Minimum wage increases in the metal industry have become prohibitively high. Year upon year of awarding above-inflation increases has led to a situation where minimum wage rates, especially amongst lesser-skilled employees, have been pushed to a level where the value that an unskilled labourer is able to add to his or her employer no longer matches his or her wage rate.

Historically, collective bargaining in the metal industry has comprised of the trade unions presenting employers with a “shopping list” of demands every few years, and the employers deciding how little or how much of the list to give away, without ever getting anything, such as a corresponding increase in productivity, in return. This decision has typically, and especially of late, been made under threat of violent protest action. It is the effect that this cycle has on business that is proving detrimental.

Gordon Angus, Executive Director of SAEFA

Research had shown that every time a collective wage agreement is extended to non-parties in South Africa, employment in the sector concerned drops by an average of 8%! With the official unemployment rate currently sitting at 31.9%, the situation is dire. However, the situation in the metal industry is made worse by the fact that from 1992 until 2021, increases were given on actual rates of pay and not on minimums. In the 90s, however, minimum wage rates were far more market related, and the effects of this concession weren’t felt for many years. Unfortunately, however, the chickens are now coming home to roost. Minimum wage rates in the industry start at R60 per hour and are rising now at an exponential rate.

In order to address this unsustainable situation, SAEFA is lobbying for the introduction of a New Entrant Wage Structure and the ability to implement wage increases on minimums. Implementing wage increases on minimums, of course, allows employers to address the problems that we have just mentioned above. The introduction of a New Entrant Wage Structure allows, as the name suggests, all new employees to be employed at an affordable rate, starting at R35 per hour.

Now I know what many readers may be thinking: “How does anyone survive on an income of R35 per hour?” I don’t know – I would certainly struggle. But consider this for a moment. Our research indicates that the vast majority of wage earners, particularly at the lesser skilled levels, are the sole breadwinners in households of multiple unemployed adults. Any business owner in the manufacturing space will testify to that fact. If you consider that currently, a minimum wage rate of R60 per hour is relied upon to cater for the needs of multiple unemployed adults and their children, it’s little wonder why employees will fight tooth-and-nail for above inflation increases. An employee like that may demand to be paid a 10% wage increase in the current economic environment where inflation is currently sitting at 5.3%. So, his or her wage will rise from R60 per hour to R66 per hour and R66 per hour will then flow into the household.

Compare this with introducing a New Entrant Wage Structure at R35, which has the effect of another member of the household securing employment. All of a sudden, the income to that household has increased not by R6 per hour, but by R35 per hour. This is nearly a 60% increase. There is now R95 per hour flowing into that household. That model, as simple as it is, has been proven to work at our member companies.

When all of the cost-of-employment “add-ons”, such as compulsory contributions to social security funds, etc. are considered, the current minimum wage rises to over R80 per hour – a rise of over R20 or more per hour. That’s not far off the National Minimum Wage. By comparison, a New Entrant Wage Rate rises by between R13 and R14 per hour to R43. The savings are there and so is the value add for taking on unskilled employees and giving them a foot in the door. Unskilled unemployed individuals would have the chance to enter the workforce, potentially acquiring new skills and enhancing their qualifications.

I believe that we have an obligation to address the unemployment crisis in South Africa and building a solid manufacturing base in the country provides a platform for other issues to be addressed. It’s high time that a more market related minimum wage rate is negotiated into the metal industry.

This is the opinion piece of Gordon Angus, Executive Director of SAEFA (South African Engineers and Founders Association)