National Minimum wage

This is the thirteenth edition of this weekly blog posted to Facebook. As always the concept behind this blog is that we urgently need new ideas that are “broad brush” – radically improving wide areas, costing little or nothing and immediately implementable. These plans must not rely on people behaving the way humanity behave at their very best, they must be practical when humanity is, well, human. At the same time, these must move us generally towards a model for a sustainable successful country in the long term – no band aids.

I will post a new idea (most not original to me) every week. Please mail me your own ideas on suggestions@nationaldialogueblogsa.com

Please also comment on the ideas posted on the blog.

Note that every new policy has negatives, there is no free lunch. In the interests of brevity and clarity, I will not always be going into deep detail of the why and why not or the mitigations which will be or have been in other blogs.

Some ideas may seem simplistic, but they are not. They are simple. They must be taken together with all the other suggestions in other blogs, they are an ecosystem.

Each idea will be in the format What? Why? How? Why not (FAQ’s)?

At the end of each, you will be invited to vote on whether this is a good idea or not. Please do vote in Facebook.

What?

Government must repeal the minimum wage law.

Why

1)              We have about 8 MILLION unemployed people.

2)              Studies by the IRR estimate that the national minimum wage cost us 430000 jobs

3)              Hungry unemployed people will happily take a job that pays less then minimum wage because it at least pays something and can help feed their children. Who are we (or government or organised labour) to say that they may not do so.

4)              Every business that is looking to hire a new person must make the decision as to whether a machine given to an existing worker will be cheaper than hiring another staff member or not. The higher the minimum wage, the less new jobs fit this criteria (of beating a machine).

5)              By the same logic, every person working must be producing something that people want at a price that is lower than our Chinese, Korean, Indian and Vietnamese competitors or else that job will disappear (our vanished textile industry is a case in point). If minimum wage makes the job uneconomic – it will disappear.

6)              The fact that the “stipends” paid by government as part of the expanded public works programme are well below minimum wage proves two things: - a) government itself does not believe that it is exploitative to hire people at less than minimum wage (calling them stipends is a legal fudge) and b) poor people stand in line to get even these very low and temporary incomes – so they clearly want even very low paying jobs – from government who are presumably not exploiting them.

7)              Minimum wage laws thus benefit the “poor employed” at the expense of the truly poor who would love to get a regular job like theirs – even if the pay was lower.

8)              Minimum wage laws are sold on the premise that it is to prevent exploitation of workers – but are extremely unfair on people trying to enter the jobs market.

9)              Together with the basic income grant proposed in a previous blog this will be a game changer in preventing poverty and hunger. Studies from Kenya have shown that a basic income grant encourages labour market participation.

10)   Given that poverty stricken unemployed people want below minimum wage jobs and many businesses cannot survive if they pay above minimum wage, all that these laws do is cause them both to conspire to break the law in the informal economy, which means that all other labour protections (such as safe work environments) no longer exist and the state loses its tax.

11)   In particular our youth with no experience and minimal education cannot justify a minimum wage – so a direct line can be drawn in particular to the 60% or more unemployment in this group.

12)   Insisting on a minimum wage being paid even when the productivity does not warrant the wage is inflationary as the company must charge more in order to pay its employees. In fact a study in 2023 (ideas.repec.org) shows this exact effect in South Africa. Minimum wage laws worsened unemployment and increased inflation.

13)   More evidence is provided by the world bank study (openknowledge.worldbank.org) which showed that minimum wage laws increase wages, but decrease employment.

14)   Look at how our minimum wages stack up against our competitors:

Country	Min wage in USD	Unemployment (estimate) 2025	Youth Unemployment
South Africa	279	33.2%	62.4%
Vietnam	132 – 190	2.5%	7%
China procincial	200 to 378	5.3%	14%

How can we compete with these countries for jobs when their lowest paid workers get less than our entry level jobs?

How?

Act of parliament

Why Not?

Organised labour will fight against this, supported by politicians who want their votes.

We need to “get” the fact that we are a poor country with a low GDP per person. We simply must address this poverty by allowing people the dignity of having a job with their income augmented by a basic income grant. We have many very poorly educated people who cannot compete with foreign workers if paid at minimum wage – so new entry level jobs will not come unless wages are lower.

 Referendum

If you support the repeal of the minimum wage law, please give this blog a “like” on Facebook.