Ingrid WoolardChair: Employment Conditions Commission

Assisted by

Gabriella Elte

• Farm workers’ in context• Structural adjustments• Employment implications• Food security

The Effects of the Minimum Wage Increase

Of the 13.6 million employed– 2.2 million are in the informal sector and assumed to

be unregulated– Bargaining Councils cover about 2.4 million workers

(of whom more than half are in the public sector)– Sectoral Determinations cover about 3.5 million

workers

Wage Setting - overview

Minimum Monthly Wages by Sector (2012)

Source: LRS, 2013

Minimum Wage by Bargaining Level (2012)

Source: LRS Awards Database, 2013

Average monthly wage for workers in elementary occupations (2010)

Source: LRS Award website, 2012 & Stats SA, 2010

ECC Criteria in Setting Wages

• Cost of living• Alleviation of poverty• Wage differentials and inequality• Impact on employment creation/retention• Impact on SMME’s• Ability to conduct business successfully

The Case of Farm Workers

• Sectoral Determination introduced in 2002• Other legislative changes (e.g. Extension of Security of

Tenure Act) had already occurred• Had already been a move away from permanent “on-

farm” labour to more temporary labour• Increased use of labour brokers

The Case of Farmworkers

• SA is third largest agricultural producer in Africa (after Nigeria and Egypt)

• Value-added per worker is 4x global average• Agricultural sector has always relied on cheap labour –

in 1997 the median wage was 17% lower than the median domestic worker wage

• From 1983 to 2004 output per worker on grape farms doubled.

Sector had been Shedding Jobs for a Long Time

Source: Liebenberg, 2011

Literature on Farmworkers

• Bhorat, Kanbur & Stanwix (2012) find that the agricultural SD (introduced in 2002):– Increased wages by 17%– Decreased employment by 13%

• Since then, wages have increased gradually and employment continued to decline

The Employers’ Take

• Employers suggest the new wage level be set considering the CPI plus 1%, provided it doesn’t exceed 6%.

• Many employers pay wages above stipulated minimum wage, employers could be discouraged from doing so if it is pushed further upwards.

• If the R150 originally demanded was met, 10 largest agricultural firms would increase costs by R3.5 billion

Monthly Food Price Inflation in South Africa

January 2008 to October 2012

Source: BFAP, 2012

Employees’ Requests

• Most employees proposed a minimum wage of between R2500 and R3500 and claimed that employers are unwilling to pay above minimum level.

• Cannot buy basics, support many family members – high dependence on farmers.

• Experience of the farmworker not considered in wage.

Present Position

• On 4 February 2013, the minimum wage was raised by 52%

• Surprisingly, agricultural employment rose by 7.9% in the first quarter of 2013 (and by 12.9% year on year)… but we will need to wait for more data to really know the impact

• The Department of Labour has received more than 900 requests for exemptions

• Too early to tell what will happen in the sector

• The politicization of the wage-setting process has resulted in demands from other sectors for a reconsideration of minimum wages

• Loss of trust

Concluding Remarks

• Agriculture can help with the food security of seasonal labourer households, but cannot solve rural poverty and unemployment on its own.

• The gap between what farmers can pay and what consumers require for a basic living is large

• Requires innovative policy framework to ease the structural adjustments that will continue to occur in the sector.