MINIMUM WAGE SLASHES 400 000 JOBSS 400 000 JOBS

Mon 20 January 2025:

South Africa’s minimum wage has been linked to the destruction of 430,000 jobs since its introduction in 2018, according to the Institute for Race Relations (IRR). Low-wage workers and small businesses have been hit hardest.

An estimated 227,800 jobs were lost in 2024 alone, while over 5.3 million people continue to earn below the mandated hourly rate of R27.58.

Citing data from the Development Policy Research Unit, Gabriel Crouse, legal executive director at IRR, said: “4.8% to 8.1% of low-wage workers have been rendered jobless by the NMW since 2019, and that is not even including peak periods during the government-imposed Covid lockdown. Assuming the population of low-wage workers has had an approximate mean of 6.7 million over that period, that amounts to between 321,600 and 542,700 jobs destroyed by the NMW.”

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“In other words, the best available estimate for the total number of jobs destroyed by the NMW to date is roughly 430,000 among low-wage workers,” he continued.

The NMW Commission has proposed increasing the minimum wage by inflation plus 1.5% for 2025. Employment minister Nomakhosazana Meth is expected to announce an adjustment in February. But Crouse argued the minimum wage should in fact be reduced, considering the jobs it has cost.

“It is estimated that cutting the NMW by 25% would bring all, or most, of the destroyed jobs back. Since reducing unemployment is the number one priority, this is what the NMW Commission ought to recommend,” he stated.

The National Minimum Wage Act was designed to protect workers by ensuring a baseline income, but critics argue that it has placed pressure on small businesses. Many employers, particularly in small, medium, and micro-enterprises, find the NMW unsustainable, leading to layoffs and non-compliance.