Cabinet has approved the draft legislation to implement a National Minimum Wage for South Africa. At present the new proposed National Minimum Wage is set at R 20.00 per hour, which translates to approximately R 3 900.00 per month. For a comparison, the current Minimum Wage for a Domestic Worker is around R 12.42 per hour or R 2 421.90 per month.
While it is unclear what the exemptions would be, working on the assumption that all Sectoral Minimum Wages will have to be increased, this legislation holds the potential to increase unemployment even more. Currently South Africa has an unemployment rate of 27.7% for the third quarter of 2017 and in what is likely to be a repeat of the Farm Workers Minimum Wage which saw a 0.8% increase in unemployment when it was implemented in 2013 over a period which historically shows a decrease in unemployment.
Given the current employees earning below this proposed minimum wage, such as Domestic Workers and Private Security Officers, it seems that the legislation would have the natural effect of employers in these sectors no longer being able to afford these employees.
While the drive for employment and improved living conditions for these vulnerable employees is commendable, it reminds me of a quote by Adrian Rogers: “You cannot legislate the poor into prosperity by legislating the wealthy out of prosperity. What one person receives without working for another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for that my dear friend is the beginning of the end of any nation. You cannot multiply wealth by dividing it.”
The currently restrictive labour legislation already has the effect of increasing unemployment and the only way to reverse this trend is to deregulate labour as was done in the UK under former Prime Minister Margaret Thatcher. Only once unemployment is under control can working conditions and pay equality be furthered to the benefit of the workforce. By overregulating the labour market the demand for labour is dramatically reduced while the offer is increased which in itself, by the working of economic rules, decreases the inherent value and therefore cost of labour.
One can only hope that government and organized labour realizes that their course of action undermines the very cause which they seek to further.