The recommendation by the labour department advisers to hike farm and domestic workers’ minimum wage by double digits will lead to a jobs bloodbath and entrenched poverty, economists said on Tuesday.
The National Minimum Wage Commission — comprising independent experts and representatives from business, labour and community — has recommended increases of 16% and 20% for farm and domestic workers respectively.
The farming and domestic-work sectors are among the largest employers in the embattled economy, which is facing an unemployment rate of 30.8%, the highest on record, but pay in the sectors lags behind the national minimum wage of R20.76 an hour.
The agricultural sector, which contributes about 3% to GDP, is responsible for about 900,000 jobs, while domestic work accounts for 6% of total employment and about 15% of the employment of women in SA.
The commission proposed that the minimum wage for farmworkers, currently R18.68 an hour, be aligned with the proposed new national minimum wage of R21.69 an hour in 2021. It recommended that domestic workers’ wages, currently R15.57 an hour, be increased to 88% of the national minimum wage in 2021, before being aligned with the minimum wage by 2022.
“The majority proposal for the amount of the minimum wage for domestic workers and farmworkers would amount to an increase of about R450 per month for a domestic worker and about R350 per month for a farmworker,” the commission said in its report.
But the proposals have raised worries among economists and minorities in the commission that employers who are reeling from the economic shock stemming from the Covid-19 pandemic might be unable to shoulder the additional costs.
Three business representatives argued the proposal will lead to “dramatic job losses”. They supported the need to increase farm and domestic workers’ wages, “but in a sustainable way”.
“To give an additional increase beyond the annual increase in January 2021 would be very problematic for both these sectors ... To induce shocks of double-digit wage increases in these sectors, which are large employers, is likely to result in huge job losses and/or increase non-compliance, both of which scenarios should be avoided where possible,” the business representatives said.
They recommended that the increases be phased in over a four-year period to “avoid the negative impacts of huge wage increases”.
Efficient Group chief economist Dawie Roodt said the increases, if implemented in 2021, would be disastrous. “People are financially stressed as it is, the economy has lost 2.2-million jobs and not all farmers are doing financially well,” Roodt said.
“I’m afraid this is going to lead to very high levels of unemployment across both sectors. This was not well thought through. It’s so very wrong.”
FNB senior agricultural economist Dawie Maree said while the agricultural sector is one of the bright spots of the economy as it was allowed to operate during the lockdown, this didn’t mean it is doing “very well”. The industry is still recovering from the devastating effects of the drought experienced in the past few years.
He said the proposed increases could lead to a rapid rollout of mechanisation, with farmers replacing workers with machines.
“This proposed increase will take farmers 100 steps back. It will be disastrous.”
DA MPs Michael Cardo and Michael Bagraim, who serve as the party’s spokespeople for employment & labour, said they oppose the proposed increases. “[We] support the minority recommendations in the report, which are premised on the need to avoid and minimise job losses.
“Any adjustment to the NMW [national minimum wage] must take into consideration its probable impact on jobs. This is especially important at a time when Covid-19 and the associated national lockdowns have wreaked havoc on the economy. Retrenchments are on the rise and unemployment is at an all-time high,” they said.
Mayoyo Mngomezulu, general secretary of the Food and Allied Workers Union, which organises in the agricultural industry, said the commission’s recommendations are a step in the right direction as workers deserve a living wage.
“We understand that Covid-19 has wreaked havoc on the economy, but workers should not be punished for that. They should be able to survive and take care of their families,” said Mngomezulu.
Department of employment & labour acting spokesperson Musa Zondi said employment & labour minister Thulas Nxesi will decide on the recommendations based on submissions received.
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