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Media Centre  |  Articles

A response to Mike Schussler: Busting Schussler`s myths, exposing white excess by Comrade Chris Malikane

16 May 2012

In the Business Day and Politicsweb (2012/05/07) “Wages of the unskilled too high”, Mike Schüssler launched the first salvo against the employed section of the working class, to be followed later by the siege from the DA on COSATU Headquarters. The underlying assertion among Schüssler, the DA and some policymakers is that workers in South Africa are way too expensive. They are resolute that if they got their way to lower the wage, there would be some resolution to the legendary structural unemployment. It is increasingly becoming clear to them that the continuing colonial structure of the economy and the extremely concentrated power relations that define it, are no longer the main causes of South Africa’s socio-economic catastrophes. They have now discovered the silver bullet to the problem: cut wages!

Schüssler has emerged as the ideological representative of this view. Newspapers ran headlines that were inspired by Schüssler’s work. However, Schüssler’s work can be refuted at three levels: the abuse of statistics, the inaccuracy of his information, and his misconception of purchasing power parity.

In relation to the abuse of statistics, Schüssler’s work is replete with the use of averages in the context where these are inappropriate. For example, he claims that the average worker gets about R13 200 per month and goes on to assert that generally, working South Africans have relatively good standards. This is an abuse of statistics. In the context where the earnings distribution is so heavily skewed in favour of white people in particular, the use of an average certainly produces an illusory picture of reality.

Rather the appropriate statistic to use is the median, which gives the level of earnings below which and above which half of the population lies. A publication by Statistics South Africa called “The Monthly Earnings of South Africans (2010)”, reports that the median earning of South Africans is R2800. To get the extent of earnings distribution in this country, half of working Africans earn less than R2 167 whereas almost 95% of white people earn more than R2000. In fact Schüssler’s numbers talk more about white South Africans, half of whom earn more than R9 500, than the majority who are African. Indeed, being white and working in South Africa should feel good.

To be more precise, and based on data from the 2007 Community Survey, white South Africans earned on average R14 206 in 2007. This is closer to Schüssler’s average earnings of his South Africans. These are his “ordinary” workers whose salaries are “out of sync” and which the South African economy “cannot afford”.

Schüssler’s numbers are also highly inaccurate. He claims that he got them from Statistics South Africa’s Quarterly Survey on Employment and Earnings. However, calculations based on those numbers suggest that on average, South Africans earned R3 336 in the fourth quarter of 2010. Schüssler may complain that this includes informal workers, but the median earning for formal workers is R3 683, which is really not that different from R3 336. This is far less than Schüssler’s R13 200. Thus, even based on the inappropriate average earnings, Schüssler’s numbers are “out of sync” and incredulous.

Once the base numbers of his study are shown to be extremely distorted as a picture of South Africa’s reality, it is then easy to dispense with his purchasing power parity arguments. Purchasing power parity basically tells us how many Rands we need to buy the same basket of goods and services that a dollar can buy. Schüssler uses this exchange rate in order to compare the earnings of South Africans and those of other countries. The OECD reported the purchasing power parity exchange rate to be R/$5.25 in 2010. This means that to purchase what $1 can buy, a South African needs R5.25. We can then convert the Rand earnings into dollar earnings and compare them with the rest of the world.

The R2 167 that was earned by Africans becomes $413, the median earning of South Africans is $533, the median earning of white people is $1 809 and the average earning of white people is $2 706. Once these conversions are made, one must then picture a South African, with these dollar earnings, living in the US. To say that $533 or $413 would be more than sufficient for a person to survive in the US is plain ridiculous.

To show the level of ridiculousness the median earnings in the US are $3 024. This is far higher than the purchasing-power-parity converted South African earnings of $533. In other words, faced with the same basket of goods and services the US worker will by 6 baskets compared to the South African. But the situation is different when we consider Schüssler’s “ordinary” South Africans, the white people. Their median earnings are $1 806. For every one basket of goods and services that they buy, the median American worker buys 1.67 times of it. In other words a median American worker is 67% better than a median white South African worker, but is 600% better than a median South African worker. The poor African from South Africa, trapped in this world of consumption and suffering from extreme exploitation and racial discrimination, can only afford 14% of what the Americans and 23% of what the white South Africans are eating!

But Mr. Schüssler may complain that he was comparing South Africa with the OECD and not with the US. We pick just one country that, according to his calculations, earns less than South Africa. Let us take Mexico. According to OECD statistics, which Schüssler also uses, Mexico’s purchasing power parity earnings in 2009 were $1 116 a month. Although this is an average for Mexico, we can compare it with the average for South Africa. With an average of R3 336, which we convert using the PPP exchange rate, we arrive at $635. But of course the result is different when it comes to the “ordinary” and “unaffordable” South Africans, who earn on average $2 706, which is 142% more than what the Mexicans earn.

There is this other issue that relates to the income gap in South Africa. Schüssler claims that unskilled employees are overpaid in South Africa and that management and artisans are underpaid. Once again this is a gross misrepresentation of the reality. Based on Statistics South Africa’s numbers that are contained in its “The Earnings of South Africans”, we calculate the average earning of the unskilled worker to be R1 264. The median earnings of a manager are R10 500. This amounts to $241 for the unskilled and $2 000 for the managers. In the US the minimum wage earnings for an 8-hour working day is $1 160, a janitor or cleaner earns a median of $1 956 a month, the median monthly earnings of a manager in the US are $4 948 a month. Once again, these numbers cast serious doubt on Schüssler’s work.

What about earnings inequality? Schüssler puts up a diagram that shows “working income inequality” to be less than 6, that is to say, the top 10% earners earn less than 6 times what the bottom 10% earners get. This is simply incorrect. The Statistics SA publication on Monthly Earnings of South Africans clearly reports that the top 10% earners get on average R12 000 while the bottom 10% get an average of R845. That is to say, among those who work, the top 10% earners take 14 times what the bottom 10% take. Once more this is a far cry from Schussler’s numbers. Alternative numbers from the UN Human Development Report (2007/08), which look at general inequality not just among those that are working, says that the top 10% took 33 times the bottom 10% in South Africa in 2000. In the US, the top 10% took 15 times what the bottom 10% got. Schüssler wants us to believe that this picture is no longer true. Inequality is now worse in the US than in South Africa.

Let us close off with Schüssler’s proposal about halving entry level wages. It is a joke! More than 60% of the unemployed have no secondary education and 72% are below the age of 34. People without secondary education and are below 34 years earn less than R1 250. According to Schüssler this is way too expensive for South African business. The Human Development Report (2010) says that 44% of workers in South Africa live on less than R10 a day. Schüssler thinks that this is abnormally high, because it has been so, and continues to be so. He narrowly reduces the massive (and historical) problem of unemployment to this “extremely high” wage. Now that he has elevated the wage as major cause of unemployment among the unskilled, may he then propose the wage that will deliver full employment?

Let us be fair to Schussler though. Many of his claims are relevant to the white workforce of South Africa: overpaid, unaffordable and consequently, must have its wages halved!

Christopher Malikane is the Associate Professor of Economics at Wits University and is a Policy Advisor to COSATU