A national minimum wage hike will deepen South Africa's unemployment crisis

30 September 2024

The Democratic Alliance (DA) has submitted comments to the National Minimum Wage Committee opposing any proposed increases to South Africa's National Minimum Wage (NMW), in response to the Department of Employment and Labour’s Gazetted invitation for written representations.

While the DA recognises the good intentions behind raising the minimum wage, the DA believes it will serve only to worsen the country’s already extremely high unemployment rate. Instead, the DA suggests keeping the current minimum wage unchanged.

South Africa’s labour market is constrained by multiple factors, especially the impact of the minimum wage on employment opportunities. The current NMW creates barriers for the unemployed, particularly young people and low-skilled workers, by setting a wage threshold that businesses may not be able to afford.

Many companies are unable to hire new employees unless their productivity exceeds the mandated minimum wage. As a result, the most vulnerable segments of the population are locked out of the job market, perpetuating a cycle of poverty and dependency on social grants.

The National Minimum Wage Commission’s approach to link future increases to inflation and other economic indicators does not adequately consider the country’s severe unemployment crisis. Although protecting the purchasing power of existing workers is important, the unintended consequence of further increases will be to reduce the willingness of employers to hire.

The DA believes that maintaining the current minimum wage level strikes a necessary balance between protecting existing workers and opening the doors to employment for those who are currently excluded from the workforce.

While the NMW may reduce inequality among those already employed, it exacerbates inequality between the employed and the unemployed. Those without jobs remain trapped in poverty, unable to gain skills, build work experience, or earn any income at all. Even a modest wage would significantly improve the livelihoods of those currently relying on the Social Relief of Distress Grant, allowing them to build towards better opportunities over time.

The DA’s policy position is to freeze the NMW at its current level. Additionally, we propose labour reforms that will expand job opportunities, particularly for the youth, such as a Youth Employment Opportunity Certificate and amending existing collective bargaining structures to benefit small businesses. These measures aim to create a more flexible, inclusive labour market to address South Africa’s unemployment crisis head-on.

The DA believes that halting further increases to the minimum wage is a necessary step to make South Africa’s labour market more accessible, reduce unemployment, and restore dignity through work.

Issued by Michael Bagraim, DA Spokesperson on Employment and Labour, 30 September 2024