The Democratic Alliance (DA) is stirring controversy with its critical stance on South Africa’s national minimum wage. Despite opposition claims of “hating workers,” the DA argues that high minimum wages lock people out of jobs, especially in a country with high unemployment rates. Their proposal aims to offer exemptions for certain groups, challenging conventional views on wage policies and sparking a debate that could reshape political dynamics around employment and economic growth.
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By Ivo Vegter
The DA’s position on the national minimum wage has prompted predictable outrage from the left.
‘We appreciate that the DA is being honest about how it hates workers and how it doesn’t want to see them earn a living wage’. Matthew Parks, labour union federation Cosatu’s acting national spokesperson, told the Sunday Times. ‘A farmworker wanting simply to be able to buy a loaf of bread and pay for transport, buy electricity and feed his children – that they have a problem with. The DA hates workers and wants them to be treated like slaves.’
‘We must never let the DA fulfil their stated intention to scrap the national minimum wage’, President Cyril Ramaphosa told a Workers’ Day rally, according to News24.
‘Despite piles of economic evidence insisting minimum wage doesn’t hamper job growth, ladies and gentlemen, I present the DA’, smirked a left-wing journalist.
The Democratic Alliance (DA) provoked these outbursts by taking a critical position on the national minimum wage, both in its election manifesto, and in a newly-released economic policy document.
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Sound argument
Contrary to the headlines, it does not propose simply ‘to phase out the minimum wage’, but it has made a sound argument that ‘a dogmatic commitment to minimum wage policies and laws [will] lock South Africans out of the labour market, prioritise the interests of unions above the unemployed, and protect uncompetitive local industries’.
It points out that South Africa’s national minimum wage is more than three times the national upper-bound poverty line, and at 148% of the median wage is higher, relatively speaking, than it is in 30 other countries it reviewed. It argues that such a high minimum wage keeps people unemployed, and the data seem to support it.
The DA’s proposal is to issue a certificate to people between 18 and 35 who have been unemployed for a year or more, entitling them to be exempted from sectoral wage agreements.
This would give them two years during which they could enter employment at a wage below the sectoral minimum wage.
The DA’s policy also proposes to exempt small, medium and micro-enterprises from collective bargaining agreements to which they were not a party.
Contrary to the claims of its opponents, the DA says explicitly that it would not scrap the national minimum wage. It would merely not increase it, allowing inflation to erode its value over time.
Research
The claim that minimum wages don’t affect employment rates significantly is highly questionable. The research on the subject is often contradictory and is usually conducted in countries with high wages and near-full employment. In the United States, for example, there is debate over whether an increase of the minimum wage from 25% of the median wage to 50% of the median wage would cause significant job losses.
The quality of research on minimum wages is universally poor, because it is hard to control for confounding factors.
Some recent research suggests that South Africa’s 2019 national minimum wage laws did not lead to an associated decrease in employment, but that could easily be explained by the fact that most employers have already cut the cost of labour to the bone.
There is other evidence, however, that suggests higher minimum wages do have a negative impact on employment. In 2019, about 1.2 million domestic workers were employed in South Africa. By 2023, a third of those had lost their jobs, and many of the survivors are working fewer hours. There were, of course, other factors that influenced domestic employment, but affordability was cited by one in four survey respondents as the reason for their disemployment.
The national minimum wage, which has risen by 38% over the last five years, certainly did not lead to greater employment, which stands to reason.
While large companies may be able to absorb legislated wage increases, albeit by raising prices (and therefore hurting the poor), smaller enterprises, for whom each additional employee constitutes a significant cost to the company, will respond to higher minimum wages by putting off hiring more people as long as they can, and trying to operate with as lean a staff as possible.
Supply and demand
A wage is simply the price of labour. The belief that supply and demand respond to prices in everything except labour is far-fetched. Forbidding people to take jobs that pay less than a government-determined minimum, in a country with 42.4% unemployment (if you include discouraged work-seekers), is perverse.
In principle, the DA’s proposal should not be limited to people between 18 and 35 or people who have been unemployed for a year. Also, it should not be valid for only two years.
Instead of viewing a minimum wage as an obligation on the part of employers, it can be viewed as a prohibition on unemployed people voluntarily accepting jobs that pay below the minimum wage.
It should never be illegal to choose a low-paying job over a R350 social grant, even if that job pays less than unions, socialists and left-wing commentators would like.
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Attacks and caricatures
The question is whether the DA should have started this fight just before the election. The populist attacks and caricatures write themselves.
Low-wage workers, such as those represented by Cosatu’s member unions, will never countenance lower minimum wages. But then, Cosatu’s workers are mostly ANC voting fodder anyway. The chance of turning them to the DA is slim.
For the DA to win this battle, it needs to pitch its case, loudly and in plain English, to unemployed people. There are 7.9 million of them, on the narrow definition of unemployment, and more then 10 million if you include discouraged job-seekers.
Sure, it does appeal to the unemployed in its economic policy document, with a trenchant example involving a fictional Sipho, but the unemployed are unlikely to read that.
DA campaigners need to be out there, among the people, saying that they don’t hate workers, but they do hate unemployment. A low-paying job is not slavery, but is an alternative to earning nothing at all. They need to say that if the ANC and Cosatu love workers so much, as they claim, why are there so few workers, and so many unemployed?
If the DA can turn one in ten unemployed people into DA voters, they’d have a million new votes in their pockets (compared to the 3.6 million votes it got in total in 2019). If so, being ripped again by left-wing commentators and opposition luminaries will have been worth it.
If it cannot turn its minimum wage position into lots of votes, then it is just another example of the DA shooting itself in the political foot, even if it is in principle quite correct.
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This article was first published by Daily Friend and is republished with permission
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