The impact of minimum wages in the environment and culture sector of the expanded Public Works Programme

• Author: Peter Baur
• Pages: 1-35
• Date: 01 June 2020
• DOI: 10.25159/2520-3223/6578
• Published date: 01 June 2020

Article

African Journal of Employee Relations

https://doi.org/10.25159/2520-3223/6578

https://upjournals.co.za/index.php/AJER

ISSN 2520-3223 (Online)

Volume 44 | 2020 | #6578 | 35 pages

© Unisa Press 2020

The Impact of Minimum Wages in the Environment

and Culture Sector of the Expanded Public Works

Programme

Peter Baur

https://orcid.org/0000-0002-9202-2826

University of Johannesburg

peterb@uj.ac.za

Abstract

The Public Works Programme initiated during the Great Depression in the

United States was known for its ability to stimulate economic activity through

employment creation. Its aim of alleviating poverty and reducing inequality

finds an echo in one of the primary objectives of South Africa’s Expanded

Public Works Programme (EPWP). This programme focuses on reducing

unemployment through work-based programmes, in that way providing income

relief to many households through job creation. The very high levels of

unemployment and the associated poverty and inequality are considered to be

among some of the most daunting challenges that the South African economy

faces. The environment and culture sector has experienced many challenges

relating to wage determination and wage-setting behaviour. The aim of this

article is to investigate the impact of setting minimum wages in the environment

and culture sector as an appropriate wage strategy intervention policy under the

EPWP. The EPWP is a nationwide programme comprising projects that are

aimed at job development. After analysing data from over 3,500 individual

projects, the author found that there was a negative relationship between wage-

setting behaviour and job creation as far as many individuals were concerned,

especially women and youths. The author established that investment in skills

development and training had a positive impact on outcomes in the Environment

and Culture Sector of the EPWP.

Keywords: minimum wages; Environment and Culture Sector; wage distribution;

Expanded Public Works Programme

Overview

The concept of a public works programme is by far not new, originating as the Federal

Emergency Administration of Public Works in the United States of America (USA)

under the presidency of Franklin D. Roosevelt. This programme was initiated in

response to the very low performance of the economic environment brought about by

Baur

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the Great Depression (1929–1933). Gayer (1935) mentioned that the focus of the

Federal Emergency Administration of Public Works programme in the USA was to

“increase employment quickly” (p. 2). To achieve this, it was proposed that the

programme should focus primarily on the construction, repair and improvement of

public highways and parkways, public buildings and any publicly owned

instrumentalities and facilities. Furthermore, it had to focus on the conservation and

development of natural resources, including the control, utilisation and purification of

water, prevention of soil and coastal erosion, development of water power, transmission

of electrical energy, construction of river and harbour improvements, flood control, and

the construction of river or drainage improvements. Other projects also had to be carried

out under public authorities (Gayer, 1935, pp. 2–3).

In South Africa, the Expanded Public Works Programme (EPWP) is a nationwide

programme that focuses on job development in different sectors of the South African

economy by empowering individuals and small businesses to maintain their work output

and increase their capacity to earn a better income while they simultaneously acquire

the skills that are necessary to improve productivity. This programme is divided into

four sectors, namely, the Environment and Culture Sector, the Social Sector, the

Economic Sector and the Infrastructure Sector. Each of these sectors includes several

government departments. The Environment and Culture Sector is comprised of the

following departments: the Department of Environmental Affairs and Tourism, the

Department of Water Affairs and Forestry, the Department of Arts and Culture, and the

Department of Agriculture.

There are several core programmes in the Environment and Culture Sector and they

reflect the commonalities of the mandates of the departments involved. As such they

provide a framework for an integrated approach to achieving job creation, community

participation, utilisation of indigenous knowledge, and sustainable management of

natural resources. These core programmes are: Sustainable Land-Based Livelihoods,

Working for the Coast, People and Parks, Working for Tourism, and Working on Waste

(EPWP, 2004).

Among the critical aspects of reforms in South Africa are enhancing the state’s role in

the regulation of social processes, strengthening the civil service to ensure social

interests, and establishing sustainable cooperation between civil society and the state.

According to the Institute of Race Relations (2018), the government spends 3.2 per cent

of the budget (R10,39 billion) on art, sport, recreation and culture. In the context of the

present transition of South Africa to innovative development, the role of the state

referred to above is a necessity to create new life conditions for people and to develop

an environment conducive to intellectual and innovative capacity-building, which will

lead to higher levels of productivity (Junusbekova, 2016).

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Introduction

The rising level of consumption inequality and the unequal distribution of wages,

combined with labour market dualism, are dominant in an elite-dependent consumer

economy (Wilmers, 2017). Poverty, unemployment and inequality are considered to be

among the most daunting challenges in the South African economic environment

(National Minimum Wage Panel, 2016).

A relationship has been found to exist between unemployment and inequality as it

appears that an increase in unemployment tends to have a disequalising impact on

income distribution. McAuley (2019) argues that sustained economic and political

stability can only be achieved through equitable development, growth, integration,

reduction of inequality, enforcement of better social cohesion, improved health of

households and better living conditions.

The increase in unemployment and the increasing levels of wage inequality are

“alternative” results of changes in the structure of relative labour demand. An adverse

trade or technology shock may lead to a combination of lower wages in existing jobs,

loss of existing jobs and re-employment in lower-wage jobs, and loss of existing jobs

without re-employment in other jobs (Zarotiades, 2004). To the extent that

unemployment is a structural macroeconomic problem, and particularly to the extent

that it is a product of problems in macroeconomic management, it cannot be considered

simply a result of excessive wages paid to some workers. In a study by Sheng (2012),

an examination of wages and income inequality in the USA between 1941 and 2010

revealed a robust trade-off relationship between the change in income inequality and

rates of unemployment.

The differences in income inequality are most noticeable when comparing different

races, genders and especially education levels within a country. Structural changes and

changes in processes in the economy mean that education, interpersonal skills and the

ability of employees to acquire new skills become the determining factors in

remuneration levels (Jeż, 2017). Taking this into account poses specific challenges for

policymakers when examining the structure supporting the development of wage policy

within an economy. The spill-over effects of the high levels of inequality experienced

in South Africa are most noticeable in the persistently high levels of poverty and

unemployment in the country (National Minimum Wage Panel, 2016).

In a study conducted by the Development Policy Research Unit (DPRU) at the

University of Cape Town in 2008, it was mentioned that the high and persistent

unemployment rates in South Africa were a severe threat to economic and social

stability in the country. This statement sparked widespread awareness and motivated

many departments to implement their policy agendas and to act with urgency. Various

factors have contributed to the country’s rising unemployment levels; most often cited

are the structural changes that took place in the South African economy during the

previous decades (DPRU, 2008). In particular, the role of institutions had caused