SA New Minimum Wage: Economists Lament That The New Wages Won’t Curb Unemployment

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Following government’s approval of  R20 an hour new minimum wage agreed to kick-start in May 1, economists lament that the new wage increase will in no way tackle the nations unemployment issues.

Speaking while analyzing the newly introduced minimum wage for South African workers, economists Azar Jammine and Mike Schussler join the deputy president Cyril Ramaphosa to say the wages will neither alleviate poverty nor solve the unemployment issues still holding the country back.

Ramaphosa had last month signed the nation’s new minimum wage agreement of R20 an hour which is agreed to come into effect on May 1 next year.

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During his announcement of the new wages to the parliament, the deputy said all stakeholders had signed the agreement except Cosatu, because the labor federation will need to report to its central executive committee (CEC) before they sign.

The minimum wage will amount to R3 500 per month for a 40 hour week or R3 900 for a 45 hour week. The deputy president acknowledged that R3 500 per month is not a living wage, but he said it would be the start of the process to pursue a living wage.

During a question session on the matter in the parliament, Ramaphosa on Wednesday, agreed that there were concerns that businesses may not be able to pay, and jobs may be lost. But he said businesses in that position could apply for a 12-month exemption.

“I agree that the R3 500 minimum is the type of wage that is not going to wipe out poverty in this country … I agree it’s not a living wage … but it’s a very good start,” he said, responding to a question from ANC MP Fezeka Loliwe.

Jammine added to this by saying that South Africa’s major economic problem isn’t in wage increase, “Our biggest problem is jobs,”

“I would rather have more jobs than a few people in jobs, getting more money. While we want to up the minimum wage, we must be careful because we already have 27% unemployment,” said economist Mike Schussler



Economist Azar Jammine also added that one of the SA problems was that more households are dependent on one income earner.

“We have to move away from that. More people need to be educated to become more employable. We have the lowest levels of labour absorption of people working in the world,” said Jammine.

State government has until next year to put in place the right people who would police payments of the new minimum wage expected to affect about 6.6 million people, said deputy Ramaphosa who also confirmed that a panel advised the social partners that there may be cases of job losses at the initial stage of the programme, but the information at hand is not definitive … sometimes the issue of job losses is exaggerated.

Ramaphosa had also cautioned that businesses who can’t afford the minimum wage avoid retrenchment and apply for exemption instead.

“We are not flying into this blind. We are taking fairly calculated measures.”

Negotiations with the National Economic Development and Labour Council have come to a close according to report by the citizens, and the negotiations have been lauded by both President Jacob Zuma and Finance Minister Pravin Gordhan.

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Meanwhile, economist Schussler said SA’s new minimum wage stands as one of the top best three in the world. “I agree that R3 500 is the type of wage that won’t wipe out poverty. But a minimum wage is not a living wage – it cannot be.

“Someone on the new minimum wage is still entitled to child and disability grants or an old age grant that starts at age 60.

We have a reasonable wage; it’s on the high side. We have to be careful. Start with a lower wage and try to work it up systematically, he warned.