A Minimum Wage increase does not alleviate poverty.

A MINIMUM WAGE INCREASE
DOES NOT ALLEVIATE POVERTY

By Gerhard Papenfus

The National Minimum Wage has just been increased with 9.62%.

The effect of the increase on the lives and livelihood of employees will, however, not be determined by the size of the increase, but by the ability of employers to absorb the increase.

The one factor that the proponents of the notion of the ‘minimum wage’ lose sight of, is the fact that employers, all employers, only pay what they can afford to pay. Any demand beyond that requires of the employer to introduce mitigating factors, i.e., retrenchment, the shortening of working hours and mechanisation. All employers that are vulnerable as a result of this increase, for whatever operational reason, will immediately be compelled to take appropriate action. 

All employees care for and sustain an extended family. The impact of the promulgated increase of the minimum wage, will increase that burden, and consequently negates the effect of the increase.

South Africa’s current unemployment rate stands somewhere between 40% and 50%. Is Government honest about the impact of the national minimum wage on this unemployment disaster? Can a country in which almost half the population is unemployed even remotely afford a minimum wage?

Government constantly emphasises South Africa’s poor record in the area of inequality, unemployment and poverty. The minimum wage does nothing to address this dilemma. Since unemployment is the main driver of both inequality and poverty, the minimum wage probably exacerbates this crisis.

Economic growth, which is the result of sound economic policies, and good governance, in respect of which Government fails dismally, automatically improve the quality of life of all citizens. Increasing the minimum wage of a few who are employed, does not have that effect. Government, however, is apparently hell-bent on continuing on a path that points downhill.

Their latest decision simply accelerates this trajectory. 

Gerhard Papenfus is the Chief Executive of the National Employers’ Association of South Africa (NEASA).

For more information:
NEASA Media Department
media@neasa.co.za