ONE could not wish for a better example to illustrate the relevance of a wage subsidy or similar policy than yesterday’s announcement of the new minimum wage for farm workers.
While the new wage of R105 is a 50% hike on the current minimum, the fact is that it is still too little to live on.
While the government and the Employment Conditions Commission, which advised Labour Minister Mildred Oliphant on the minimum wage, are aware that even this will put farmers and jobs under pressure, it is clear that from both a moral and economic standpoint that the R69 minimum had to be substantially improved.
The gap between affordability for employers and survival for workers and their families is one that an employment subsidy of some kind could helpfully fill.
The research paper which the commission drew on to determine the R105 level unpacks the dilemma of how to close this gap with a great deal of precision and careful analysis.
While minimum wages for farm workers have been increased in line with the consumer price index (CPI) since they were implemented in 2003, the research paper — written by the Bureau for Food and Agricultural Policy at the universities of Stellenbosch and Pretoria — points out that food inflation has been far higher than CPI.
While CPI over the period was mostly in the region of 5%-6%, food inflation was astronomical.
In two particular periods — between January 2008 and mid-2009 and from October 2010 to 2012 — food inflation has been 20% or higher, depending on which measure is used. In the two years immediately preceding the Western Cape farm strikes, the official CPI for food was 18%.
The bureau also makes a more precise estimate of inflation’s effect on farm workers in particular. Based on the five basic foods most consumed by poor people and taking account of their daily portion sizes, the bureau’s "poor person index" put food inflation at 28% between October 2010 and 2012. This spike was largely driven by bread prices, as well as by the price of maize meal, margarine, coffee and chicken.
In illustrating what it calls "the farm workers’ dilemma", the bureau makes another chilling calculation: the food plate in a poor household in the Western Cape provides only 40% of the recommended energy intake and is "extremely inadequate in terms of nutrient diversity".
If a poor household of four was to receive an adequate (although not ideal) energy and nutrient intake, it would need to spend at least R2,307 a month on food. This, given other household expenses, would require a monthly income of about R5,630. Only in a household with two working adults, each earning R150 a day, is that achievable.
Weighed against this is what the bureau has called "the farmer’s dilemma".
An increase in farm wages from present levels to R150 a day — the demand put forward in the strikes — would increase the wage bill in agriculture by 57%.
From an analyses of the wages and income of several types of farms, the bureau estimates that if daily wages rise more than R20 a day, many typical farms will go under.
Since most permanent farm workers in the Western Cape are paid about R85 a day anyway, the bureau accordingly made R105 a day the cut-off point to avoid major job losses.
While this might be manageable for either farms that do not employ much labour and are capital intensive or for the price of permanent labour, a problem is set to arise when it comes to casual, seasonal workers.
These workers earn "at most" R84 a day, says the bureau, and during the strikes many claimed that they earned only the minimum of R69.
It is also the case that many of the seasonal workers on the Western Cape farms are young people, a good proportion of whom have matric or dropped out just before it.
With farmers looking to maximise productivity in the face of raising wages, whether by mechanisation or just by a more careful use of labour, these youngsters will be the first to lose out. A wage subsidy for youth would help keep at least some of them employed and put a balanced plate of food on farm workers’ tables more often.