Over-legislation of the labour market will only harm employees

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A national minimum wage (NMW) will be detrimental to the labour market, says the business watchdog AfriBusiness. It is especially the youth of South Africa between the ages of 15 and 24 who will find it increasingly difficult to enter the workforce.

Deputy President Cyril Ramaphosa has signed the agreement for a NMW of R20 per hour, which will come into effect on 1 May 2018.

A NMW will cause more employers to think twice before employing people. The over-regulation of and ongoing government interference in the labour market will inevitably only cause more hardship and poverty than the intended alleviation thereof. Although Ramaphosa recently stated that the implementation of a NMW would uplift 6,6 million people, his statement did not take into account the increasing number of young people between the ages of 15 and 24 who are not employed, studying or learning a trade.

Statistics South Africa (SSA) indicated in their 2016 Quarterly Labour Force Survey, that young people aged 15 to 24 who are not employed, studying or learning a trade amount to 30,1% of their age group – an increase of 1% from the previous year. However, the more worrying reality is that young people between the ages of 15 and 34 years constitute the largest portion (19,7 million) of the 35,8 million working-age population according to a report by SSA that was released in 2015 – therefore more than 50% of the workforce.

From this follows that from the 26,4% of the workforce that is unemployed, the majority of these are between the ages of 15 to 34, which is the age-group that will most likely be willing to work for a NMW as they are at the beginning of their careers.

The implementation of a NMW will only broaden economic disparities to such an extent that more of the working-age population won’t receive an income. Employers will now have to reconsider the number of employees they employ and the number of hours worked, especially in economically trying times.

“You cannot legislate the poor out of poverty. The government should rather introduce and implement more strategies to ensure that jobs are created and that more people can enjoy the fruits of a free market system. By legislating more laws to confine and limit the principles of such a system, the state is only creating a more socialistic state, which is detrimental to the economy and labour market,” says Charles Castle, Manager of AfriBusiness’s Labour Law Advice Unit.

It is trite that the government continuously struggles to ensure that a healthy economic environment is established and maintained. Increased interference by government will however only amplify poverty.