South Africa implements first ever national minimum wage – but leaves poorest out

Signal of change / South Africa implements first ever national minimum wage – but leaves poorest out

By Courtnee O'Neill / 21 Dec 2016

In a bid to tackle this extreme divide between rich and poor, South Africa’s government has proposed to implement a minimum wage for the first time. The 20-rand-an-hour ($1.40 roughly), equivalent to a monthly wage of 3,500 rand (USD242), will be implemented within the next two years.

It will reach all workers except those in the domestic, agriculture and small business sectors.

South Africa’s domestic workers already earn 76% less than the projected minimum monthly wage, however the measure does not apply to the countries’ poorest workers. Reasons behind this are through fears of it leading to further job losses as opposed to growth. The University of Cape Town predicted job loss rates between 500,000 to 750,000.

So what?

A commonly used measure of inequality, the Gini Coefficient, has consistently determined South Africa to be one of the most unequal societies in the world. The World Economic Forum also found very little change in the ‘economic power balance’ of the country over the past 21 years of democracy.

A startling 26.7% of South Africa’s population are unemployed, its highest figure since 1995. Out of the estimated 5 million that are unemployed, 3.7 million are under the age of 35 and 170,000 are educated to degree level.

Whilst the implementation of minimum wages has transformed the lives of many across the world, such as in Brazil, it can also serve to reinforce inequalities.

How can the South African government ensure the growth of a more inclusive economy, without hurting those at the bottom?

Sources

http://www.bbc.co.uk/news/world-africa-36367703 http://qz.com/842428/south-africas-plan-to-reduce-its-massive-wage-inequality-leaves-out-its-poorest-workers/ https://businesstech.co.za/news/wealth/144233/what-unskilled-workers-already-earn-vs-national-minimum-wage/

What might the implications of this be? What related signals of change have you seen?

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