Economists have sounded the alarm on above-inflation pay deals between workers and employers, saying they could keep the prices of goods and services high and relegate many people to below the breadline.
But labour disagrees, arguing workers’ wages have not kept up with inflation and stagnated over the years compared with the “ridiculous” and insane salaries and benefits earned by captains of industry.
Consumer inflation eased to 4.6% in July, the lowest rate since July 2021, from June’s 5.1% due to softer price rises in food and transport as a result of a lower fuel price. That did not stop trade unions demanding inflation-beating rises.
The Pietermaritzburg Economic Justice & Dignity Group says the average cost of household food basket (nationally) is R5,227,14, while the legislated national minimum wage is R27.58/hour. The cost of living spurred unions, especially the National Union of Metalworkers of SA (Numsa), to demand higher pay and even profit share.
Some of the significant above-inflation wage increases include:
- April 2024: The Communication Workers Union signs a one-year 6% wage deal with the cash-strapped public broadcaster SABC;
- April 2024: JSE-listed Harmony Gold signs a five-year wage deal with Numsa, NUM, Amcu, Solidarity and Uasa for increases of R1,200 in the first year, R1,250 in the second, R1,300 in the third, R1,450 in the fourth and R1,500 in the final year;
- May 2024: Numsa and the Steel and Engineering Industries Federation of Southern Africa (Seifsa) sign a pay deal for increases of 7%, 6% and 6% over a three-year term;
- May 2024: Numsa signs a two-year deal for increases of 5% and 6.5% with employers in the bus passenger sector;
- June 2024: Numsa signs a three-year pay deal with earth-moving equipment specialist company Almar Investments for a 7% increase from March 2024 to February 2025; an increase of 7.5% from March 2025 to February 2026; and 7% from March 2026 to February 2027;
- July 2024: Numsa signs a one-year 6.8% pay deal with Gautrain operator Bombela Operating Company, ending a 17-day strike;
- November 2023: World’s leading diamond producer De Beers signs a five-year pay deal with labour for increases of 7% in 2023 and 6% in the subsequent years until April 30 2028;
- May 2022: Anglo American Platinum signs a five-year wage deal with NUM, Amcu and Uasa for increases of 7.5% or R1,100 in the first year, rising to R1,500 or 7.5% in year five; and
- June 2022: Impala Platinum follows suit and signs a five-year pay hike deal with labour for increases of R1,150 in year one, up to R1,500 in the last year of the deal.
Bureau for Economic Research economist Lisette IJssel de Scheeper said: “If you have wage increases that are above inflation and above productivity growth, that fuels inflation in the economy ... the employer has to recoup the losses somewhere.
“If wage increases are above inflation but are aligning with productivity growth, that’s not a problem, but once wage increases run away from productivity growth, then that’s where you have a problem.”
Efficient Group chief economist Dawie Roodt said the above-inflation pay raises had a bad effect “unless there is stronger productivity growth”.
Higher pay was among the causes of inflationary pressure, “hence central banks tend to keep monetary policies tight.
“If you look at SA, the rate of productivity tends to be below the rate of wage increases and there are many reasons for that. Labour in SA is very organised and the organisations are very strong.”
Roodt said that people with jobs know having jobs is special with so much unemployment.
“They organise themselves to protect their jobs, in the process [making] it difficult for the unemployed to enter the job market”. There were 16.7-million employed people in SA and 8.2-million unemployed.
“There are a couple of things that can be done: grow the economy. If the economy grows more people will enter the job market, ironically, labour unions will become less powerful,” said Roodt.
Wits School of Economics senior lecturer Lumkile Mondi said employers gave increases based on performance and also on the value each individual brought to the company in the medium to long term.
There were several scarce skills in SA, and in such situations the remuneration package tended to be higher, he said.
“In SA, being a net skills exporter to other countries, everyone is trying to keep talent to the best of their ability.
“Keeping employees happy and looking after them through various schemes is very important,” Mondi said, noting however that higher wages “keep prices very high”.
Econometrix chief economist Azar Jammine said that if the number of employers settling for above-inflation increases was high “it could have inflationary impact”, which would not be the case with a lower number.
Numsa spokesperson Phakamile Hlubi-Majola said: “Yes, we always demand above-inflation increases. You can’t exclude the lives of ordinary people as they are also affected by high prices of fuel, transport and food. Workers have not kept up with inflationary pressures.”
Hlubi-Majola criticised analysts and economists who never complained about CEO salaries and the widening income inequality gap in key sectors of the economy.
“There is a very warped perception that guides these analysts. They believe that workers must be poor and earn slave wages. We need an attitude shift and focus on what really matters. CEOs earn ridiculously high salaries with benefits.”
She pointed out that economists did not sound the alarm when Sibanye-Stillwater CEO Neal Froneman took home a R300m share-based pay packet in 2021.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.