The Federation of Unions of South Africa (FEDUSA) General Secretary Dennis George will participate in a telephone conference with credit ratings agency Fitch this afternoon between 15h00 and 16h00 to discuss developments in the labour market. Fitch has, along with Standard & Poor, already downgraded South Africa’s sovereign to sub-investment grade or junk status. A third credit rating agency, Moody’s, has put South Africa on review for sovereign downgrading.
FEDUSA’s governing body between Congresses, the National Executive Council or NEC has mandated it to discuss the state of the national income, how the proposed national minimum wage could improve the incomes of exploited working people and labour market stability with Fitch.
According to the OECD (Organization of Economic Cooperation and Development), national income refers to the sum of all income available to residents of a given country in any year. The division of national income between labour and capital is called the functional distribution of income. Labour’s share is that part of the national income allocated for labour compensation, while the capital share is that part of the national income going to capital as profit.
The OECD says a falling labour share often reflects more rapid growth in labour productivity than in average labour compensation, and an increase in returns to capital relative to labour. The share of wages in the national income in South Africa has dropped from 50% in 1994 to just over 45% in 2009, while the share of profits climbed from 40% to 45% over the same period, according to Statistics South Africa
“Many South African workers are poorly paid, and are employed in vulnerable and dead-end jobs. In the third quarter of 2008, half of all employed people earned less than R2500 a month and over a third earned under R1000 a month. However in its country report on South Africa, the International Monetary Fund pointed out that when it comes to productivity and wages, the challenge in South Africa also resides in excessive executive pay and bonuses and not exclusively with the quantum of wages,” says George.
“The situation is worse for young people, largely because too few jobs were created to absorb the large numbers of new entrants to the labour market. In the first quarter of 2010, the unemployment rate for young people aged 16 to 30 was 40%, compared to 16% for those aged 30 to 65.
“The informal sector, agriculture and domestic work contributed a third of all employment, but two thirds of working people earning under R1000 a month. Moreover, one in five employed African women was a domestic worker”.
George said FEDUSA will advise Fitch that the NEDLAC’s (National Economic Development and Labour Council) agreement on a National Minimum Wage (NMW) of R3 500 a month or R20 an hour will take effect no later than 1 May 2018 and would improve the lives of millions of workers.
‘The NMW is not a living wage but it would begin to address income inequality. Currently 6.6 million workers in South Africa earn less than R3 500 a month when calculated on a 40 hour week,” he said.
“FEDUSA will brief Fitch that in future, the National Minimum Wage Commission, which will replace the current Employment Conditions Commission, will determine levels of annual increases of the NMW after considering a number of factors including inflation‚ productivity and growth in gross domestic product. Businesses that cannot to afford pay the national minimum wage will be allowed to apply for exemption for a period of one year”.
Mitigating measures will be put in place to assist fragile businesses and sectors to avoid plant closures and massive job losses. The NMWC will be made up of three representatives each from business‚ labour and communities as well as four independent experts, concluded George.
FEDUSA is the largest politically non-aligned trade union federation in South Africa and represents a diverse membership from a variety of sectors in industry. See www.fedusa.org.za for more information.
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