This article was first published by Business Brief on 13 March 2024
According to Statistics South Africa, the SA unemployment rate in the third quarter (Q3) of 2023 was 41.2% (7.8 million people). In addition, youth unemployment (ages 15 to 34 years) in Q3 was 4.6 million, out of a total of 12.4 million unemployed people in the country. The total population is 61.02 million. According to the International Labour Organisation (ILO) South Africa already has the highest unemployment rate in the world. From further legislation imposed on employers with more than 50 employees, it appears that the Department of Employment and Labour has no hesitation in driving the unemployment rate even higher than it is currently.
The Minister of Employment and Labour has announced that the Minimum Wage will increase by 8.5% to R27.58 per hour, from R26.42 per hour. This means that employers, such as householders and small businesses who cannot afford the higher wage, will be compelled to reduce staff, or reduce the number of hours worked by their workers.
In addition to the 12.4 million people who are registered as unemployed there are probably more people who are not registered. Employers are prevented by the minimum wage laws from offering to pay a lower wage than the current R26.42 per hour or R27.58 per hour when the new wage rate comes into play. The only option is then, other than dismissal, is to reduce working hours to compensate for the increased wage rate.
The minimum wage law and the unemployed
In a country with a relatively low unemployment rate, a minimum wage does not inflict visible harm. However, in a country like South Africa the harm caused is devastating. Despite the havoc it causes the minimum wage remains in place. Surely the South African Constitution and the rule of law should not allow as many as 12.4 million young people to be forcibly blocked from working because they cannot find anyone to employ them at a wage equal to or above the minimum wage of R26.42 or 27.58 per hour.
The Minimum Wage Law totally deprives individuals who cannot justify a wage of R26.42 per hour, of the right to work. Hence South Africa has accumulated the highest number of unemployed people in the world.
Do these crude labour laws exist anywhere else in the world?
A search for other areas in the world where minimum wage laws apply, revealed that minimum wage laws were applied in American Samoa by the American administration, where the major industry is tuna fishing and canning. When the US government instituted the minimum wage in the US it also applied it in American Samoa. As a result, a substantial number of people in the fishing industry were retrenched, causing a serious decline in production of Tuna for export. As a result of the unemployment it had caused, the minimum wage was withdrawn.
South Africa’s harsh treatment of young people is still in place and plays a role in securing South Africa’s position as having the highest unemployment rate in the world according to the ILO. The five countries mentioned by the ILO as having the highest unemployment rates are: South Africa 29,8%, Djibouti 27.9%, West Bank & Gaza 25.7%, Eswatini 24.4% and Republic of Congo 21.8%.
Having the highest unemployment rate in the world is nothing to be proud of, it is a situation the incumbent government should be ashamed of as well as being concerned about the harm caused to the country by the continuation of the minimum wage. The fact that the government fell into a left-wing academic trap about the claimed benefits of a compulsory minimum wage does not excuse the fact that the Ministry of Labour and Employment has persevered with it. Adding twelve senior academics to the team that has the annual task of determining the amount of the minimum wage does not improve matters, it increases the harm inflicted.
Role of South Africa’s National Minimum Wage Commission
The twelve National Minimum Wage commissioners are appointed by the Minister of Employment and Labour to decide, not on labour matters in general, but solely on a single figure – the national hourly minimum wage! The national panel of twelve academics must every year establish the hourly amount by which the minimum wage must be increased.
The group of twelve must take full responsibility for whatever consequences emerge from their decision. In fact, if they were to take full responsibility, they would advise the Minister to scrap the minimum wage laws and regulations and allow the currently unemployed people to enter employment contracts with whomever is prepared to offer them jobs on conditions of employment and wages acceptable to them.
Human rights and the economics of the minimum wage
The first step in dealing with the unemployment and labour shambles must be: ridding the country of the legislation and regulations that purport to act on behalf of the unemployed, the employed, the employer, the buyer, the seller, and the young people who are the future participants in various roles throughout the economy. Everyone who is being harmed by the enactment of the minimum wage legislation and regulations must be relieved of the burden.
The minimum wage is supposed to be a “friend of the young and otherwise low paid individual”. It pretends to protect them from being deprived of a “decent wage”. In the meantime, it deprives many young people of earning anything at all and protects those who have low-level jobs from having to compete with the jobless. In the absence of the minimum wage there would be much greater competition at the lower end of the jobs market. Small businesses and households would employ many of the people who are currently squeezed out of the jobs market altogether.
