‘National’ Minimum Wage-Setting in South Africa
Working Paper Number:
In 2014-15 the South African Government began to consider seriously proposals from the trade union federation COSATU that a uniform, ‘national’ minimum wage be set at a level several times higher than the lowest sectoral minimum wages set hitherto. The suggestion that a national minimum be set is hardly controversial, given that the state already regulates the wages of most low-paid workers and has the statutory power to regulate any that fall outside of the current sectoral mechanisms. What is controversial is the level at which a national minimum should be set, and the procedures for setting it. COSATU argues that a high national minimum is in line with international norms and would not have negative effects on employment. We show that South Africa’s existing sectoral minima are in fact broadly in line with international norms and that COSATU’s proposal is far out of line with them. We show also that both international and South African evidence suggests that COSATU’s proposed high national minimum would cause job destruction directly without any compensatory macro-economic boost to employment. We conclude that a high national minimum wage would be likely to worsen poverty and inequality, and suggest that expanded tax-financed social assistance and job creation programmes combined with South Africa’s existing sectoral minimum wages would be more effective ways of addressing poverty and inequality.