‘Not everyone is happy with new National Minimum Wage’

Not everybody is happy with the new National Minimum Wage that Minister of Employment and Labour Thulas Nxesi announced on Friday, taking the minimum wage for a general worker from R25.42 to R27.58 per hour from 1 March.

Gerhard Papenfus, CEO of the National Employers Association of South Africa (NEASA), says Nxesi announced an 8.5% (inflation plus 3%) increase to the National Minimum Wage acting on the advice and recommendations of the National Minimum Wage Commission.

“The commission ignored the input of numerous business institutions and trade unions who warned of the dire consequences of implementing further increases, the calls for the scrapping of the national minimum wage and simply proceeded with recommending the implementation of its own original proposals.

“This minimum wage is an arrangement that prevents anyone from being employed unless he can find an employer who is prepared to pay him a wage, not a wage that he is demanding, but which government determines he must receive. This is an arrangement that dictates that unless a jobseeker can find such an employer, he will be doomed to a life of abject poverty.”

ALSO READ: This is the new national minimum wage from 1 March

This is what the new minimum wage ignored

Papenfus says the minimum wage arrangement ignores the fact that:

• employers, without exception, only pay wages that they can afford and which they want to pay. Establishing a minimum wage does not change that;
• for employers who are already paying more than the minimum wage, this arrangement is entirely irrelevant and;
• employers who cannot afford it, will revert to alternative arrangements, such as reduced working hours, restructuring, reconsidering the need for lower-paid employees and even retrenchments. Some will merely fly under the radar, breaking the law regardless of the risk.

“These are simply the facts and state intervention will never change it. The influence of market powers is too strong and to the extent that the state ‘succeeds’ in its interference, it will only lead to increased unemployment, the biggest driver of inequality in South Africa.”

He says the commission also lost sight of the fact that:

• a job, even a low-paying job, is better than any social relief government has to offer and;
• being unemployed, no matter from which angle it is viewed, is a terrible form of abuse to subject any individual to.

South Africa, with a population of approximately 62 million that is growing fast is burdened by the highest unemployment rate in the world, with close to 12 million people unemployed.

The country is also burdened with a situation where almost half of its population depends either fully or partially on some form of a grant and it has only 16 million people who are employed, of which only 5.5 million pay tax, Papenfus says.

“This is unsustainable. Our current debt burden, borrowing cost and budget deficit simply dictate that the entire scheme is doomed to fail and will eventually implode. The only solution to this is a growing economy, robust labour market arrangements and a new approach to the nobility of work, a dispensation in which all forms of entitlement and expectation of hand-outs are not only discredited but rooted out.”

ALSO READ: Many South Africans not paid a living wage – Here’s how much they say they need

Farmers are also unhappy with new minimum wage

Francois Wilken, president of Free State Agriculture, says the 8.5% increase in the National Minimum Wage is completely out of touch with the economic realities that business experience and shows the complete lack of understanding of the economic conditions in the country.

“Employers in the agriculture sector support paying reasonable and fair wages to employees. Farming is based on healthy business practices that include financial considerations such as sufficient means to pay employees.”

He says this drastic increase (again) of the minimum wage is not only out of touch with economic realities but will also put material pressure on the sector.

“Agriculture has the ability to create jobs, something the country needs at this time. If you take the unemployment rate of 32% it seems that economic realities have been swept under the carpet when you consider the behaviour of the decision makers.”

And it seems decisions are made that rather focus on survival in the election than creating an environment where business can flourish and issues such as unemployment and poverty can be tackled effectively.

He finds it concerning that the commission does not even mention productivity, that the South African labour market is known for for the wrong reasons.

“The effect of an unwise minimum wage increase can cause a further ripple effect on employment, while further job losses cannot be ignored.”

ALSO READ: Conundrum of national minimum wage and unemployment

But Cosatu applauds the increase

On the other hand, the Congress of South African Trade Unions (Cosatu) applauds the announcement of the increase of 8.5% as it was Cosatu’s proposal.

“This increase helps to protect the value of the minimum wage and workers’ ability to take care of their families from inflation.  It will inject badly needed stimulus into the economy spurring growth and helping to sustain and create jobs.”

Cosatu says the new minimum wage will provide relief to more than six million workers in the agricultural, domestic, construction, retail, hospitality, transport, security and cleaning sectors.

“Many critics of the minimum wage said before it came into effect in 2019 that it would lead to a jobs bloodbath. Independent research by the University of Cape Town has shown this not to be the case. It had a positive impact on reducing poverty and inequality levels and boosting the economy.”

Beyond the minimum wage, Cosatu says government must tackle the other obstacles to growing the economy, in particular load shedding, cable theft, collapsing infrastructure and endemic crime and corruption, as these are critical to unlocking the economy, rebuilding public services, slashing unemployment and creating decent jobs, as well as ensuring workers earn a living wage.