Investigating the Feasibility of a National Minimum Wage for South Africa

Currently in South Africa, minimum wages are organized through two main structures: Bargaining Councils (BC) and Sectoral Determinations (SD). Together, these cover close to 70 percent of low-wage workers in the country. More recently, however, the proposed introduction of a National Minimum Wage (NMW) by government has been the subject of ongoing national deliberation and discussion. The report recommends that the South African Government consider introducing a NMW to address low wages. However, it is argued that critical attention must be given to the design and implementation of the policy so that it achieves the goal of protecting workers, minimizes the potential negative consequences on employment, and ultimately succeeds in improving levels of compliance with legislated wages. The report starts with summarizing the international literature on minimum wages, with a specific focus on the effect of minimum wages on employment. An overview is then provided on current minimum wage systems in South Africa. The second section presents quantitative data on the South African labour market, looking specifically at working poverty, minimum wage coverage, the evolution of legislated wages in the SDs, and the current wage distribution. The third section explores how a NMW could impact on employment levels, wage poverty, and wage inequality across a range of possible scenarios. The fourth section focuses on implementation and enforcement. Here the experience of several other countries are reviewed and key lessons drawn for NMW structures and implementation. This includes issues of coverage and possible exclusions, the level of the NMW, phase-in periods, time frames, and enforcement regimes.