Minimum wage causes problems

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Minimum wage causes problems

I always read the labour articles in Business Report with interest and found the views of Neil Coleman (Business Report, February 7 and 14) on a national minimum wage particularly thought-provoking.

He made a compelling case for a national minimum wage but I believe he fell short on two points.

As a farmer I have experienced first hand the impact of a sudden increase in the minimum wage. I would challenge Coleman’s suggestion that because farmers could absorb the drastic increases last year they are obviously in a position to afford another round of drastic wage increases.

What he fails to appreciate is that the minimum wage was set at R105 a day because independent research indicated that this was the limit of what the industry could afford without widespread bankruptcy and catastrophic job losses, so while the first round of drastic increases did not destroy labour intensive farming another round certainly could.

Coleman further fails to appreciate the nature of farming. Farms are not factories that can immediately cut output and shed jobs when wages rise too steeply. Farmers will, however, adapt over time to reduce labour and stay in business.

As the real wage increases so the breakeven point for mechanisation changes. Fifteen years ago all wine grapes were picked by hand; today virtually 100 percent is done by machine. Similarly, onion lifting machines are now viable and will be a common sight in years to come.

Unfortunately, people like Coleman will choose not to make the connection between a drastically increased minimum wage in 2013 and reduced employment in agriculture by 2018.

By far the biggest contradiction, though, came at the end of his two-piece article. Coleman began by arguing that a national minimum wage was needed to save the working class from poverty.

Yet later he argued that domestic workers would need to be excluded from the national minimum to prevent the national wage being set too low. By implication, he acknowledged that if domestic workers were paid what Cosatu considered a decent wage, there would be widespread job losses in the industry.

Is employing a domestic servant not the epitome of wealth and so would excluding domestic workers not be the worst form of “allowing the wealthy to benefit from slave wages”? Coleman clearly believes that in the case of domestic workers a low paying job is better than no job at all. How is this different for any other sector?

Steven Versfeld

Ceres

Commission should stop Neotel takeover

Surely the Competition Commission should convene an urgent enquiry into Vodacom’s takeover of Neotel?

Neotel was expected to have the positive effect of reducing the exorbitant telecommunications rates in South Africa by providing much-needed competition to the fixed-line monopoly of Telkom.

Unfortunately those hopes have been dashed with the newcomer now in the clutches of the giant Vodacom corporation, which has always been characterised by its monopolistic hyperpricing in the cellphone sector.

When Pick n Pay made a bid to purchase the Fruit & Veg City fresh food chain, the Competition Commission, thank goodness, blocked that deal.

Instead of being absorbed into and ultimately buried in the belly of the Pick n Pay giant, today that highly innovative, fast-growing chain has greatly extended its market share, and now includes the exceptional culinary fare of the Food Lover’s Market, thus providing some really serious competition in service levels and pricing to the big four food chains.

The Competition Commission must ensure greater competition in South African commercial markets, which are invariably dominated by a handful of massive anti-competitive players, ensuring that our prices are among the highest in the world.

The more the greedy giant conglomerates are allowed to gobble up their competition, the higher prices soar.

Farouk Laher

Mayfair

There is urgent need to nourish grey matter

In his article “Liberalism remains a foreign concept in the Arab world” (May 30), Ronald Meinardus, the regional director of the Friedrich Naumann Foundation for Liberty, makes a pertinent and valuable point of vital relevance to South Africa too.

Having tried to express the same truth and provide educational remedy in The Visible Hand for a Firm Grip on Accountability, Benchmarking and Control (ISBN 978-0-620-43900-8), which is now being used by the attorney-general’s department to improve levels of accountability, I was prompted by Meinardus’s logic to thank you for publishing his insight.

He writes:

“What they are not able or willing to appreciate is that it is not the market system that has failed. The main reason for the absent ‘trickle-down’ of wealth is a lack of the rule of law and accountability. These are pre-conditions for markets to set free their beneficial power.”

Coincidentally, you published on the same page Ayanda Mduli’s article “Investment in education could have averted strike”, in which he makes the same point that the lack of skills and non-acceptance of hard economic principles lies at the root of so many disastrous conflicts in labour and politics.

It must be clear to educated minds that there is a point where the costs of an enterprise will eliminate sustainability with consequences for employment, trickle-down benefits and economic well-being. This is the point that has escaped unions and members and has allowed mistrust to result in such self-inflicted hardship on a serious scale in mining and threatens the same disasters elsewhere.

Once again the message is the sooner we get started with “nourishing the grey matter” (as statistician-general Pali Lehohla put it) the better for South Africa and all its people.

Dr Gavin Barnett

Somerset West


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