Collective Bargaining: Is it time for a new wage model?

Workers demand a 12% wage increase, employers offer CPI-X of 3%. Why are workers’ wage demands so high when government statistics tell us that their increased costs have hit all time low?. Jenny Grice investigates.

For the past four years, Numsa and other Cosatu affiliates have been using the CPI-X as a guide to determine what wage increases should be. The CPI-X measures how prices increase over time.

If CPI-X goes up by 6% between May 2004 and May 2005, then it should mean that if you get a wage increase of 6% for 2005/6, you should be able to live at roughly the same living standard (as long as CPI-X doesn’t increase too much over that year!). Any increase on top of that should improve your standard of living – you would be getting a ‘real wage increase’. That is why Numsa’s demand has always included a demand for CPI-X plus an improvement factor.

However, workers have started to question whether CPI-X is really measuring the price increases that they are paying. To them it seems that a CPI-X increase with an improvement factor is not improving their standard of living. And hence the demand of 12% that came out of the Numsa National Bargaining Conference earlier this year.

How is CPI-X calculated? To understand why CPI-X is causing workers problems, we need to understand what the CPI-X is and how it is calculated.

The government has a statistical department called Stats SA. Every five years it does a survey of 30 000 households across the country. It surveys different types and sizes of households from hostels, traditional dwellings to town houses and flats. It asks them what income they receive and how they spend it. From this survey it calculates what proportion of its income each household spends on a ‘shopping basket’ of goods and services.

This is what Stats SA’s CPI-X basket of goods looks like (see box below).

For example, if you are taking home R2500 per month, Stats SA says you spend 25.66% on food – that’s about R148 per week and 15,3% on transport – that’s about R88 per week on transport. It last updated this basket in 2001.

Calculate your basket compared with Stats SA’s (Note: totals might not add up because figures have been rounded off)

CPIX basket of goods

%

Weekly expenses on take home pay of R560 per week (expenses have been rounded off to the nearest Rand )

Now calculate how much you spend on this basket:

And now calculate the percentage of your income that you spend on each item.

Item x 100

Weekly pay

Food

25,66

R148

Non-alcoholic beverages

1,26

R7

Alcoholic beverages

1,7

R10

Cigarettes, tobacco etc

1,35

R8

Clothing and footwear

4,06

R23

Housing

11,57

R67

Fuel and power (eg electricity, gas, paraffin, coal etc)

4,28

R25

Furniture and equipment

3,15

R18

Other household equipment and textiles

1

R6

Household operation (eg cleaning materials, laundry/dry-cleaning etc)

5,22

R30

Medical care

7,70

R44

Transport (includes bus, taxi, train etc)

15,3

R88

Communication (ie telephone, cellphone etc)

3,19

R18

Recreation and entertainment (eg radio, tv licence, CDs, sport)

3,39

R20

Reading matter (magazines, newspapers etc)

0,40

R2

Education

3,77

R22

Personal care (soap, skin creams, toilet paper, toothpaste etc)

4,37

R25

Other (eg funeral expenses, repayment of loans, stationery, etc)

3,63

R21

Totals

100

R560 per week

But when we did a snap survey of 114 shop stewards’ transport costs in the Wits Central West region in May, this is what we found. * The average cost of transport for these shop stewards was R32 per day (R160 per week) (This excluded transport costs for other family members like their children or their spouse) * Their transport costs had increased over the past year by on average 24% * Workers were spending on average 24% of their income on transport.

Why is it that the CPI-X could be measuring workers’ costs so wrong?

Between May 2004 and May 2005, high international oil prices forced up the petrol price by 15% (since then prices have risen even higher). More than 60% of workers use taxis to get to work. The vast majority of taxis use petrol. Apartheid’s legacy of workers living far from their places of work is putting extra strain on workers’ pockets.
Trade union Solidarity says that Stats SA itself has calculated the inflation rate for administered prices (school fees, water, electricity, petrol prices) at 12,3% over the past year. Workers have no choice but to pay these increased fees – they cannot find another substitute for water nor is it easy to find an alternative to taking a taxi because of a lack of public transport.
Solidarity has also pointed out that the weights in the CPI-X basket have not been adjusted since 2001. Since petrol and other administered prices that consumers do not have a choice over paying have been increasing at rates way beyond the inflation rate since 2001, it means that the proportion of income that workers are spending on these items is way above what Stats SA says it is.
The CPI-X basket is an average of all households from the very rich to the very poor, from one pensioner to a household of 10. It does not show up the vast differences in expenditure patterns between these diverse households.

And while trade unions haggle with bosses over what is the real figure for price increases, statistics reveal what workers are feeling:

Between 1993 and 2004, workers’ share in the national income declined from 51% to 45%. (Obviously this was helped along by the high unemployment rate!)
Companies’ share of profits increased from 26% to 30% of the national income.

Questions for discussion:

Does the CPI-X basket of goods and services reflect the spending patterns in your household? Calculate your own basket.
How much extra are you paying on transport this year compared to last year? Are you paying less or more than shop stewards in the Wits Centra West region?
What cost has increased the most over the last year?
What do you think of using CPI-X as a basis for our demand
Do your own calculation: If you want to calculate the percentage increase in your transport costs since last year, do this calculation: Transport cost per week August 2004 R120 Transport cost per week August 2005 R145 Increase in transport cost R145 – R120 = R25

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