Minimum wage will increase unemployment – Solidarity 

22 November 2016

In its response to the proposed minimum wage trade union trade union Solidarity today said that the introduction of a higher minimum wage would seriously aggravate the conditions of the unemployed in South Africa. In Q3 of 2016 the number of the unemployed came to 9 million persons.

Dr Eugene Brink, senior researcher at the Solidarity Research Institute (SRI), pointed out that although Solidarity strongly supports fair remuneration for workers, it should not happen at the expense of employment. “The implementation of the proposed minimum wage will increase labour costs as a whole, and as a consequence, businesses would employ fewer people in future. “In the end, the unemployed who can’t find jobs, as well as quite a number of working people who would eventually lose their jobs would pay for it,” Brink said.

According to Brink, the implementation of the minimum wage would further accelerate the process of mechanisation, which is gaining momentum as it is. “There comes a time where labour would simply not be affordable anymore and it would be cheaper to invest in machines. Pick n Pay is already experimenting with cashier-less tills. Those who stand to benefit from the minimum wage are the very ones whose jobs could be the first to be replaced by technology,” Brink explained.

Brink also makes the point that the minimum wage is yet another form of increasing economic interventionism that would further cripple the formal private sector and would deny people the right to make voluntary choices when it comes to remuneration, employment and appointments. “Smaller businesses will be especially hard hit, as well as those workers who simply want to get a foot in the door somewhere in the labour market and who are prepared to work for less than the minimum wage. At the same time, it would simply aggravate bureaucratic red tape in the labour market.

According to Brink, the issue of a minimum wage has now simply become a political football by which political parties and populist trade unions seek to attract voters with unrealistic promises that create expectations. “In these economic times, we should make every effort to improve job creation. A higher minimum wage will achieve the opposite. The best way to increase your income is to expand your skills and increase your productivity. This applies to the individual and the country as a whole,” Brink concluded.   

Issued by Eugene Brink, Senior Researcher: Solidarity Research Insitute, 22 November 2016