The Department of Employment and Labour says that increases in the National Minimum Wage (NMW) have not impacted employment numbers in South Africa.
This was minister Thembelani Thulas Nxesi’s response in a recent parliamentary Q&A, where his department was asked to comment on whether or not the NMW had a material impact on employment numbers across several sectors, including Agriculture, Mining, Manufacturing, Construction, and Trade.
The department said that research had been conducted annually for the past three years, assessing the impact of the NMW on employment, hours of work and wages. They observed no significant shifts in aggregate employment following NMW increases over the past few years.
This sentiment goes against many expert opinions – such as organisations and CEOs in the affected sectors – that said the increases in the NMW amid the current economic climate would cripple businesses and lead to job losses across the country.
Private households (domestic workers and gardeners) were also among the sectors noted by the Department of Employment and Labour. The research showed that it also experienced no significant changes in employment due to increased NMW.
However, data from Stats SA shows that domestic workers have seen a notable decline in employment numbers across the country despite the department’s remarks.
According to the latest Quarterly Labour Force Survey for Q4 2022, South Africans currently employ around 863,000 domestic workers, adding 38,000 jobs (+4.6%) since the last survey.
Year-on-year, however, 86,000 fewer domestic workers are employed – a 9% drop since Q4 2021 – and total employment numbers are still significantly lower than pre-Covid levels.
South Africa has historically had around 1 million domestic workers employed in the country, but this took a massive knock in 2020 following the Covid-19 pandemic and subsequent lockdowns.
Around 250,000 domestic workers lost their jobs in the quarter following the lockdown before recovering in subsequent quarters – but never going back to the numbers seen before.
The sector has struggled for almost three years to get these jobs back, with the latest data pointing to around 140,000 domestic workers still lost to the market.
Other factors pressuring the affordability of the NMW
While increases in the NMW have anchored many displeased remarks by experts on the fragile state of businesses and homeowners in South Africa, other significant factors lend to the “unaffordability” of the increases in the NMW.
Included in his response, minister Nxesi noted that a more direct driver of job losses at the aggregate level was the effects of Covid-19 and the country’s lockdown policies, not any changes in the NMW.
“While there are legitimate concerns about the impact of the annual national minimum wage adjustments on employment in the country, it is worth noting that the Covid-19 pandemic negatively affected employment as many business establishments closed down and many people left unemployed,” said the NMW Commission.
“Over 2021 and 2022, the Covid-19 pandemic coincided with the period of the national minimum wage adjustment, making it difficult to evaluate and isolate the impact of an increase in the national minimum wage from the effects of the pandemic,” it added.
Additionally, when commenting on the planned NMW increase for 2023 – announced in February – attorney and National Collective Bargaining Co-ordinator for the Consolidated Employers’ Organisation (CEO), Daniel van der Merwe, voiced concern for the sustainability and possibility for survival of Small to Medium Enterprises (SMEs) across South Africa.
However, although the wage increase was part of his criticism, he pointed to the challenging environment in South Africa as the main reason for the increased wage unaffordability.
“SMEs are held hostage by ever worsening load shedding and lower labour productivity levels, which have increased unemployment levels,” he said.
“It is illogical to place already-overburdened employers in a more perilous position rather than looking for ways to stimulate the economy and create more jobs.
“Focus should be directed at rectifying the issues within the economy, stimulating growth and looking for ways to weed out corruption and create employment,” he added.
Regarding the struggling employment numbers of domestic workers, data published by SweepSouth showed that the cost of living crisis and emigration and semigration had a part to play in South Africa.
SweepSouth estimates that around 100,000 female and 25,000 male domestic workers have lost their job since its last report.
“Job losses were dominated by two causes: employers no longer being able to afford the services of their domestic worker and their employer moving homes,” SweepSouth said.
More than a quarter (28%) of domestic workers said they lost their job because their employer had moved: 33% of the employers moved to a different town or city in South Africa, while nearly half (48%) moved to another country.
Van der Merwe noted 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.
As of March 2023, the NMW increased by 9.6% from R23.19 per hour to R25.42 per hour – equating to roughly R4,270 per month.