Media release: NMW will be economically insane and morally reprehensible and based on three widely contradictory studies

07 October 2016
Views 1 409


“The National Minimum Wage (NMW) is cruel, inhumane, discriminatory, regressive and oppressive,” said Free Market Foundation (FMF) executive director Leon Louw, speaking at an FMF media briefing on 4 October 2016. Paraphrasing Stalin’s famous quote, he said that one destitute job-seeker is a tragedy,  while 9 million are a statistic. South Africa has 9 million unemployed and that number is rising. Louw said that the fastest way to increase this appalling number is to introduce the NMW, that those promoting it had no compassion for the unemployed and were protecting organised labour and big business.

Louw quoted US economist Walter Williams saying the minimum wage was maximum folly which protects insiders – those who already have jobs - at the expense of the maximally vulnerable people, including the elderly, youth, disabled, rural migrants, unskilled and uneducated and others. He asked where in the minimum wage debate was the constitutional right to dignity of the unemployed?

Using his phrase TANSTAAFL, ‘there ain’t no such thing as a free lunch’, Louw said that the fundamental economic principle against a minimum wage is that higher prices reduce demand. The price of labour – a wage – is no exception. South Africa has a vast oversupply of labour with nine million unemployed citizens and 18 million on welfare. Raising the price of employing someone is “economically insane and morally reprehensible,” said Louw. He called for the names of deputy president Ramaphosa’s panel of experts and other proponents tasked with determining the “right price of wages,” to be widely published. Thereby, the unemployed could know who are the people responsible for keeping them on the human garbage heap of destitution and blame them.

Louw spoke of the three sets of policy research groups on which the NMW decisions rest, each with widely differing conclusions and recommendations, calling the reports “academic deception.” 

UCT’s Development Policy Research Unit (DPRU) says that “The benefits of setting a national minimum wage at R2 447 per month could ... outweigh the costs, but setting it at R3 400 could risk far greater job losses.”

For who’s benefits and at who’s costs, asked Louw.

The WITS National Minimum Wage Research Inititive version says, “A national minimum wage would cut poverty and boost growth in South Africa. At R3,500 to R4,600, job losses would be “slight, negligible or statistically insignificant” versus “far greater job losses” from UCT.

The third contender, UK-KZN Pietermaritzburg Agency for Community Social Action (PACSA), not only astoundingly fails to even mention unemployment, but sets the monthly wage at R 8000 , far higher than the other two. Louw asked why stop there? Why not R 10,000, R 100,000, R 1 million? Obviously jobs will be lost at these levels – but jobs will also be lost at much lower levels, especially in SME companies, who need flexibility to be able to pay what they can afford or do without workers. Louw said that in the real world the minimum wage is always zero: not a high wage or low wage but a high wage or no wage.

Yet it is on this research that 9 million people depend, for basic human dignity and a chance to earn something in return for their labour, rather than stand on street corners or turn to crime. First world labour policies from countries with low unemployment rates are set to be implemented in South Africa with its vastly different labour environment and history.

If a compromise is required and the NMW is a deal done, then the FMF urges the use of job-seekers’ exemption certificates (JSECs). This allows the job seeker to waive his or her rights to legal terms and conditions and to offer their labour at a rate negotiated with the employer, for prescribed periods and conditions. However the long term solution for a higher quality of life for all is growth and only growth, which depends on minimum government and maximum freedom.

Louw and the FMF call for the *Cabinet required Social Economic Impact Assessment (SEIA) to be undertaken, before any decision impacting 9 million unemployed people is decided. 

*Cabinet decision announced October 2015.


Comments on Media release: NMW will be economically insane and morally reprehensible and based on three widely contradictory studies