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What you need to know about minimum wage in South Africa

What you need to know about minimum wage in South Africa

The design and implementation of the national minimum wage legislation – and the level at which it set – will be crucial.

This is the word from Nicci Whitear-Nel, senior lecturer – School of Law, University of KwaZulu-Natal.

The South African government has committed to introducing a national minimum wage. At present minimum wages are set in various specific sectors but there is no minimum wage legislation which applies to all employees in South Africa.

The detail is yet to be thrashed out.

According to Whitear-Nel, there are some who are convinced that the introduction of the national minimum wage will have a devastating effect on employment.

“However, statistical modelling by Wits University’s National Minimum Wage Research initiative shows that setting the national minimum wage in the amount of between R3,500 and R6,000 per month will have a negligible detrimental effect on employment.”

This research is borne out by the extensive international research in this regard conducted in both the developed and the developing world, Whitear-Nel said.

In South Africa, when minimum wages were introduced in the domestic worker and security guard sector they did not have a negative impact of employment levels in those sectors.

“It is widely agreed that employees with the South African average of four dependants who earn less than R4,000 per month are not able to lift themselves and their families above the poverty line and are referred to as ‘the working poor’.

“Shockingly, over 40% of South African workers earn below this level. In the agricultural and domestic sectors it is estimated that a staggering 90 – 95% of employees earn below this level,” Whitear-Nel said.

Evidence showed that introducing national minimum wages contributes significantly to reducing inequality in society.

Whitear-Nel noted that South Africa is one of the most unequal countries in the world. “On average the top 10% of wage earners earn more than 24 times more than the bottom 10%, while the top five percent of the highest earners earn just about 50% more than the bottom five percent of earners. This gap is widening at an alarming rate. In 2010 the gap between the top and bottom 5% earners was 20 times less than it is today.”

“Interestingly, wage differentials rather than unemployment are regarded as driving inequality. The latest figures show that unemployment is rife – particularly among the youth (18 – 25 years old), where the official rate of unemployment almost doubles to approximately 52%,” Whitear-Nel said.

By Nicci Whitear-Nel (BA LLB), a senior lecturer at the University of KwaZulu-Natal’s School of Law.  She practiced as an attorney before joining the university.

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BusinessTech's Staff Writer is directly plugged into the South African Internet backbone, and spits out press releases and other news as they receive it. They are believed to be cl...
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  • Erlo Muhl

    As far as minimum wages are concerned it is something that tries to better the position of individuals, but its’ actual effect is that the % of people employed nationwide drops to unacceptable low levels. This is happening in S.A. at the moment. This is history and factual. Free enterprise generates more employment and because of a bigger competition in finding people to work for the entrepreneur creates an eventual higher wage structure through competition which is healthy and thus more people are employed and the wage structure rises to a more acceptable level and much less jobless people all round.

    • Ikabot

      The research mentioned in this article indicates that minimum wages don’t significantly negatively affect levels of employment.

      Higher wages through competition between employers is a reality for scarce skills roles, but in unskilled and semi-skilled roles, the competition is between hordes of unemployed people competing wages down.

      • Erlo Muhl

        Might be the immediate effect, but on the long term the picture alters to satisfy workers and employers. The advantage for both is the worker feels proud if he is productive and the employer gains though better production through motivated workers even if they earn more.

      • Some of the other rabidly left-wing material from the same research outfit casts grave doubts on any of their conclusions.

      • Ikabot

        We should remember that rising wages have multiplier effects, because wages earners spend their wages into the economy whereas profit takers push up property prices.

    • john speck

      Think they should just put a maximum salary difference top to bottom ,ie the ceo cant pay himself more say 20 times the lowest paid in the business ,We have the highest in the world genie coefficient comes in certain areas at a figure around 900 which is criminal as far as i’m concerned.Cant justify that.

      • Erlo Muhl

        I agree with you on this lot. If somebody is self-employed the sky is the limit if all his dealings are honest. Employed people earning more than 20 fold what the lowest employer is earning is definitely too much and then there should be a ceiling, especially if Coe’s grant themselves such salaries.

  • Mugabeisikulufa iAfrikanotso G

    Listen nicely. Domestic help isn’t a job! How can a job be construed when there’s no profit generated? It’s an auxiliary service, something that helps those that do create profit more time to do so.
    When the tipping point is reached and the benefit of time saved is not cost effective, domestic help will be discarded.

    So minimum wage for a non – job is going to delete those million plus ladies from the employment pool.

    Then what?

    • Ikabot

      Domestic work has economic value. Clean living environments reduce disease and increase psychological well-being. An economic good doesn’t need to lead to profit on someone’s balance sheet.

      • Mugabeisikulufa iAfrikanotso G

        It does when payment for the service-help- becomes economically unviable.

        It’s like a street sweeper asking to be paid an electricians salary. Anyone can pick up a broom, not just anyone can work with electricity.
        This does not mean the broom is irrelevant, just that the hand wielding it may change.

  • Ross Gordon

    There is a certain section of the population who will not be able to afford the R4500/R6000 minimum wage, what they will do is go to part time work employment and for the small start up business the answer will be profit share not employment, there will also be a range of employment where the employer will mechanize rather than employ. So yes introducing a minimum wage will result in a shuffling in the employment market. If the current wage * number employed = x before the minmum wage then after the minimum wage and after the adjustments the amount of money paid out in wages would also be about future wage * number employed also to equal x. If it is x + a number then the price of goods will rise…..

  • jandr0

    Minimum wage laws – destroying jobs and hampering overall economic growth as planned.

    “Proudly” foisted on the rest of us by greedy politicians and self-interested labour unions (who are looking after their members’ interest ONLY, and to hell with the real unemployed people struggling to find a job).

    And of course, cheered on by confused bleeding-heart socialists.

  • Blapartheid Zulu

    I sure hope with the national minimum wage it also help increase productivity

  • S’nyakanyak

    I agree with Erlo Muhl, but, what about freedom? If a person does not like the wage I offer, he isn’t forced to take the job? He can go and try to sell himself somewhere else.
    Another point: If minimum wages are fixed, will that minimum also apply to old age and disability pensions?

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