NEWS & ANALYSIS

Minimum wage debate can't afford to ignore the unemployed - Ian Ollis

DA MP says minimum wages must be sector specific, perhaps localised, with multiple exemptions

Minimum wage debate cannot ignore the 8.4 million unemployed

11 November 2015

Note to editors: The following speeches were delivered in Parliament today by the DA Shadow Minister of Labour, Ian Ollis MP, in the Minimum Wage Debate. 

My friend Larry’s sister Julia managed to complete her BA degree at Wits. She then began looking for work in Johannesburg. Four years later she hadn’t found a job, being repeatedly told she had no experience. She ended up taking a position as a Domestic Worker in Sandton. After trying to improve her situation she noticed an advert in a newspaper for an agency, which could place you overseas in a decent job. She borrowed the money for the deposit, and was quickly placed as a trainee nurse in London. She has progressed since then and is now an accounts manager at a firm in England. 

South Africans need real job opportunities, in the country, not overseas. 8.4 million South Africans wait for this every day. Giving R300 or R400 extra to someone via a minimum wage might provide a little help for those who already have a job, while ignoring those 8.4 million South Africans who sit on the side of the road in Alexandra, Ekhuruleni or Mamelodi every day looking for work. They need our urgent help. 

The national minimum wage debate does exactly the wrong thing. It attempts to ease our consciences appearing to do something for the poor, when actually we are just making it more difficult for those 8.4 million unemployed people to get jobs or just plain ignoring them completely. 

Let me be clear on the DA’s policy: the DA is not against minimum wages, but we reject politicians who try to use minimum wages to buy votes. Minimum wages must be sector specific to curb job losses in marginal industries such as textiles and more recently steel, as well as those where rapid increases will lead to job losses such as agriculture, security services and domestic work.

Sectoral wages must be set by an independent Minimum Wage Commission, made up of experts in economics and international labour policy. We do not need politicised labour clashes resulting in unrealistic and sudden wage rises leading in turn to job losses. This happened in the Agricultural sector. It is commonly agreed by researchers that the agricultural sector suffered massive job losses as a result of   radical increase in minimum wages. The risk of job losses from a National Minimum wage is immense. 

The DA believes that we need to exempt students, the youth and interns from minimum wages as well as workers applying for jobs in small and micro enterprises in order to help people with no experience get their first job. If you don’t, minimum wages will lock out those who don’t have experience like my friend Larry’s sister, Julia.

If you implement a National Minimum Wage instead of a sector specific system of minimum wages, as happened in Germany, you end up with a much, much longer list of exemptions to prevent job losses. These vast exemptions make a mockery of the national minimum wage. Germany has over 75 exempt groups. One size does not fit all!

But let me tell you about Sibongile. She works for a bank in Johannesburg. Her husband qualified as a teacher, but is unemployed. Her mother and father are also unemployed. Her sister is not working and gave up studying in a TVET type college as she didn’t have the money to finish. Here’s the problem: It does not matter if you create a national minimum wage, as the ANC wants to do, or implement the EFF’s R4.500 per month. None of these options will help Sibongile or her family one bit. Her 4 family members along with 8.4 million other South Africans, spend the day looking for work or wishing they had a job. A National Minimum Wage might actually make it even harder for them to get a job.

Minimum wages if properly implemented sectorally by experts not connected to political parties, may help some people get sustainable realistic increases, but what about that 8.4 million unemployed? They are the ones suffering, not the bricklayer who has a job, or the welder who works on cars!

How do we create jobs in South Africa?

According to the ILO, 85% of all new jobs in the EU are created by SMMEs. That’s  an opportunity! We need policy to rapidly grow SMME’s by making it easier to register a business, by incentivising smme’s to take on apprentices, and by exempting them from skills levies etc.

We must sell state assets to fund infrastructure investment and slash the staggering R25bn bill for consultants, travel and catering in order to afford investment expenditure.

Instead of more cake and catering, we need to build dams, sewer plants, and replace the aging water infrastructure in our cities. 

Instead of lavish hotel bills we need new rail lines to be built such as the Moloto rail corridor, as well as rapidly increasing capacity on the Durban- Gauteng rail corridor that is strangling the economy. Instead of massive consultant’s bills we need…. You get the picture!

Unless the infrastructure is just vanity projects, it creates jobs twice: Once during construction and the second time by speeding up the economy through faster transport, increased electrical and water capacity, increased tourism and access to new export markets.

Instead of scoffing at the private sector, we need to harness it in a healthy relationship with government to leverage new business. The Western Cape and project to provide free and subsidized Internet infrastructure is available to companies to set up new internet based businesses in SA. This has seen over 4400 call centre jobs created in Cape Town in the past 12 months as a result of foreign companies moving to South Africa. Over 3 of 4 years it now amounts to 9600 new jobs in the Western Cape, according to stats released by Business Process enabling SA (BPeSA). A National Minimum wage is not going to help that industry take on more people.

Even the Chinese model of localised minimum wages will be better for South Africa than a National Minimum wage. 

DA Leader Mmusi Maimane recently visited Keimoes and Calvinia  which show a 50% unemployment rate. How will a national minimum wages fix this problem?

Finally, we should examine the numbers and create a reliable model of these demands that are thrown around by political parties. 

At a National “one size fits all” minimum wage of R4500, which the EFF is demanding, research is indicating the potential for 1.6 million people to lose their jobs over a 3-year period.  This includes , 1.1 million youth (under the age of 24) This will push up the narrow unemployment rate from 25.5% to  over 33.3%.

Incidentally, the EFF’s manifesto launched on 22 February 2014 wanted sectoral minimum wages for a host of different numbers for each sector. Farmworkers R5000, Construction workers R7000. Etc.  Now today they want R4500 for everyone except Mineworkers at R12500. Where is the research? Thumb sucking isn’t research. It’s Christmas soon and next week the EFF will probably want Rolls Royces for everyone! Hypocrisy is different to policy, honourable members. It doesn’t’ require a brain.

After Ministers Davies, Patel and Gigaba have wrecked the South African economy with their policy disasters, I am sure the EFF will also want to have a go. After they are finished there will probably be nothing left in the economy to salvage. Let’s create new jobs

Issued by the DA, 11 November 2015