Scrap the National Minimum Wage for those under 25 in South Africa, says former CEO

 ·28 Sep 2023

Amid record levels of unemployment in South Africa, FirstRand co-founder and former CEO Paul Harris believes scrapping the minimum wage for anyone under 25 would have a notable impact on the country’s unemployment crisis.

Last week, the Financial Mail asked 23 of South Africa’s top CEOs and power brokers how they would change the trajectory of South Africa and upend the narrative of failure – including Harris.

Regarding his short-term strategy, Harris told the publication that he would scrap the minimum wage for anyone under the age of 25 – making it easier to hire and fire employees.

FirstRand co-founder and former CEO Paul Harris.

“At present, people get the social grant without working, but the youth can’t enter the job market by voluntarily working for less than the minimum wage,” he said.

“The outcome of minimum wages has been more unemployment and fewer viable SMEs; they employ fewer people, and more go bust.

“The government should stand up in support of the unemployed – they haven’t got a union,” he added.

Harris’ perspective on the National Minimum Wage (NWM) echoes the sentiments of business groups and other experts, who’ve voiced their concerns that the NMW – and the annual increases of such a wage – is not conducive in the current economic climate, especially for SMEs. It has only added to the unemployment queue in South Africa.

The latest increase, announced in February, saw the national minimum wage hiked by 9.6%, bringing it up to R25.42 per hour.

While unions and labourers welcomed the increase, employers and labour organisations were less enthused. Specifically, the latter raised alarms over the increase being far above inflation, pointing out that the wage was hiked around four percentage points higher than expected inflation for the year.

This increases the cost of labour in a business environment already under pressure due to the prevailing economic conditions.

Business groups acknowledged that the hardships faced by many minimum wage earners in South Africa and the dire economic circumstances they find themselves in could not be ignored, and the purpose of the NMW is to ensure a living wage.

However, the challenging environment in South Africa has created hardships for wage earners and employers alike.

Legal experts have argued that the national minimum wage itself is mostly smoke and mirrors. Firstly, the wage is not a living wage in South Africa – and secondly, it disincentivises businesses from hiring new employees due to the cost and the stringent labour laws that often protect workers over employers.

As the wage increases, costs go up – and businesses, particularly SMEs, that can no longer afford the overheads cannot easily let workers go.

Another issue with the minimum wage is that South Africa’s unemployment rate is so high that almost half the population is without any wage at all.

According to the latest Quarterly Labour Force Survey (QLFS), South Africa’s official unemployment rate is 32.6%, while the expanded definition – including those not actively looking for work – is 42.1%.

However, the Department of Labour said that the national minimum wage has not impacted employment levels or raised unemployment in sectors it has assessed.

Read: CEO warns of state collapse in South Africa

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