Nex Media • HOW CAN WE ACHIEVE HIGHER WAGES IN SOUTH AFRICA? PRODUCTIVITY AND INCENTIVE PAY
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How can we achieve higher
wages in South Africa?
Productivity and Incentive Pay
The South African economy is encumbered by labour disputes and strikes which are often centred
on wage disputes. The first two months of 2014 proved to be no different, with the platinum sector
strike seeing approximately 200 000 workers on strike. The main reason for the strike appears to
be remuneration – unions and their members feel the current remuneration levels
are too low for the nature of the work they perform.
I
n an article published on News24 (21 February 2014), economist Johan van
Tonder said that increasing the amount paid to workers would have a knock-on
effect and stimulate demand in the economy. This however, would take time to
reflect. Therefore, in the short term, although companies would increase their
wage bill, this would not be met by the same increase in demand. There is
also no guarantee that increased pay would be met by a similar increase in
productivity. This would drive up the marginal cost of the product and hence the
cost of the product to the consumer. This could cause companies to shed jobs –
or even close down – until the market reaches a new equilibrium.
In a press release on 23 February 2014, Economic Freedom Front leader Julius
Malema said that should the EFF be voted into power he would increase the
salaries of public servants by 50 percent. He said that this would be funded via
higher taxes imposed on the private sector.
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