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Minimum Wage increase: DA warn of unemployment knock-on effect

With the national minimum wage having been increased by 4.5%, the DA fear that employers will feel the pinch and move to modernise workplaces.

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The Democratic Alliance (DA) have suggested that the above-inflation increases to the National Minimum Wage (NMW) – which have now been mandated at R21.69 per hour (an increase of 4.5%) – will actually lead to further job losses and jeopardise the financial security of more South Africans than are currently trapped in the depths of poverty.

The minimum wages for domestic workers and farmworkers have also been increased by 23% and 16% respectively after the National Minimum Wage Commission noted that inflation for poorer households is currently significantly higher than for higher-income earners, due to the sharp increase in food prices seen in 2020.

‘Minimum wage increase will force industries to turn to technological solutions’

Michael Cardo, the DA’s Shadow Minister of Employment and Labour, said that few sectors will be able to absorb such steep increases at a time of serious economic decline.

“As it is, the domestic service sector has been particularly hard hit by COVID-19 with many employers struggling to keep on their domestic workers. In the agricultural sector, research has shown that large legislated wage increases cause extensive job losses,” he said.

Cardo insisted that a double-digit increase in the minimum wage will “in all likelihood lead to increased mechanisation”, which in turn will result in widespread job losses in the agricultural sector.

“The DA supports sustainable wage increases in the agricultural- and domestic service sectors,” he insisted but said that the party does not believe that increases should be forced by way of regulation.

“Increases should be determined by employers and trade unions entering into negotiations. With due regard to NMW legislation as it stands, however, the DA would have preferred the Minister to take the current economic climate into consideration and apply inflation-related increases.”

‘Private sector will not cope’ – DA

Cardo turned his attention to a perceived failing from government to properly implement wage policies and warned that private sector employers will struggle to cope with the newly mandated regulations.

“The government itself had to renege on the three-year wage agreement that it entered into with public servants because of financial constraints,” he said. “Many employers in the private sector will now find themselves in a similar situation.”

“Recent history has shown that the high level of wages paid to unskilled workers, and the pace at which these increases have risen, is one of the key factors in fuelling unemployment.”

The wage increases were announced on Monday 8 February in the latest government gazette and come into effect on 1 March 2021.