Removing the causes of mass youth unemployment in South Africa would have multiple positive consequences for job seekers. If small businesses and households, “the natural employers of young and untrained workers in an open labour market”, were free of the burden of the minimum wage and other unnecessary regulatory burdens that have been imposed on them, they could make an unprecedent contribution to the economy.
The National Minimum Wage Act was adopted in 2018 and implemented in January 2019. The minimum rate was set at R20,00 per hour. According to Minister Thulas Nxesi, the minimum wage was “aimed at protecting lower earning workers in South Africa and providing a platform for inequality reduction.” Since the introduction of the Act, there have been annual increases of the wage guided by the National Minimum Wage Commission.
Individual’s choice – low or no wage?
If the unemployed could find themselves jobs at whatever (even low) wage is acceptable to them, they could improve their lives and the lives of their families. The minimum wage set by government is a burden on the unemployed and not an advantage. Given freedom to set their own rules of employment, they could not only enhance their own employment opportunities but also, in the long term, make a more substantial contribution to the economy.
If the eight million currently unemployed South Africans could earn R1,500 per month, they would yield a collective monthly income of R12 billion. This would result in the poorest people in the country earning a total of R144 billion per annum.
The current reality for most unemployed people is the choice between a low income and no income whatsoever. When the National Minimum Wage Act came into force in 2019, this choice was stripped away from them as they lost the right to voluntarily make the decision to accept a wage lower than what the political elite deems appropriate.
The Act did not result in the unemployed earning R3,500 per month. On the contrary, every time the minimum wage increases, it becomes even more difficult for an unemployed individual to find a job, and many of those who do have jobs risk losing them.
U.S. Justice William Douglas once called “the most precious liberty that man possesses, to be the right to earn a living” and that this view was deeply rooted in American history and tradition. And further, that courts of law should protect innocent entrepreneurs against the wrongs done to them by regulators and crony businesses.
The South African minimum wage which, on the surface may appear to be a measure to aid low-income workers, is in fact a measure intended to prevent entry into the labour market. The South African government and courts would do well to heed the advice expressed by the learned judge.
Bill of Rights
The Bill of Rights contains various protections for vulnerable individuals in South Africa, including recognition of the values of human dignity and freedom in section 7(1) of the Constitution.
Unemployment causes people to lose their dignity, has a negative effect on their lives, and is a…
Read the full article by Eustace Davie, Director, Free Market Foundation, as well as a host of other topical management articles written by professionals, consultants and academics in the October/November 2023 edition of BusinessBrief.