Can we afford the 15% increase NUMSA is calling for?

The National Union of Metalworks of South Africa (NUMSA) announced that it would be demanding a 15 percent wage increase, earlier this month. This as negotiations began in the first week of this month, as a result of the current wage agreement lapsing at the end of July.

The union have also to date rejected a 5.3 % proposed increase and show no signs of backing down at this stage.

But can the economy afford a 15% wage increase?  

According to Econometrix economist Mike Schussler the short answer is, no.

“The profit margins in the economy are below 6% at present and the wages make up about half of the costs so the 15% increase will wipe out profits unless we have price increases of about the same 15%. The problem is also that inflation is now closer to 5% so a wage increase closer to inflation is perhaps a better way forward. We already have a large part of the adult population without work so the demand for Labour is not high,” added Schussler.

Stats SA’s most recent release of its Non-financial census of municipalities report shows an increase in the number of poor households across the country. With South Africa’s 278 municipalities registering 3,56 million indigent or poor households in 2016, the highest number on record since figures were first published by Stats SA in 2004.

While this is the case, Schussler remarked that the South African formal sector pay is much higher than many think.

“The metal industry pays well above minimum wage and most workers earn R4500 and more. The problem is not just wages but that we need more people in work. The real poor have no jobs and our middle class is in the informal sector or works as a domestic worker or such as taxi driver,” Schussler added.

With us nearing the end of July without any consensus being reached as yet, the fear is that there may be a full blown strike to come. With strike action being notoriously expensive, this could suffer a further blow to our economy.

“We must be rational about long strikes as they hurt other sectors and workers who are not part of the argument. We need to have someone like the CCMA or Labour specialist become involved within say a two week period and workers must then go back to work. These arbitrators are given then say a maximum three months to solve problem.” suggested Schussler.

“In 1963 it took an hour for someone at the bottom (lowest SEIFSA scale) scale to earn enough money to buy a loaf. Today they earn that in less than a quarter of an hour so we have made giant strides and need to acknowledge this,” he added.

The ability of country to compete and create jobs for the many not the few, need to be considered.

“We need to think very long and hard before we go on strike and certainly need to get away from month long strikes. The damage done is immense and many people no longer view us as an investment country and the innocent people in the form of suppliers and customers and service providers and area retailers etc. get hurt too much,” concluded Schussler.