By Manglin Pillay PrEng, CEO of the South African Institution of Civil Engineering (SAICE)

 

Income inequality is the tolerated bane of modern democratic and capitalist societies – the Haves and Have-Nots emerge kicking a screaming through the valleys of equal opportunity, policy, and education – and somewhere down there is a river of truth, surrounded by thorny bulrushes of lies.

Considering the minimum wage issue – currently at around R3 000 depending on which sector and which part of the country’s economy one is immersed in – is R3 000 sufficient to shield against increasing living costs in South Africa? Does it uphold human dignity through affordability of a reasonable quality of the traditional basket of goods and services for an acceptable standard of living by general definition?

Perhaps there is merit in increasing the minimum wage to say R8 000 per month, for which the Pietermaritzburg Agency for Community Social Action, PACSA, argues. At a superficial level and at a glance, this seems about sensible. But before we go hurriedly into the frenzy of policy, we need a deeper conversation to broaden the understanding of impact.

Firstly, is there merit in the proposition that if we earned more, that we would afford better and spend better? Is more money the answer to the socio-economic advancement question? Various international studies of lottery winners show that most winners go bankrupt within five years of winning.

One riches to rags individual from the UK, who squandered his fortune in less than 12 months said, “I find it easier to live off a £42 (R900) dole than a million.” It seems then, that when money comes gushing through the door, parsimony is deluged out the window. While this is an extreme example, there appears to be evidence that makes the point that more money is not necessarily the answer.

Secondly, how many middle class families, where minimum wage earners find employment, are able to sustain R8 000 per month for their current helpers, gardeners, cleaners and nannies? The answer is easy – not many.

Contrary to popular belief, most middle income earning families are not laden with gold coins stashed in a basement. I posit that an increase in unemployment in the house management sector, will follow an increase in the minimum wage, not to mention creating a higher economic barrier of entry for the almost 30% zero income bracket, for whom the barrier is already prohibitive.

It is inhumane for workers to earn break-even wages – this is totally unacceptable. What are the possible interventions on the minimum wage conundrum then?

The basket of goods discussed earlier, includes food and beverages such as cereal, milk and coffee. It also includes bedroom furniture, apparel, pets, toys and recreational, social activity like admissions to museums, libraries and so on.

Finally, housing costs, transportation expenses, medical care costs, education and communication expenses round out the basket’s contents. Some governments include a few random items such as tobacco, haircuts and funerals.

Most minimum wage earners spend a large portion of their income and time, on travel to and from work, basic and higher education costs for their children, healthcare and social spend. For the masses, Government should rather invest heavily in efficient and dependable public transport, quality education (#Feesmustfall), communications and reliable healthcare so that the low income bracket minimise spending in these areas.

While government and engineers brave on with these service delivery challenges in order that minimum wage income earners can stretch their rand, we should also teach financial sustainability. We should be educating our people to become money savvy – all the way from President Zuma’s office to the common household. Graduate professionals are no different – we too need to refine our understanding of value for money, planning and saving for the future, and being thrifty.

Minister Pravin Gordhan has traversed the globe in recent months discouraging downgrading of our borrowing status, promising them “…South Africa will be doing things differently.” While we have avoided an overall down-grade status, we are not out of the woods just yet.

In dealing with the minimum wage issue, we should take the long-term view, and be circumspect about that decision – in dealing with short-term interests; the warning is that we will, in the long-term, be doing more harm than good by providing a quick fix, band aid solution.