Can SA businesses afford a R20 000 living wage?

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JEREMY MAGGS: South Africa has a new living wage benchmark and I think it is likely to spark a fierce debate. The Living Wage South Africa Network says workers should be taking home at least R20 000 a month for a 40-hour week if they are to live with basic dignity, maybe save a little and also cope with emergencies.

But here’s the rub, I think, in a low-growth economy, with many businesses already under immense, huge pressure, is this realistic and is it completely unaffordable?

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Let’s discuss this in a little more detail. I’m in conversation with Dr Mark Bussin from the Living Wage Network. Mark, a very warm welcome, R20 000 a month take-home pay is a big number in the South African context. Tell us how you reach that figure. Why is that a living wage right now?

MARK BUSSIN: Thank you, Jeremy. Yes, it is a big number. The way we reached it was a methodology that is used around the world. We interviewed just over 2 000 people and asked them questions around 13 factors. I can list them for you, but it’s things like housing, neighbourhood, employment, quality of working life and so on.

We asked them what would give you a dignified lifestyle? What would put you in a position where you could save a bit of money and not worry about money? The range was between R14 000 and R25 000 a month take-home [pay], and we settled on R20 000 as the Living Wage Network.

JEREMY MAGGS: Your research then says people below R14 000 struggled to live decently, those above R25 000 generally can. Was there a lot of argument in settling on that R20 000?

MARK BUSSIN: No, there wasn’t because the R20 000 was among the Living Wage Network members ourselves, the executive members ourselves.

We came to the conclusion that R20 000 would be a good number, and most folks who we spoke to said that would be a reasonable number to consider.

JEREMY MAGGS: Is this figure, Mark, meant to apply nationally, or does it maybe risk ignoring major differences, say, between Johannesburg and rural and smaller provinces, where maybe there is more pronounced economic disparity?

MARK BUSSIN: That’s a great question, which we are wrestling with at the moment, to be honest. So if you take the UK Living Wage Network, for example, they do take London, for example, as more expensive than one of the towns or cities outside in the UK. A lot of the international folk do take costs of living of various cities into account.

At this stage, it’s a national number for ourselves. With more resources, more sponsorship, more money, we could then extend the research to various places in South Africa and see if there is indeed a geographic difference, but right now it is a national number.

JEREMY MAGGS: Explain to me how a living wage is different from the national minimum wage, beyond it simply being higher at R20 000.

MARK BUSSIN: The minimum wage is government legislated and it is around R5 000 rand a month. It’s a bit different from that, but let’s say around R5 000. This is four times the amount, R20 000. It is not legislated. It’s not compulsory, whereas the minimum wage is government mandated. It is compulsory. You do have to do it.

So we don’t talk about the living wage as an absolute number. It’s a journey. So those folks who can’t do it, I personally believe that employment and jobs are much more important.

We don’t want people to be implementing this R20 000 and then retrenching half of the workforce. It’s a voluntary amount, and if one can afford it and one is able to do it, then one should.

JEREMY MAGGS: Even if you’re not being prescriptive, do you think that pushing for R20 000 could unintentionally lead some employers, maybe in smaller or medium-sized businesses, to hire fewer people, automate faster, or simply outsource work? Given that you’ve now put this debate front and centre.

MARK BUSSIN: It is possible that that happens. That would be a very sad and unintended consequence. It’s not meant to pressurise folks. It’s not meant to make people feel that they should be doing it and hiring fewer people.

I think the cousin of this is employment and job loss. We need to look at the two together. This is not instead of jobs. So I’d be very, very sad if folks were hiring less. I’d be very sad if folks did see it as that. But one can’t exclude the possibility. You’re spot on there.

JEREMY MAGGS: Mark, to the question about maybe idealism. How would you answer employers who say this is morally attractive, but commercially impossible and simply not viable?

MARK BUSSIN: We’d have to accept that, because the idea is not to put businesses out of business. The idea is not to create unemployment. But when we look at the UK statistics, one in seven employers is a living wage employer. We are nowhere near that. But we are not zero.

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We do have, according to our estimations, more than 25 organisations that are already a living wage employer.

So those who can, should, and it’s a good thing and the right thing to do, but those who can’t and commercially cannot, then they shouldn’t. But it’s an aspirational number and it’s a journey.

JEREMY MAGGS: The network goes on to argue, as I read it, that this ultimately is an investment and not a cost. Is there any evidence, Mark, that shows that better pay improves productivity enough to justify your thinking?

MARK BUSSIN: The Living Wage Network itself does have evidence. I work [with] another hat in the academic world and happier employees, employees who are not worried about their financial security and safety, are generally more productive. So it’s a sweeping generalisation. Can one generalise that to absolutely everybody? No. I’ll find you an overpaid worker who’s not productive.

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But generally speaking, the less worried I am – the new word is wellness – if I’m well, I am genuinely more productive. If I’m more productive, I’ll be easy to retain, and if I’m easier to retain, the company should perform better.

JEREMY MAGGS: We’ve discussed living wage versus minimum wage, but in respect of the living wage, do you think at any point government might have a role here? Or do you think turning this into regulation simply destroys the voluntary spirit of the idea?

MARK BUSSIN: I hope it never becomes legislation, because if we legislated R20 000, it would be, I think, catastrophic for the country.

The role that government could play is to create enabling policies that help our organisations grow. That help the economy grow.

If we can get to a GDP growth of 4%, 5%, 6% by just changing just a handful of laws that makes it easier for organisations to comply. Maybe we might not be one in seven, but we could be one in 10, and that’s really the goal.

JEREMY MAGGS: Just finally, is there a practical step, Mark, that a South African employer might want to take if they accept your argument and principles, but simply cannot reach the R20 000 immediately.

MARK BUSSIN: To keep an eye on it, to talk about it, to compile budgets in parallel to their current budgets, what would it look like? Do scenario planning, what ifs? Modelling, they do modelling all the time, how could we do it?

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It’s just to get the debate going and to get people thinking about it. If that is the first step, and if that’s a practical step, then we’ve achieved something.

JEREMY MAGGS: We’ll follow this with a great deal of interest. Dr Mark Bussin from the Living Wage South Africa Network. Thank you very much.