An in depth Analysis of BBEEE in RSA | #eBizInsights | Bryden Morton

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Huge salary discrepancies between races and genders for the same (or substantially the same) job (see Equal Pay for Work of Equal Value definitions on www.21century.co.za) are a common subject in social and published media today.

This emotive subject is driven by the history of South Africa that is tainted by inequality and injustice. Simply put, it is a history of a one sided economy.
Recently, there have been a number of articles addressing the ‘Elephant in the Room’ – the income disparities between race and gender groups.

BizInsight-on-BizRadio-600x250Bryden Morton in conversation with eBizRadio’s Nick Snow

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In order to analyse this messy subject, we have examined the racial salary gap holistically and across the entire formally employed South African labour force.
This article will make use of a database of approximately 300 000 rows of data from the formal employment market in South Africa. We have performed a two-tier analysis of income disparities, both within and across race and gender groups.

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The median (50% of people earn more than this salary and 50% earn less) of each race and gender group by grade (eg: A1, A2 ,A3) has been calculated and the resulting ratios between race and gender groups have been averaged within each broadband (eg: A1, A2, A3 were averaged into A band) to obtain a broad based view of income disparities across each occupational level.

Table 1 uses this methodology to obtain the average difference by grade of each occupational level.

Table 1:

Occupational Level Broad Band Paterson Black / White Coloured / White Indian / White
Unskilled A Band 77% 67% 68%
Semi-Skilled B Band 69% 79% 83%
Skilled Technical / Supervisory C Band 72% 83% 85%
Professional and Middle Management D Band 99% 95% 101%
Senior Management E Band 119% 121% 119%
Top Management / Executives F Band 96% 119% 91%
Average   89% 94% 91 %

Table 1 produces some rather interesting results.

  • In the A, B and C Paterson bands we see the most pronounced instances of white people earning more than their fellow race groups – for example, coloured people within the A band earned (on average) 67% of what white people earned.
  • There is a normalisation of median salaries in the D band before the statistics change.
  • Within the E band it can be seen that the white race group earns below the black, coloured and indian race groups.
  • A normalisation once again takes place at the F band and the salaries are considered to be ‘equal’ in remuneration tolerances.

Employment Equity legislation seeks to not only address ownership but representation and skills transfer within the economy.
If it is managed correctly, this will benefit all South Africans, ensuring that a skilled, representative workforce is available to lead the economy into the future. Other legislation which seeks to address disparities between races and genders is the Equal Pay for Work of Equal Value legislation.
This legislation aims to eradicate differences between workers within the same organisation by ensuring that salary packages and benefits between individuals that perform substantially the same work are equitable.logo-for-slider-section-JPEG

Extending the discussion on racial disparities to gender disparities yields the results in Table 2.

Table 2:

Occupational Level Broad Band Paterson Males / Females
Unskilled A Band 106%
Semi-Skilled B Band 97%
Skilled Technical / Supervisory C Band 129%
Professional and Middle Management D Band 101%
Senior Management E Band 136%
Top Management / Executives F Band 121%
Average 115 %

 

  • Males earn more than females at most of the broadband Paterson grades (eg: Males earn 6% more than females within the A band).
  • There is a sizable difference between the median salaries of males and females within the C Band.
  • D band consists of professional and specialists and equity has been achieved at this level.
  • One trend of particular interest is the large gap between men and women at the E and F band level (Senior Management and Executive Level).

Analysing income disparities between the various races and genders is only one part of performing a gender and race analysis of income disparities within an economy. The distribution of pay across these races and genders is equally important.

The distribution of pay is an indication of how evenly the pay of individuals within each group is spread across the sample. Are there many individuals that earn very little and a few that earn disproportionately high salaries compared to the rest of the individuals in the group (which would yield a large Gini coefficient) or is it fairly evenly distributed (which would yield a low Gini Coefficient)?

The Gini Coefficient is a measure of income distribution across a specified group. A Gini Coefficient of 0 indicates absolute equality (everyone earning exactly the same) whereas a figure of 1 indicates absolute inequality (one person earning all income).

It should be noted that only employed individuals are considered within this analysis (as payroll information has been used) and as a result it is not a reflection of all racial and gender disparity across the whole of South Africa.logo-for-slider-section-JPEG

Table 3 indicates the Gini Coefficient of each race group and gender.

Table 3:

Group Gini Coefficient
Black 0.39
Coloured 0.42
Indian 0.38
White 0.36
Female 0.39
Male 0.38

 

These figures indicate that although there are slight fluctuations between the various groups, there appears to be a fairly consistent distribution of income within these groups. This means that, when analysing the employed population, the inequality is across groups rather than within groups.

The evidence presented indicates that particularly at the A, B and C band level, equalisation in salaries between the races needs to take place.

Similarly, the salaries of women need to be brought more in line with those of men at C, E and F band.

These changes should be done over time, using a careful, methodical approach. Simply raising salaries above inflation without an accompanying increase in productivity leads to increases in real wages. Although increases in real wages are desirable for individuals, they can have an adverse effect on the economy as they drive up the unit labour cost (cost of production) and can ultimately lead to job losses.

This means that equality needs to be reached through stagnation of increases rather than accelerated increases in a stagnant economy. Equalisation of salaries between individuals doing the same level of work should be the end goal, but if we wish to avert job losses and boost the economy it is vital that we use a carefully considered, methodical approach.

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eBizRadio is a live multi- platformed social media service providing an online forum to the business community for holding conversations on the key issues related to specific businesses as well as availing a space for cross-business collaboration in response to key issues affecting the world of business. The place to go if you want to know about business and lifestyle

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