Is this really the time for a national minimum wage? – Politicsweb, 14 March 2016

John Kane-Berman questions the wisdom of such an intervention in a country with 8,2m unemployed.

By John Kane-Berman 

According to the deputy president, Cyril Ramaphosa, the government is "working frantically" to reach an agreement over a national minimum wage that will "make a meaningful difference in the lives of the lowest paid". It might make an even bigger difference in the lives of those priced out of the labour market, but of course Mr Ramaphosa did not mention this. Those favouring minimum wages seldom bother about the unintended consequences.

The impact of any national minimum on unemployment levels will depend on how high or low it is set. However, with unemployment in South Africa running at 8.2 million - a rate of around 35% - the introduction of even a low minimum wage is risky. Those to whom it poses the greatest risk are young African women, among whom unemployment is now running at 72%, while 64% of their male counterparts are unemployed. At current rates of economic growth, they face years of joblessness and poverty.

Dating back at least 15 years, opinion polls show that most people think unemployment is this country's most serious problem. This view cuts across age groups, provinces, and party- political affiliations. So far, however, it does not seem to have cost the African National Congress substantial support during elections.   

South Africa's limited unemployment insurance system will not help the jobless very much. It covers only those who have lost their jobs, and then only for a limited time. A third of unemployed people have never worked, so they are not eligible for unemployment insurance payouts anyway. And two thirds of the unemployed have been unemployed for more than a year, which means they are unlikely to get jobs.

Some will be supported by other family members, including those with jobs but also including pensioners. Some will depend on the social grants paid to their own children. Millions will be dependent on subsistence farming and horticulture to feed themselves and their families. Some may turn to stock theft or other types of crime.

President Jacob Zuma announced in his state-of-the-nation address last month that agreement on the principle of a minimum wage had been reached by the "social partners" in the National Economic Development and Labour Council (Nedlac). However, this institution has always been structurally flawed by the fact that the unemployed have no voice in it.

Organised business and organised labour use Nedlac to pursue their own interests. The government could speak up in Nedlac for the unemployed, but it has consistently failed to do so. Nor has Parliament remedied the defect, even though it has the final say over whatever legislation might emanate from Nedlac. 

With municipal elections due later this year, imposing a national minimum wage is clearly designed to meet trade union demands. Whether it is set high enough to satisfy unions remains to be seen. But it will add further rigidity to a labour market which is already over-regulated.

It will, moreover, do so at a time when business and credit rating agencies are calling for "structural reform". This is a euphemism, because no one wants to use the term "liberalisation", least of all when it comes to discussion of the labour market.    

South Africa's poor suffer from numerous disabilities, including rising prices and inferior schooling, not to mention the dreadful conditions in so many shack settlements. But pricing the poor out of labour markets inflicts on them an additional disability: it prevents them from doing very much about their poverty, except by joining the informal sector or engaging in subsistence agriculture.

We condemn and outlaw slavery because we don't think any man should be able to confiscate another man's labour. But we then introduce measures, such as minimum wage laws, restricting the rights of the poor to sell their labour. Either way, slave or free, they earn no money.  

* John Kane-Berman is a policy fellow at the South African Institute of Race Relations, a think-tank promoting political and economic freedom.

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