Deputy President Cyril Ramaphosa has appointed a seven-person panel to advise on an appropriate level at which the national minimum wage could be set.

Ramaphosa did this in his capacity as chair of the Committee of Principals of the National Economic Development Council (Nedlac). The committee comprises representatives of government, labour, business and the community. It is charged with, among others, determining the national minimum wage.

The appointment of the advisers takes place against the background of consensus among Nedlac social partners to introduce a national minimum wage as part of efforts to restore the dignity of the majority of South Africans, address the triple challenges of poverty, under-development and inequality and reduce pay differentials while maximising job creation, according to a statement issued by the Presidency on Sunday.

The Presidency pointed out that in his State of the Nation Address in June 2014, President Jacob Zuma had called on the Nedlac social partners - under the leadership of Ramaphosa - to address low wages; wage inequalities and a national minimum wage; and violent and protracted strikes.

"Ramaphosa has now, in consultation with Nedlac social partners, appointed a Panel of Advisers to assist Nedlac in setting the level of the national minimum wage, taking into account work done so far by Nedlac technical task-teams," according to the statement.

Panel members

Prof. Imraan Valodia has been appointed as chair of the panel. He is a part-time member of the Competition Tribunal and a commissioner on the Employment Conditions Commission.

The other members of the panel are macro strategist Mamokete Lijane (Aluwani Capital Partners); commercial law expert Debbie Collier of the University of Cape Town (UCT); poverty and inequality expert Prof. Murray Leibbrandt of UCT; Ayabonga Cawe (economic justice Manager at Oxfam South Africa; skills development and training expert Dr Siphokazi Koyana; and economist Dr Patrick Belser of the International Labour Organisation.

In March this year Ramaphosa said a national minimum wage could go a long way to provide a much-needed injection into SA’s economy. In his view SA is progressing well with its implementation, compared to other countries like Germany and Brazil.

“Today our level of inequality is the worst in the world. But this could be turned around and a minimum wage could lead to the injection of growth in our economy. If people have more money in their pockets they become better consumers. This could fuel the manufacturing and demand for goods and services. We should not only look at a minimum wage from negative perspective,” Ramaphosa said at the time.

Free Market Foundation

This is, however, not the view of the Free Market Foundation (FMF). In June this year FMF director Temba Nolutshungu said, in his view, the proposed minimum wage will rather hamper than stimulate job creation in SA.

"Instead of considering national minimum wages intended to raise the wages of people who already have jobs, government should be giving its full attention to creating conditions that will lead to an increase in the demand for labour," added FMF director Eustace Davie.

In an article published on the FMF website Davie said onerous termination requirements, minimum conditions of employment, compulsory minimum wages and other regulatory conditions imposed on employers, all serve to consign some people to the ranks of the permanently unemployed.

This is because the sum total of their wages and the costs to the employer of complying with the labour regulations exceed the economic value of their expected production, he explained.

According to Nolutshungu evidence shows the most vulnerable sector of the labour market will again be the young, unskilled and inexperienced youth, because some businesses will not be able to pay their entire workforce the arbitrarily determined minimum wage.

On the other hand, Ilan Strauss, a macroeconomist and development economist, who consults for the United Nations Conference on Trade and Development (UNCTAD), recently wrote to Fin24 to point out that recent research by Wits University’s National Minimum Wage Research Initiative (NMWRI) argues that workers receiving relatively more income from the implementation of a national minimum wage could boost domestic output and spending.

"South Africa’s labour share is around five percentage points lower than its peers and has declined in the post-apartheid era. There is a growing consensus among global policy makers that the world economy is suffering from too little demand. This is partly due to rampant inequality: most households do not have enough money to buy the goods and services that allow the economy to tick over," said Strauss.

"When complementary domestic policies, such as increased public infrastructural spending, are used in conjunction with increasing the labour share, the effects are larger in the GPM. And when other countries implement similar policies alongside South Africa to increase their labour shares, South Africa, as a small, open economy, benefits further."

In his view, the primary benefits of a national minimum wage for South Africa are through its notable impacts on reducing poverty and inequality.

"A national minimum wage is a potentially important plank in any suite of measures that aims to expand the South African economy in a balanced and sustainable manner. Positive measures are needed on both the supply and demand sides to boost the domestic economy," said Strauss.