipping them with adequate skills and training. The study provides recommendations relating to the interpretation of the findings, which amongst others, proposes that independent contractors be included in the definition of the term “worker” so that this group is included in the minimum wage bracket.