Why talk of ’the middle class’ is so misleading

DESPITE a raft of labour legislation implemented since 1998, inequality has increased from the very high levels inherited from the apartheid era, says the International Labour Organisation in its Global Wage Report 2014-15.

To the question of why so much legislation and so little outcome, University of Cape Town academic Rüdiger Helm, who is working on the “Build Ubuntu — close the pay gap” project, suggests the answer is the lack of implementation. In a draft report on the growing wage gap, Helm says section 27 of the Employment Equity Act, a key part of the legislative environment since the late ’90s, “holds great potential to reduce vertical pay differentials”.

Section 27 requires an employer to take measures to progressively reduce disproportionate income differentials where they exist. This could include collective bargaining and skills development.

Helm says there is no way to justify the wage differences in South Africa and believes employees could close the gap by being “well prepared” when entering into collective bargaining.

The ILO says the rise in inequality in this country between 2007 and 2011 occurred because the income growth of the bottom decile households stagnated in real terms, while that of the top decile households continued to increase.

There is even massive inequality within South Africa’s so-called middle class. The ILO data suggests that talk of a middle class in South Africa is misleading because there is such a wide disparity between the income groups that traditionally comprise the “middle class”.

Middle-class inequality in South Africa is higher than the levels of inequality between the very top and the very bottom income groups in Iceland, Slovakia and the Czech Republic.

While paying low wages may be good for individual companies, Helm says extreme levels of inequality undermine economic growth potential.