Reducing Wage Inequality

This policy brief by the Institute for Economic Justice (IEJ), prepared for the Labour Caucus in the Jobs Summit Inclusive Growth working group, argues for decisive state regulation to reduce extreme wage inequality in South Africa. It proposes strengthening the Employment Equity Act to mandate wage ratios, capping executive pay, and using state procurement and investment levers to enforce wage equity.

• Wage inequality is identified as the primary driver of overall income inequality in South Africa, accounting for 90.65 percent of the total.
• The document proposes amending Section 27 of the Employment Equity Act (EEA), which currently requires reporting on income differentials but has not been enforced, to introduce regulated wage ratios.
• The IEJ suggests implementing a maximum economy-wide wage ratio between the top 5% and bottom 5% of earners, proposing an initial realistic ratio of 25:1 to be progressively reduced over 5 to 10 years.
• There is significant public support for state intervention to limit executive compensation, with an HSRC survey indicating that 75% of respondents either agree with or do not oppose legislation imposing limits on executive pay.
• The brief recommends using state levers to promote wage equity, such as making access to government incentives, state assistance via Development Finance Institutions (like the IDC), and state procurement dependent on wage equity requirements or living wage certification.
• The document suggests that retirement funds, including the Public Investment Corporation (PIC), should adopt investment policies that only qualify companies adhering to specified wage equity norms for investment.
• The brief highlights a private sector example of wage restructuring at PPC in 2013/2014, where pay cuts for 60 executives and raises for 1,000 low-paid workers reduced the pay gap from 120:1 to 40:1.

APA

Coleman, N. (2018). Reducing Wage Inequality. Institute for Economic Justice. https://iej.org.za/wp-content/uploads/2020/07/Stream-2-Policy-Brief-2-Reducing-Wage-Inequality.pdf

Chicago

Coleman, Neil. Reducing Wage Inequality. Institute for Economic Justice, 2018. https://iej.org.za/wp-content/uploads/2020/07/Stream-2-Policy-Brief-2-Reducing-Wage-Inequality.pdf.

Wikipedia

{{cite report |last1=Coleman |first1=Neil |title=Reducing Wage Inequality |publisher=Institute for Economic Justice |date=August 2018 |url=https://iej.org.za/wp-content/uploads/2020/07/Stream-2-Policy-Brief-2-Reducing-Wage-Inequality.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{coleman2018reducing, author = {Coleman, Neil}, title = {{Reducing Wage Inequality}}, institution = {Institute for Economic Justice}, year = {2018}, month = aug, url = {https://iej.org.za/wp-content/uploads/2020/07/Stream-2-Policy-Brief-2-Reducing-Wage-Inequality.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }