Workers need a living wage, not a minimum wage, says SARA

South African Reward Association
November 2022

Employers should pay their workers a living wage and not just the national minimum prescribed by law.

This is according to Dr Mark Bussin, Master Reward Specialist and Exco member of the South African Reward Association (SARA). "An employee's monthly pay should be at least R12,000 to R15,000 for a 40-hour work week," he says. 

Bussin defines a living wage as remuneration sufficient for an individual and their family to have a frugal yet dignified lifestyle. "Workers who earn the minimum wage often still cannot afford basic monthly essentials and are woefully unprepared for financial misfortunes, like roof repairs or hospitalisation," he says.

Business impact

What many employers don't realise is that financial distress among workers is bad for business.

The strain of not earning enough and constantly struggling to survive can negatively affect employees physically, emotionally and cognitively.

In an August 2013 Science journal article, researchers Mani, Mullainathan, Shafir and Zhao observed that a lack of money led study subjects to make poorer decisions. They hypothesised that poverty reduced focus and effort, resulting in inferior performance.

So the stress associated with financial hardship causes employees to make errors in judgement and inhibits their productivity. It also prevents them from reaching their full potential, increases absenteeism, and results in higher turnover rates.

"These effects can reduce business performance in the short term and hinder economic growth over time," warns Bussin. Replacing workers will not solve the problem if most of them face the same predicament.

Trapped in poverty

According to estimates from PwC, the University of Cape Town and the Tshwane University of Technology, the national minimum wage level for 2022 of R23,19 per hour is only around half to a third of the current living wage.

It is not possible for low-income workers to survive on these amounts and they are often forced to turn to unlicensed money lenders for additional cash to make up the shortfall.

Saddled with unregulated terms and high interest rates, they soon become trapped in a vicious cycle of borrowing from Peter to pay Paul.

As they end up poorer than before, their descent into negative income can see their quality of life spiral. Being unable to look forward to tomorrow or plan for a better future can have dire physical and mental health consequences for them.

Breaking the cycle

Employers who pay a living wage are instrumental in the eradication of poverty. Employees with disposable income are not only happier and more productive at work but are also more active in the market, stimulating economic growth.

In addition, workers do not need to engage in risky lending to make ends meet, reducing their exploitation by the unscrupulous.

Therefore, the argument for a living wage is not only a moral one that focuses on business' obligation to society. It is also a strategically sound investment that, as it lifts up the poor, creates a more prosperous business environment for companies and citizens alike.

"The more companies that decide to embrace a living wage, the greater the positive effect will be," says Bussin.



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