This article was first published by Business Brief on 18 March 2024
Raising the minimum wage may seem like a way to help alleviate the plight of working South Africans, but all it really accomplishes is pricing more and more people out of the job market.
The 2024/25 financial year will see an 8.5% rise in the minimum wage. Effective 1 March, the minimum wage will rise from R25.42/hour to R27.58/hour. Alongside inflation, rising cost of living and the fact that South Africans earn quite little compared to other countries, this may seem like we’re going in the right direction. But raising the minimum wage does not actually increase wealth.
Rather, a mandated increase in wages causes a general rise in costs, which mitigates the increase to begin with, while also ensuring that employers can afford to employ fewer and fewer workers.
With South Africa’s official unemployment rate at 32.79% in 2024, we should be focusing on helping as many people get jobs as possible. A rise in the minimum wage does not benefit people who earn nothing. And we must not be blinded by our privilege that a small wage would mean less to them than no wage at all.
A minimum wage is a privilege of a society which does not have disastrously high unemployment and endemic skills shortages. We should not be legislating people into poverty because they do not have the skill or acumen to produce value equal to the mandated minimum wage.
Rather, we should be allowing job seekers to negotiate one-on-one with their potential employers. It’s their right as human beings to work for what they are willing to accept, and what their employer is able to pay them.
Why is it that volunteers and unpaid interns are allowed to work for free, but a poor individual is not allowed to work for R1 less than the minimum wage? Dictating agreements between private individuals should not be interfered with by the government.
Instead of micromanaging businesses and people just trying to get into the job market, the government should be focusing on addressing actual, violent crimes. Not wasting resources going after employers and employees who dare to set a market-rate for their labour.
South Africa shouldn’t be raising the minimum wage. Rather, it should be abolishing it. Allow all job seekers to enter into voluntary agreements with their employees. This will not lead to a race to the bottom.
Unions exist already to ensure that their members are paid far beyond the minimum wage. And people are still rational human beings that will demand a rate that they feel is proportionate to their time and labour.
Abolishing the minimum wage would allow businesses to take a risk on young job seekers, giving them vital job experience and a start to climb the economic ladder. It would allow unskilled workers to earn anything at all, rather than businesses being unable to justify paying them an inflated wage.
Countless people relegated to joblessness and poverty would have the opportunity to make a buck. The desperate few that would have otherwise turned to crime and looting, would not need to anymore. This would further reduce the strain on law enforcement, and allow them to focus on violent, career criminals.
With a rapidly dropping unemployment rate, a vibrant employment sector filled with new entrants constantly being given new opportunities, and the economic growth that this would achieve, all South Africans will be richer for it.
It is a human right to make our own decisions. Even if that decision is to work below an arbitrary set minimum wage. Abolish it. Stop making law abiding South Africans into potential criminals. And let us all start making our own decisions.
