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Mandatory above-inflation minimum wage increases will lead to job losses

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Dear MyPE

The Democratic Alliance (DA) believes that the above-inflation minimum wage increases gazetted yesterday by the Minister of Employment and Labour will lead to further job losses at a time when unemployment is already rampant and rising.

The National Minimum Wage (NMW) has been increased by 4.5%. The minimum wages for domestic workers and farm workers have been increased by 23% and 16% respectively.

Few sectors will be able to absorb such steep increases at a time of serious economic decline. As it is, the domestic service sector has been particularly hard hit by Covid-19 with many employers struggling to keep on their domestic workers. In the agricultural sector, research has shown that large legislated wage increases cause extensive job losses. A double-digit increase in the minimum wage will in all likelihood lead to increased mechanisation resulting in even greater job losses in the agricultural sector.

The DA supports sustainable wage increases in the agricultural- and domestic service sectors. We do not believe that increases should be forced by way of regulation. Increases should be determined by employers and trade unions entering into negotiations. With due regard to NMW legislation as it stands, however, the DA would have preferred the Minister to take the current economic climate into consideration and apply inflation-related increases.

The government itself had to renege on the three year wage agreement that it entered into with public servants because of financial constraints. Many employers in the private sector will now find themselves in a similar situation. They will not be able to sustain the above-inflation wage increases prescribed by the Minister on the advice of the National Minimum Wage Commission.

Recent history has shown that the high level of wages paid to unskilled workers, and the pace at which these increases have risen, is one of the key factors in fuelling unemployment.

We are now likely to see more retrenchments and further job losses. In a country with unemployment as high as South Africa’s, we should be pricing people into jobs, not out of them.

Regards

Dr Michael Cardo MP
DA Shadow Minister of Employment and Labour

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