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The rationality of public sector pay — simultaneously too high and not high enough (Part 1)

The rationality of public sector pay — simultaneously too high and not high enough (Part 1)
To earn what the CEO of Woolworths earns in a single day, the lowest-paid worker in the company has to work for 1,308 days, or three-and-a-half years. This is the highest pay gap of nine JSE-listed wholesale and retail companies analysed by Just Share, a non-profit shareholder activism organisation. The wholesale and retail sector is SA’s second-largest employer after government. More than 346,000 people are employed by the nine companies in the survey, which have a total reported revenue of R721.4-billion. Woolworths and Shoprite are the only two companies to make their minimum wage public. For the other companies, the salaries of the lowest-paid workers were based on 2023 or 2024’s minimum wage. Note: CEO remuneration includes incentives and other benefits. Credit: The Outlier
Jeff Rudin
By Jeff Rudin
22 Oct 2024
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South Africa has the third-largest public sector wage bill as a proportion of GDP in the world, which at about 10.5% of GDP greatly exceeds that of countries like the US, UK, Australia and Japan. But this masks the fact that there are 139,811 workers on the bottom three levels earning between R123,741 and R159,879 a year in the world’s most unequal society. Part 1 in a three-part series.

“Truth,” write Branko Brkic and Maria Ressa, in a recent Daily Maverick article, “is being relativised daily; what once was a common understanding of material reality, is today often supplanted by fact-free interpretation. In many instances, the very form of the word Truth carries the meaning of Lie.”

Reason, however, precludes the relativism of truth, which closes off critical analysis, an issue to which we will return in Part 3. For now, I’m suggesting most of us seek to behave rationally and to abide by rationally determined precepts, policies, laws and morality.

Confounding the issue, however, is that different people have what for them are equally rationally determined precepts, policies, laws, moralities and behaviours. We must here differentiate between thoughts more or less exclusive to a particular individual and those shared in common with a significant number of others.

Taken on his own, Benjamin Netanyahu or his Hamas equivalent might easily be taken as mad, depending on where you stand. However, each of them has many followers, which makes madness a simplistic answer. Each group thinks that they, unlike their irrational adversaries, are acting perfectly rationally. Group rationality is our only concern here. Why and how there should be competing rationalities is for later.

Recognition of there being more than one rationality, however, does not mean that none of them are open to critical analysis.

This article seeks to show that the rationality of those who hold excessive public sector wages accountable for much of our economic woes is a rationality heavily dependent on selective perceptions. Besides other things, these selective perceptions determine priorities. Denials of some objective realities are central to both their perceptions and priorities.

The rationality of excessive public pay


There are many more economists who agree with this rationality than those who work within an alternative rationality. I use one particular economist from the mainstream only as an exemplar of how most economists see the world.

Business Maverick’s award-winning journalist Ray Mahlaka recently wrote an article titled “In Defence of the Government Ahead of Public Sector Pay Negotiations”. The article was considered so important that Daily Maverick 168 republished it as “Government Must Stand Firm During Public Sector Wage Talks” on 14 September 2024.

The article begins: “Public servants are already well remunerated. Agreeing to their demand for a 12% pay rise in 2025 will further undermine public finances and any reform efforts.”

In 2024, he continues, the government’s public sector pay plan “gobbles up 30% of the government’s total expenditure”, for “just 2% of the population” (his emphasis).

He follows this up with more “shocking” statistics. The number of public servants earning more than R1-million per year has increased by 280% from a decade ago. There are 37,800 public servants in national and provincial governments earning above R1-million per year.

He blames the government for public sector pay getting out of control. It did so by settling on “above-inflation pay increases for more than a decade” (his emphasis), making public servants and trade unions accustomed to “this largesse”. The rapid growth of employment benefits, especially medical aid and housing allowance, compounds the problem.

Given all this, he argues, it is time for public sector trade unions to “embrace a compromise as their members have been remunerated handsomely” (his emphasis).

Noting that “some workers, in the private sector, have gone without pay increases for years” or that “their take-home pay has been adjusted at or even below inflation” (his emphasis), he attributes implicit irrationality to the trade unions for not recognising “economic conditions are no longer favourable and supportive of public finances”. The pay expectations of the unions should accordingly “reflect this new reality”.

South Africa’s Constitutional Court has the same rational approach to public sector trade unions as Ray Mahlaka. Only, it is less constrained in its condemnations. I draw here from a February 2022 Business Day article by Luyolo Mkentane, “Judge Criticises Unions in Win For Government Over Wage Deal”.

The case involved public sector trade unions contending that the government was reneging on a negotiated wage agreement with its employees. In what Mkentane described as a “hard-hitting” unanimous judgment, Constitutional Court Acting Justice Mjabuliseni Isaac Madondo lashed out at public-service workers, accusing them of having been “unjustifiably enriched” by a collective agreement the unions had reached with the government in 2018.

The acting justice dismissed the appeal, saying that the workers had already enjoyed “illicit salary increases” and that if the agreement were to be implemented in full it would “precipitate a fiscal crisis” that would both plunge the government into “substantial excess debt” and detract from the state’s ability to alleviate the plight of the poorest of the poor.

“In the present economic and health circumstances facing the country”, the Judge concluded, “it would not be just and equitable to require the state to make good the illicit salary increases it promised at the expense of far more pressing needs affecting the country.”

Selectivity in the service of rationality


Foremost among abundant examples of the considerable overlap between all the issues covered selectively are:

  1. “Economics is a political argument”: This aphorism by Cambridge economist, Ha-Joon Chang [Economics: The User’s Guide (2014:451)] is the premise of much of what follows. Regardless of who decides the Constitutional Court’s “pressing needs affecting the country”, or Mahlaka’s concern about “what the government can afford”, such issues are inherently political — i.e. substantially selective — determinations.

  2. Unaffordable public sector pay: Most economists and politicians have long agreed that public servants are seriously overpaid, and that the economy suffers from this anomaly. Many, like Lyse Comins, in her article “Public Service Wage Bill Almost Doubles to R721 Billion”, now use the information provided by the Minister of Public Service and Administration, Noxolo Kiviet, in April 2024 as the basis for their alarm.


Economists, politicians and like-minded researchers and business groups have additional concerns. Business Unity SA (Busa), for instance, having pointed out as early as 2019 that average pay for public servants in 46 countries was 9.4% of GDP in 2017 compared with South Africa’s 15%, warned that “the government’s precarious fiscal position — in part driven by unaffordable levels of public servant pay — threatens the wider economy”.

Five years later, the Centre for Risk Analysis found that South Africa has the third-largest public sector wage bill as a proportion of GDP in the world and that our “wage bill as a share of GDP (about 10.5%) towers over economic powerhouses such as the United States, United Kingdom, Australia and Japan”.

Selectively unseen by those issuing such warnings are the bottom three salary levels in the world’s most unequal society. There are 139,811 Level 1-3 workers earning between an average of R123,741 and R159,879 a year for a combined annual total of R20.2-billion.

At the top end of the scale – Levels 12-16 – average annual salaries range from R1,080,681 to R2,158,533 for a combined total of R45.3-billion for just 37,839 staff. Also selectively not mentioned is that trade union involvement in pay negotiations cover Levels 1-12 only. Trade unions have nothing to do with Levels 13-16, to say nothing of Levels 17-22, which are singularly missing from the critiques of senior management pay.

Among the unseen are others, well below the public sector’s Level 1, who are part of the government’s 20-year-old Expanded Public Works Programme. The programme claims to provide poverty and income relief through temporary work for the unemployed to carry out socially useful activities.

Expanded Public Works Programme workers don’t even figure in the public service salary bands. Programme workers are now paid at national minimum wage rates. This wasn’t the case in 2019 when Expanded Public Works Programme workers were paid substantially below the just introduced (national minimum wage) – R12/hour for programme workers when the national minimum wage was R22/h in 2021. Today, this is R27.58 per hour, or R5,049.76 per month based on a 40-hour work week.

While the government itself recognises that this is not a living wage, the law nonetheless allows a discount for employers who can’t afford even that poverty wage. The discounted wage is R4,543.44. Thanks to the “Sustainability Initiative of South Africa”, farmers are allowed to employ Expanded Public Works Programme workers. It might be argued that this is at least better than under apartheid when prisoners provided virtually free labour for potato farmers (Ruth First, Exposure! The Farm Labour Scandal, 1959.)

Phase 4 (2019/20-2023/24), of the Expanded Public Works Programme has cumulatively created more than 4.5 million work opportunities against the target of five million work opportunities for the period ending March 2024.

Returning to the Public Sector Salary Levels, Ray Mahlaka attached particular importance to South African teachers earning “nearly 50% more than the Organisation for Economic Co-operation and Development average”. Indeed, he was so incensed by this that he put the statement in bold.

According to the Department of Basic Education’s teachers’ salary report of mid-2024, annual salaries range from R154,671 to R1.209-million. BusinessTech, however, informs us that the top salary can reach up to a maximum of R1.6-million when considering inclusive packages. The average annual salary for a government teacher is R210,000, or R17,500 per month. A teacher with a four-year university education degree has a salary of about R333,624 – R23,168 per month – for their first year of employment. These latter two are hardly princely amounts.

For princely amounts one has to move to another group about whom those attacking exorbitant public sector pay selectively don’t seem to see, although they are in plain sight, in the private sector. Indeed, such is the power of the selectivity that Ray Mahlaka does indeed see some of them — but only for purposes of his own rationality. With his own emphasis, he writes in bold that: “In the private sector, some workers have gone without pay increases for years, or their take-home pay has been adjusted at or even below inflation.”

Having opened the door to the private sector, let’s look at what he evidently doesn’t see. Thanks to Daily Maverick’s Georgina Crouth, we know about the remuneration of CEOs in South Africa’s important retail sector, which contributes about 20% to GDP, and employs about 17% of the country’s workforce, making it the second-largest employer in South Africa after the government.

Her article is thus highly relevant, besides being just the most recent of many on CEO pay in South Africa. She informs us that CEOs in the sector earn on average 597 times more than the lowest-paid workers in their companies. This means that the average lowest-paid worker would need to work for 21 months to earn what their average CEO earns in a single day.

Woolworths pays its top executive the best in the industry – a total annual package of R122,468,000 compared with the lowest-paid staff member, who earns R93,600. That’s a vertical pay gap of 1,308, despite Woolworth’s minimum wage being 57% higher than the sectoral-determined annual minimum wage.

To earn what the CEO of Woolworths earns in a single day, the lowest-paid worker in the company has to work for 1,308 days, or three-and-a-half years. This is the highest pay gap of nine JSE-listed wholesale and retail companies analysed by Just Share, a non-profit shareholder activism organisation. (Graphic: The Outlier)



Crouth was reporting on research by Just Share. Her article was published on 15 September 2024; Mahlaka’s was on 10 September. Just Share’s report gives September 2024 as the date of publication but without giving the actual day, so it could be said that Mahlaka couldn’t have been aware of it.

However, Just Share’s 2023 Report on the sector has been available since June last year. Its 2023 Report essentially merely updates the numbers. It additionally reminds us of the King IV Report on Corporate Governance, the bible on the subject.

Its remuneration policy includes “provision for… arrangements towards ensuring that the remuneration of executive management is fair and responsible in the context of overall employee remuneration in the organisation”.

But these omissions are not Mahlaka’s only surprise. His other one is what he does acknowledge, albeit an acknowledgement that undermines his article attacking all public workers for endangering the economy by their unwarranted “handsome remuneration”.

“Surprisingly,” he continues — but without any mention of the Constitutional Court’s rebuke of, and adverse decision against, the lower levels of the public sector salary levels — “the government has been able to limit growth to the remuneration bill. Over the past few years, it has implemented a pay freeze and if increases have been granted, they have been kept close to the inflation rate or a few percentage points above. It should continue on this path of holding the line.”

This is far from being his – and others’ – only inconsistency – as we’ll see in Part 2 of this article. DM

This article is published jointly with the journal Amandla.

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