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Minimum wage a ‘blunt tool’

Economy

Johannesburg - There is conclusive evidence suggesting that the implementation of a National Minimum Wage in South Africa could have a positive impact on inequality and poverty.

Researchers and experts attending a symposium on the subject at Wits on Tuesday said studies conducted in countries, which had already effected a minimum wage, showed there were more positives than negative.

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File picture: Waldo Swiegers, Bloomberg

Alan Manning from the London School of Economics said there was strong evidence that higher levels of minimum wages were associated with lower levels of wage inequality. He, however, warned while effective, the system was a blunt instrument for addressing household poverty.

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“It has to be used in conjunction with a set of other policies, such as welfare support for those out of work and in-work benefits for those in low paid work,” explained Manning.

The impact of the national minimum wage in relation to poverty and inequality was also dependent on the agreed amounts being neither too high or too low.

The International Labour Organisation’s Uma Rani said countries considering the wage system had to ensure a minimum wage which offers real benefits to low paid workers, while avoiding unnecessary risks to enterprises and jobs.

However, international evidence presented by most experts had shown that there had been little or no effect to employment in countries such as the United States, the United Kingdom and some Latin American countries.

“If the minimum wage is set at a low level, it may be ineffective in ensuring a minimum living income to workers and their families. If the minimum wage is too high or raised unexpectedly, then it can trigger price inflation, hurt employment and lead to widespread non-compliance,” Rani said.

It was also critical for South Africa to consider its internal challenges before deciding on a minimum wage as this could make a notable difference to how well received the system would be.

Challenges such as a single worker supporting a family of 10 people and the fact that the majority of the country’s citizens lived in poverty had to be taken into account, added Social Development deputy director general, Wiseman Magasela.

Labour Bureau

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