The National Minimum Wage (NMW) Commission has published its adjustment proposals for 2022, recommending an increase slightly above inflation.
As of March 2021, the minimum wage in South Africa is R21.69 for each working hour. The commission has recommended an increase of CPI+1%, which would take the new rate to R23 per hour.
The inflation rate (measured by CPI) as of October 2021 was 5%, so the adjustment should be about 6%, the commission said. The actual amount, however, will depend on the inflation in the month in which the adjustment takes effect.
Domestic workers are expected to benefit from the proposed adjustments for 2022, with the commission recommending that domestic worker salaries be increased to 100% of the National Minimum Wage.
Under the Act, the minimum wage for domestic workers was initially set at 75% of the National Minimum Wage in 2020. The Commission proposed that it be increased to 88% of the national minimum wage in 2021 and to 100% in 2022.
“As a result, the minimum wage for domestic workers in 2021 came to R19.09 per hour. The equalisation of the domestic sector was proposed in 2020 by the Commission, wherein there was a minority report proposing a phased-in approach.
“In line with its earlier proposal, the Commission recommends that the minimum wage of domestic workers be increased to the national minimum wage in 2022,” it said.
This would bring the minimum wage for domestic workers to R23 per hour – a 20% increase from R19.09 in 2021 – or approximately R3,700 a typical work month (20 days, 8 hours a day).
There is a minority view in the commission’s proposal that the national minimum wage be increased by a slightly higher CPI+1.5%.
While the move to bring more workers in line with 100% of the NMW is a positive stride, unions and other critics of the policy have argued that it remains a poverty wage, as it is below the upper-bound food poverty line for an average-size family.
The food poverty line in South Africa is at R624.00 per person per month, or R2,188 for the average-sized household (which has between three and four members). The food poverty line covers only the resources required to meet the minimum required daily energy intake.
The lower-bound poverty line is at R890 per person per month or about R3,115 for an average-sized household. This poverty line encompasses a minimum of non-food essentials in addition to the food poverty line.
The upper-bound poverty line is at R1,335 per person per month or R4,673 for the average-sized household. This poverty line includes the cost of non-food items typically consumed by households that are able to afford the basket of foods utilised in setting the food poverty line.
In its report, the commission conceded that, even at CPI+1%, the increase comes in below inflation, as CPI is actually higher for the poorest households. Stats SA’s data shows that inflation for the lowest decile sits at 6.5%.
“The Commission agrees that, in order to retain the purchasing power of the national minimum wage, the annual adjustment should be set as an increment above the increase in the cost of
living. Inflation should be measured by the increase in the Consumer Price Index.
“The Commission notes that inflation for low-income households is currently significantly higher than it is for the upper-income group. In October 2021, the headline year-on-year CPI
rate was 5%.
“The inflation rate for the poorest decile was 6.5%, while it was 5.2% for the richest decile. The main reason is the relatively sharp increase in transport and food prices, as these constitute a higher share of consumption for lower-income households,” it said.
However, as rationale for its proposed increase, the commission used the median value across all bargaining councils outside of the NMW, while also taking into account how industries have been negatively impacted by the prevailing Covid-19 pandemic, and all the pressures surrounding it – particularly unemployment.
“There are legitimate concerns about the impact of the annual national minimum wage adjustments on employment in the country. It is worth noting that the Covid-19 pandemic negatively affected employment as many business establishments closed down and many people left unemployed,” it said.
“The period of Covid-19 the pandemic coincides with the period of the national minimum wage adjustment and this makes it difficult to evaluate and isolate the impact of an increase in the national minimum wage from the effects of the pandemic.”