Minumum Wage Legislation – Good or Bad?

Home Forums Labour Law Debate Minumum Wage Legislation – Good or Bad?

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    Ivan Israelstam

    Within the next few months most South African employers will be forced by new minimum wage laws to pay a minimum of R20 per hour to their employees. In South Africa’s private sector there are approximately 550 000 businesses of which approximately 400 000 or 80% are small and micro enterprises. While bigger business will be able to cope with this minimum wage many tens of thousands of smaller businesses are currently failing or only just surviving because they pay low wages. At the same time low wages in some jobs make survival difficult for many workers whose weak spending power puts a damper on business revenue and economic growth. Those opposed to minimum wages argue that it will result in retrenchmemnts and thus have a major effect in increasing the ranks of the unemployed (which is currently at 36%) and will therefore further depress our economy. Those in favour of the impending legislation argue that the resulting increased wages will boost the spending power of workers and will thus stimulate economic growth.
    Our experts provide their views on whether this new law will be good or bad for our economy.

    Patrick Deale

    I think it’s “good”. Free market instincts incline me to simply allow the forces of supply and demand to determine the price of labour. But this Darwinian “survival of the fittest approach” only works in more or less equal societies. They exist in both a successful socialist countries system, like Sweden and Norway, and in successful free market countries like the US and the UK.

    SA is neither of these – it’s a bit of both. We have enclaves of seriously successful businesses operating on free market principles in a massive sea of unemployed and desperate people. There’s a dangerous tipping point in this equation which we dare not push too far. If not quick fix solutions, there must at least be buffers to manage the discontent lest it tip us into chaos.

    The NMW provides a modest buffer. It’s significant, not just for its money value – but also because it signals a message that society cares. A caring society offers hope – which feeds endeavour. And it’s a small handbrake on the “race to the bottom” in which the price of labour is driven to exploitative poverty levels by the oversupply of labour. We all strive for personal progress – and we all value our personal dignity. The NMW signals a small step to realise these basic human needs. .

    Patrick Deale

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