SA’s minimum wage plans will hurt unemployed – IRR

1 year ago written by

With more than 50% of South Africans between 20 and 30 unemployed, not in education or training, the proposed new minimum wage of R3,500 per month will make it much more difficult for young people to find work. Nor will the minimum wage do much to improve the circumstances of existing workers.

Think tank the Institute for Race Relations (IRR) says in its latest analyses of plans to raise South Africa’s minimum wage to R3,500 per month that the proposal will only further limit access to the labour market for unemployed people and not really help those who are already on small salaries.   

I recent study by the IRR revealed that 50% of people in South Africa aged between 20 and 30 years old were not in employment, education, or training. For these people of working age without a university education, the labour market absorption rate is below 50%, which is far off emerging market norms. 

The IRR says in a statement the proposed new minimum wage will “make it much more difficult for these people to ever find work. It will also serve as a new obstacle to the creation of small enterprises”. 

According to the IRR minimum wages can be used by large established companies as market protection mechanisms with which to undermine the emergence of small competitors.

At the same time the proposed minimum, especially when sectoral exemptions are taken into account, will do very little to improve the socio-economic circumstances of existing workers. 

“The minimum has also been set at such a ‘low’ level that it will further open the business community, the ruling party, and government to the accusation that they are promoting the exploitation of the poor. We expect that it will become a new rallying point for critics of the government and the business community. 

“On balance, it looks like the drafters of the new minimum wage have simply been playing politics, with no regard for the interests of the economy or the unemployed. That the Deputy President, Mr Cyril Ramaphosa, has championed what is effectively a charade, when real solutions to the problems of poverty and unemployment are needed, calls into doubt his leadership temperament.”

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