R5000 minimum wage could hurt the most vulnerable, warn researchers

A national minimum wage of R5000 a month would lead to job losses among the very workers that it seeks to protect, a new report warned today. 

This was among the unintended consequences outlined by University of Cape Town professors Jeremy Seekings and Nicoli Nattrass in the 2015 Transformation Audit report of the Institute for Justice and Reconciliation. 

Urging policymakers to proceed “with caution”, the report noted that the effect of a R5000 minimum wage as proposed by Cosatu would be “considerable job destruction” not only in agriculture and clothing manufacturing, but also in private security, retail and domestic work. 

“More worrying, the pattern of job destruction would disadvantage the very poor and the poor more than the non-poor.” 

Saying that it was crucial to understand how minimum wages affected employment, the report said that higher wages resulted in higher household incomes only if workers in poor households kept their jobs. 

“If they lose their jobs, then they are worse off.” 

A R5000-a-month minimum wage would in real terms double the lowest sectoral minimum in low-wage sectors such as clothing and domestic work. 

Domestic workers and security guards already earning close to R5000 a month would be more likely to keep their jobs while those working for less – in low-income urban and rural areas – would be more likely to lose their jobs, said the report. 

“The result would probably be even greater polarisation between the poor and the non-poor, and between rural and metropolitan areas.” 

Amid the challenge of persistent poverty and inequality in the country, the authors suggested alternatives, such as: 

» A more “pro-poor growth path” through wage subsidies for the unemployed; 

» Land reform; and 

» Strengthening the current system of setting minimum wages on a sectoral basis. 

“Increased taxation of the rich, to finance these programmes, would also serve to reduce inequality in disposable income.” 

At its 12th national congress in December, Cosatu called for a national minimum wage of between R4125 and R5276.