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AUG/SEPT 2014 • www.cosatu.org.za

these two considerations will be the subject of intense debate and contestation. But we need to remember the situation of farm workers, where ultra low minimum wages were increased by over 50% without the huge disruption that was predicted. So the necessary level of boldness is required. The international experience shows that a phased process also allows sectors to introduce innovation and adapt, without causing job loss. • What formula would be used to target the substantial real increases needed every year, to achieve the target of an acceptable national minimum wage? In Brazil, the government introduced a formula where the NMW was increased annually based on in fl ation plus the combined growth of GDP over the last two years. Such a formula could be considered, but we would probably need to be bolder than this given the extremely low base off which we are coming. • What should be the scope of a national minimum wage? Ideally it should be universal, but internationally, the practice is to cover domestic workers separately. The alternative of including them, may mean that the NMW is set at too low a level, to be broadly acceptable. Therefore it might be necessary to cover domestics with a separate determination. Certainly, however such a determination would need to drastically

But as the ANC manifesto recognises, there are a number of modalities which need discussion and engagement, to ensure that the transition to a national minimum wage is managed in a structured way. Among the questions which arise are: • How do we determine the initial level or amount of a NMW, and an amount which should be targeted over the medium term? There are two important yardsticks used internationally which should be considered. Firstly an acceptable minimum living level- this requires serious research by reputable institutions (such as those which historically researched the household subsistence level), as well as involvement by people themselves in de fi ning their most basic needs. Secondly, we should consider the formula used inter alia by the OECD, which suggests that the NMW should be around 40-50% of the national average wage. This is where the oft-quoted fi gure of R4500 p/m comes from in the South African context. • Should there be a process of phasing in an amount based on such measures? In the context of extremely low minimum wages, it may not be possible to immediately move to an amount based on the above criteria. Therefore the NMW might require a process of phasing in, to ensure that we achieve the target of an adequate national minimum, without a massive shock to the economy. • Of course the balance between

policy, with the national minimum wage and a restructured collective bargaining system, as the key pillars. The ANC 2014 Elections Manifesto takes important steps in this direction, inter alia proposing a NMW; promotion of bargaining in all sectors; use of state incentives to promote wage equity in bargaining; and implementation of requirements on companies to reduce excessive income inequalities. This is an important breakthrough, and lays the basis for a broad national engagement. While engagements unfold on these matters, a process to implement a national minimum wage would constitute an important fi rst step to move us forward. International research by the ILO shows that a key advantage of the NMW is its simplicity, and therefore is relatively easy to implement and enforce. However we do face a number of challenges in moving from our current complex and fragmented minimum wage structure. The principles are clear: a legislated minimum wage will be set which is national, and below which no sector (see quali fi cation below) or region will be allowed to pay. While those currently earning below that minimum will be upgraded, those earning above the minimum will not be able to be downgraded. The minimum wage will be linked to a researched minimum living level, which determines the minimum required to support a family of 4 or 5. Workers through their unions in sectoral bargaining processes will continue to fi ght for a living wage above this national minimum level, to provide for the needs of workers beyond the bare minimum which is usually provided for in a NMW.

ECONOMY