Introduction
The National Minimum Wage Commission recently called for public comment on potential changes to the national minimum wage (NMW). The Commission will present its recommendations to the Minister of Employment and Labour, Nomakhosazana Meth, to determine whether the NMW should be adjusted in 2025.
During the inaugural meeting of the Ministerial Committee, the Minister pointed out that South Africa is facing the triple-threat of poverty, unemployment and inequality. Her department is facing an uphill battle in addressing the nation’s unemployment crisis.
National Minimum Wage
The National Minimum Wage Act has existed since 2019 and aims to enhance economic development and social justice by increasing the wages and improving the lives of the lowest paid workers.
The current national minimum wage is R27.58 per hour, following an 8.5% increase in March 2024. Thus, it is currently illegal to pay a full-time employee less than R4 412.80 per month.
The Minister of Employment and Labour is empowered to adjust the NMW annually, after considering the recommendations of the Commission. This Act provides that the Commission must promote NMW targets, aiming to alleviate poverty and reduce wage differentials and inequality. The Commission is obliged to consider the current cost of living, gross domestic product, business success and the effects on micro, small and medium businesses.
Effects of National Minimum Wage
Proponents argue that the NMW enhances economic justice by protecting vulnerable workers in low-skill jobs, such as farm workers and domestic employees.
However, critics argue that increases in the NMW do far more harm than good. It is suggested that the NMW acts as a barrier to employment as it overburdens businesses and disincentivises the creation of low-skilled jobs.
Interestingly, academics have suggested that NMW increases have trivial effect on the macro-economy, as medium and large businesses tend not to employ the low-skilled workers that the NMW targets.
Instead, micro, small and medium sized businesses are most impacted by the NMW as they are forced to reconfigure their employment structures by reducing working hours or retrenching staff to offset rising labour costs.
However, Professor Heinrich Bohlmann of the Department of Economics in the Faculty of Economic and Management Sciences at the University of Pretoria argues that small real wage increases do not have a significant impact on employment. Thus, the NMW is the least of South Africa’s employment concerns.
Unemployment Statistics
South Africa has one of the worst unemployment figures in the world – even war-torn Ukraine is outperforming the Republic.
Statistics SA reported that the official unemployment rate had increased to just under 34% by June 2024. The expanded definition now sits at a staggering 43%. Almost half of all young females are jobless, while unemployment among 15-24 year-olds sits at a whopping 59.7%.
Adriaan Kruger explains that this means that 1 in 4 South Africans who want to earn a living cannot find a job.
Moreover, South Africa is a young country. More than 27% of our population is less than 15 years old, whereas people over 60 make up less than 10% of the population. Thus, South Africa is barrelling towards an unemployment disaster as more youths are set to enter the workforce in coming years while the number of people who can afford to retire at 65 diminishes.
Therefore, employment is currently scarce in South Africa, but the nation’s economic trends signal that there will be even fewer jobs in the future.
State of the Economy
Busi Mavuso, chief executive of Business Leadership South Africa, has explained that the business environment has been poisoned by crumbling infrastructure, energy supply challenges, shoddy governmental planning and corruption.
Additionally, the South African market is rife with over-regulation which has stifled entrepreneurship. The share of 16-64 year olds intending to start a business now sits at a 20-year record low of 10%.
According to Trading Economics, South Africa’s gross domestic product grew by a dismal 0.6% in the 2023 financial year. Consumer spending is down, and 62% of consumers’ household income is now devoted to debt.
The consumer price index has reached an all-time high of 115.90 points, and the cost of food has increased by 4.5%. According to The Conversation, more than 20% of South Africans are food insecure. Starvation and poverty are thus also on the rise.
In these bleak economic times, South Africa is in dire need of job creation. Addressing the unemployment rate provides immediate relief for the most vulnerable members of society. The NMW can serve as a key component of this strategy as it strives to safeguard the interests of jobseekers while encouraging economic growth.
Conclusion
Although there may not be consensus on its precise benefits, the NMW is considered a valuable tool that can improve the lives of vulnerable workers and enhance economic justice.
As the country faces the harsh realities of rising unemployment, poverty, and inequality, it is essential that the public actively participates in shaping policies that affect their livelihoods.
The upcoming review of the NMW provides an opportunity for citizens to voice their concerns, share their experiences, and contribute to decisions that will impact the future of work in South Africa. Public participation is not just a right - it is a key instrument in ensuring that government policies are fair, effective, and responsive to the needs of the people.
The Commission will be receiving submissions from the public until 30 September 2024. You can have your say on the National Minimum Wage at DearSA. Every voice matters in shaping a future where dignity and fairness are at the heart of our nation's labour policies.
