‘In a country where skills are in short supply and the work ethic is poor, the responsibility of executives and managers to ensure the survival of prosperous organisations for everyone’s benefit is inevitably going to call for an adverse Gini coefficient.
Is the familiar harping on the pay differential due to envy or an excessive preoccupation with “equality”, which as we all know is a fictitious concept in the realms of skill, work ethic, performance and level of responsibility?’
View or download the letter appearing in Business Day today – Equal pay is unfair.
Business Day has kindly consented to the use of some extracts.
Best practice is to fix remuneration on the bases of individual position (responsibility), performance (results) and potential (promotion prospects).
It’s unlikely that a common pay level, let alone an equal percentage increase, can be either fair to employees or to an organisation.
Illogical calls from both management and labour, do sometimes complicate wage negotiations. So do sloganeering and name-calling. They also confuse public debates on matters important to society, like “Equal pay for work of equal value”, and how the dangerous discrepancy between the poorest and richest sections of our population can be reduced. A call for equal pay for work of equal value should not be confused with one for “equal pay” such as denies the principle that “people with higher responsibility will earn greater remuneration (than those with less)”. The latter is indeed “unfair” and is “as we all know … a fictitious concept”.
I have, however, yet to come across a demand from a trade union in South Africa calling for equal pay on that basis, so while the headline is catchy, it is misleading.
It is also simply not correct to argue that “In a country where skills are in short supply and the work ethic is poor, the (increased) responsibility of executives and managers to ensure the survival of prosperous organisations for everyone’s benefit is inevitably going to call for an adverse Gini coefficient”.
The Gini coefficient is used to measure and compare what percentage of the population owns/earns what percentage of the wealth/income of that country.
In South Africa’s case it shows that a disproportionately large percentage of the population owns/earns a disproportionately small percentage of our wealth/income, versus of course a disproportionately small percentage owning/earning a disproportionately large percentage of all wealth/income. Such a situation is universally acknowledged to be dangerous, and should not be confused with a call that labourers should be paid the same as CEO’s.
Correctly measuring ‘equal pay for equal work’ (‘equal pay’) will result in sensible negotiations.
Equal pay means comparing the pay and outputs of individuals operating within the same occupational level as used by the Employment Equity Act (EEA). This is the measurement of income parity and is determined by comparing pay to job-outputs, responsibilities, etc.
Difficulties arise with irresponsible references to the ‘apartheid wage gap’, meaning the pay difference between the CEO and the entry-level employee.
First, this is not a valid job-costing measurement, and second, it has nothing to do with apartheid and everything to do with the measurement of differential job-worth and relative job-worth – which we have forgotten how to measure.
To illustrate the importance of these measurements, the relative job-worth of a qualified artisan is between 6 and 8 times greater than an entry-level employee. The artisan’s job is also placed 2 occupational levels higher than an entry-level employee.
During the engineering sector strike SEIFSA published the existing pay rates showing that an entry-level employee earned R23.85 and the artisan R45.35. This means the artisan’s pay is only 1.9 times greater than the entry-level employee, but the job-worth is 6 to 8 times greater.
This is ridiculous. The SEIFSA agreement only seeks to agree minimum rates. If these do not reflect a reasonably realistic situation there is no incentive for individuals to improve their earnings by acquiring additional skills and moving up a structure of jobs and pay that is greater than an entry-level job.
To rub salt into this wound the final agreement awarded a 10% increase to the entry-level employee and 9% to the artisan.
Artisans earn market-related rates that are higher than the SEIFSA minimum but there is no point in comparing entry-level employees to CEOs when they are not able to compare their current job status and pay to development opportunities within their own sector.