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Living wages, living allowances and the platinum strike

18th July 2014

By: Saliem Fakir


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Debates on living wages or minimum wages are not unique to South Africa. You will find similar debates in France, the UK and the US following a recession and growing household debt in these countries.

Because of the globalisation of the world labour pool, low- and semiskilled workers have been the biggest losers of the global income share despite the growth in wealth that has been unprecedented in human history.


The world has been witness to the workplace not as a place of harmony and collaboration but of internecine conflict and power struggle. Workers who have felt disenfranchised have gone slow, withdrawn their labour or gone out into conflict mode.

Marikana was not only a labour relations matter – it was also symptomatic of how mining capital has lost its bearings and sense of broader purpose. Mining’s historical problem in South Africa is that mineworkers (as elsewhere) have only been given regard for their muscle power, and have received little regard for their mind and spirit. This indignity was ever evident for the world to see in the Marikana massacre.


But what are the factors contributing to low wage pressure?

There are several reasons for this. In some developed economies, this has had to do with the weakening of labour unions. It is said that wages must be dictated by the market and some sort of ‘willing buyer, willing seller’ model. Debates couched in market language tend to ignore the fact that living wages are an effect of bargaining power, negotiating skill and broader economic conditions. The market, if you want, is dictated not by the movements of the market, but by who has power at the negotiating table. The problem of surplus labour and easy movement of capital has meant that domestic labour ‘prices’ are not determined by domestic supply and demand only, but also by the international context.

The second reason is that the information and communication technology revolution has been significant. Some of the effects of this technological revolution are manifesting only now, after a long lag period. The effect of technology has been displacement, with technologies taking over routine tasks and new technologies beginning to take on more complex tasks.

The combination of technological change and cheap surplus labour has exerted further downward pressure on the wages offered by employers.
The debate on whether minimum wages are a disincentive for employment creation will continue to rage. However, a better understanding will be offered if studies can focus on the relationship between minimum wages and employment creation for different sectors (tradeable, nontradeable, manufacturing and low-skill services), the impact on young, compared with old, workers, and large and small firms.

Some samplings of the evidence are touched on below, but it should be noted that differences of views will persist regarding what exactly the evidence points to.

Given that research on these issues tends to be inconclusive, some studies show that effects can be positive, especially if workers feel confident that their effort will be rewarded with job stability and fairness in the distribution of the wage bill. The feeling of belonging and value will undoubtedly show in the productivity statistics. High differentials in wages between top management and workers will also influence commitment to the firm and its long-term sustainability.

For smaller firms, characterised by uncertain future cash flows, minimum wages can reduce employment, unless the firms are in a growth phase and dependent on specific types of skills. Larger firms prefer stability, loyalty and commitment and so would organisationally adapt to changes in minimum wages.

Competition between firms for talent can also have a positive effect on wages. In the platinum industry, everybody who understands the business knows that rock drillers are a special kind of worker. There is some possibility at new mines that machines can replace labour but machines do not have the kind of flexibility that humans have to sustain work.

While much of the public attention has been on the five-month-long Association of Mineworkers and Construction strike – which ended on June 24 – and living wages, the problem of the appalling lack of services and housing in the platinum belt is not something that can be resolved through wage bargaining. Rustenberg has been a boom town. As for all boom towns, orderly planning and development are crucial for Rustenberg.

A plan that imagines prosperity not only during mining boom periods but also after mining – when the bust period sets in – will be more appropriate. The dependence of these towns on one major economic sector is perilous, as the protracted platinum strike’s impact on Rustenberg’s economy showed.

On the issue of living allowances – they should be pooled, placed in an escrow account and used to build permanent housing for workers.
The lack of rental or housing stock means that close to 100 000 workers with living allowances chase after limited stock. The consequence is inflationary effects and a counterproductive effect of the living allowance – it corrodes the buying power of wages.

Mining companies should also pool their various corporate social investment funds into a development fund and work with government to ensure proper services are introduced and infrastructure is developed in underserviced areas.

Finally, unreasonable garnishee orders should be restructured so that punitive financial effects on wage income are minimised or eliminated in the long term. This tendency of considering only the wage debate, and not the broader social and economic issues, has to be addressed. Wages can only go so far – they do little about long-term sustainability.


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