Minimum wage a danger

02 June 2017
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Minimum wage a danger

John Spiropoulos (The minimum wage and the moral economy) expresses concerns about the plight of the poor and high levels of dependency, which I share.

But has he stopped to ask himself why the employed have a large and growing number of dependants? Have government policies over the past 20 years punished the productive private sector and forced them to mechanise? Has he stopped to wonder how a minimum wage would affect young people, dependent on a single wage earner? Has it occurred to him that a minimum wage might be the insurmountable obstacle that prevents them from getting on to the first rung of the ladder and working towards being independent, relegating them to a life of permanent dependency?

Inequality and poverty persist because South Africa has more than nine million unemployed people. You do not need to be an expert in economics to detect that something is seriously wrong with the explanations of how a minimum wage will miraculously solve South Africa’s poverty, inequality and unemployment problems.

Wage hikes that follow productivity increases should be welcomed by all, but those that are increased by political diktat should be rejected. The idea that wages can simply be forced up by government decree misdiagnoses the underlying problems of the desperate skills shortages in this country.

Forcing up the wages of the working poor will not permanently solve the problem of, for example, South Africa’s failed education system. Less than 40% of the country’s working-age population has a matric certificate and it regularly ranks among the worst performers in maths and science.

This costly, additional layer of regulation will only serve to worsen the unemployment problem. A legislated national minimum wage will have a disparately negative effect on the employment prospects of most new entrants into the labour market and the unemployed – who are typically young black people.

It seems that what Spiropoulos favours is even more of a command-and-control economy than what South Africa already endures. If so, has he read how Venezuelans are suffering under state control of the economy? – Jasson Urbach, director, Free Market Foundation

This article was first published in Mail & Guardian on 20 January 2017



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