What we should be doing is getting more of SA's 9 million unemployed to work, writes Jasson Urbach.
The expert advisory committee appointed by Nedlac (the National Economic Development and Labour Council) has proposed a national minimum wage of R3 500 to combat South Africa’s high levels of poverty and inequality.
If the goal is to reduce poverty and inequality, do not expect to see much improvement.
In fact, given the high and rising rate of unemployment, inequality and poverty are more likely to persist.
Nedlac is comprised of big business, big unions and big government.
Big businesses do not typically employ people with low levels of skills without work experience.
The unskilled and inexperienced would ordinarily find jobs in small, medium and micro enterprises (SMMEs).
They provide that critical first rung on the jobs ladder.
A minimum wage makes it illegal for an SMME to risk employing a young and inexperienced person at a wage rate that reflects their skill level.
It's easy to lose sight of the role of trade unions, which protect members’ interests by raising the wages of their members relative to equally productive non-unionised workers.
Their incentive is to block potential competition mainly from low-skilled individuals who are willing to work for lower wages rather than be unemployed. Trade unions work to secure the wages of those who have jobs.
What trade unions are not interested in are the unemployed or that income inequality will increase as some individuals will continue earning money while others are priced out of the market or prevented from entering it at the lower end.
As Professor Jeremy Seekings from UCT states: “The question is not whether wage increases destroy jobs, but how many jobs are destroyed, and how to weigh up the costs of the job destruction with the benefits of higher wages.”
According to Carmen Louw, spokesperson for the Women on Farms Project, more than 73 000 jobs were lost in the Western Cape farm sector after the statutory minimum wage was raised by more than 50 percent in the wake of the violent farm worker strikes of 2012. This is a cruel and inhumane experiment to play on the most vulnerable members of society.
The government has an incentive to pursue populist policies to remain in power. Last week, we were told Cosatu will be backing ex-trade unionist-turned-presidential hopeful and head of Nedlac, Cyril Ramaphosa, to succeed President Jacob Zuma as the president of the ANC at its party conference in December next year.
No representatives from SMMEs serve on Nedlac, and there is no voice representing the unemployed. Not surprisingly, the task of the panel appointed by Nedlac was not to determine whether a national minimum wage should be introduced, but, rather, at what level.
Inequality and poverty persist because South Africa has more than 9 million unemployed people.
You do not need to be an expert in economics to detect that something is seriously wrong with the typical explanations provided of how the introduction of a national minimum wage will miraculously solve South Africa’s poverty, inequality and unemployment problems.
Wage hikes that follow productivity increases should be welcomed by all, but those that are increased by political diktat should be rejected.
The idea that wages can simply be forced up by government decree misdiagnoses the severe underlying problems of the desperate skills shortages in this country.
Forcing up the wages of the working poor will not solve the problem of, for example, South Africa’s failed education system.
This country is one of the world’s least educated nations, where less than 40 percent of the country’s working aged population has a matric certificate and regularly ranks among the worst performers in maths and science.
This costly, additional layer of regulation will only worsen the country’s unemployment problem.
A legislated national minimum wage will have a disparately negative effect on the employment prospects of the vast majority of new entrants and the unemployed who are typically young black people.
* Jasson Urbach is a director of the Free Market Foundation
** The views expressed here are not necessarily those of Independent Media.
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