Opinionista Refiloe Nt'Sekhe 7 May 2018

Minimum wage is necessary but if not looked at holistically will lead to job losses

I fail to also understand how minimum wages would stimulate an economy such as South Africa which desperately needs to create jobs. The country needs to encourage and build entrepreneurs who will start businesses and then employ other people.

I have listened with keen interest to discussions on the subject of a minimum wage. My interest was further sparked when I attended the Freedom Day National Celebrations which were held in Mangaung, in the Free State.

I listened intently as President Cyril Ramaphosa spoke about minimum wage, when he talked about the success of introducing the minimum wage saying it would protect just over six-million South Africans who are already in employment.

I expected him to answer the question that came into my mind: how will this minimum wage help the over nine-million South Africans who are jobless? Will they become the sacrificial lambs? By introducing minimum wage, we are then ensuring that their struggle is even harder to get a job. I am battling to understand how the introduction of a minimum wage is a victory for them.

Let me explain why I am battling to understand this.

Suppose a company has a budget of R100 to hire people per hour: they need five people to perform a function. If the government imposes a minimum wage of R25 per hour per employee, then the company can only employ four people. One person then loses out on the opportunity of getting employed.

Where half a loaf is better than nothing, in the example above four get more than a full loaf, while one gets nothing. The other consequence is that the four people who do get employed must do the job of five people because that’s what the company needed. This is not a win-win situation: not for the employees, not for the company and certainly not for the fifth person who lost out on the job opportunity – remaining unemployed.

I don’t have figures but can only imagine the number of companies that would lose out, and the potential employees that would stay on the unemployment list contributing to statistics of the nine million jobless South Africans.

If five people were employed at R20 and worked hard and the company grew, then the basic logic is that as the company grows, employee wages would also increase and ultimately more people would get employed: reducing the nine million people who are jobless.

There is another consideration, employers who fear this minimum wage will resort to mechanisation as much as possible and reduce their human resource requirement. The minimum wage will become a deterrent to potential employers. In some cases, it might deter people from becoming entrepreneurs. Minimum wages are signs of a state or government meddling too much and should allow the market to regulate itself.

The minimum wage also fails to unpack how domestic workers should be treated. It seems to have a blanket approach.

Let me explain: suppose a domestic worker earns R20 per hour and travels into work every week day. She has a child and hires a neighbour who is unemployed to care for her child while she goes to work. The domestic worker has also become an employer. This means the neighbour becomes a domestic worker as well. How much is the domestic worker expected to pay her neighbour? R20 as well? Then how much is the domestic worker left with when she has finished paying her neighbour R20? My mathematics says zero rand.

I’m not sure this was thought through. Or are domestic workers not allowed to hire other people as domestic workers? Not everyone wants to place their young children in an Early Childhood Development facility.

Once again – minimum wage seems to favour those who are already employed (the domestic worker) but not the unemployed (the neighbour) who could be employed if the market regulated itself.

Having explained my very limited understanding of economics. If the wage were too low in an unregulated environment, workers would reject the offer until the employers came up with an income that allows them to at the very least survive. Economies would self-rectify.

When wages get to exploitative levels, then employees would start rejecting the offers because they would not be able to break even: the cost of living and travelling to work would exceed their income and then there would be no value derived in working – in this case, it would then make more sense to refuse the salary offer.

I fail to also understand how minimum wages would stimulate an economy such as South Africa which desperately needs to create jobs. The country needs to encourage and build entrepreneurs who will start businesses and then employ other people. How can small business be expected to employ people at minimum wages, at best, small business will find quick solution such as technology to avoid getting caught up in the web of minimum wages.

Where are the unions that are standing up for those who are trying to enter the job market? Those nine-million South Africans who are jobless and just saying to themselves “at the moment, we have absolutely nothing, and believe that half a loaf of bread is better than nothing”.

Where are the unions that fight for the unemployed mothers who cannot put food on the table for their children: watching their children sleep on empty stomachs: grumbling the whole night?

When the debate around and legislative process around a minimum wage arose, my colleague, the DA Shadow Minister of Labour, Ian Ollis, stated that “this is a key lens through which the DA approaches the need for minimum wages, as South Africa battles with the legacy of our painful past and the high levels of unemployment we continue to experience today”.

He further added that “a one-size fits all approach, no matter how well intentioned, will result in further job losses adding to the nine-million unemployed South Africans”.

To be clear, the DA supports sectoral minimum wages. They are important to ensure the rights of working South Africans are protected and guarding against the abuse of the most vulnerable members of our society.

To add to the conversation, the DA Congress adopted the policy of a Job Seekers’ Exemption Certificate (JSEC), which is a document giving a person the right to take a job at a wage they find acceptable. This document would be available to any person who has been unemployed for an uninterrupted period of 12 months or more, and would be valid for two years.

Show me the union that is championing the cause for those who get nothing, have no jobs, have lost hope of even getting a job, those who have turned to nyaope because they don’t know where else to turn? Show me the union that fights for those who have tried for years to find something, anything kind of work just to put food on the table? Where is that union? That is the union that says, “let’s get all South Africans who can work, working?”

Where is the union that wants to get more South Africans off welfare and into the job market? Where is the union that wants to find despair? Where is the union for the over nine-million jobless South Africans? DM

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