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Minimum wages damaging to employees and job seekers

Friday, February 1st, 2013

Legislation that imposes industry-wide minimum wages goes against the interests of employees and job seekers, and trade unions should oppose it, the Solidarity Research Institute (SRI) said today. This comes amid the review process on the determination of minimum wages in the agricultural industry and a court case against the enforcement of minimum wage requirements for the entire textile industry which started in the Pietermaritzburg High Court this week.

According to Piet le Roux, senior economic researcher at the SRI, wage agreements should be a matter of negotiation between employers, employees and their representatives, such as trade unions or employers’ organisations. ‘Of course entry-level wages can be agreed to through this kind of negotiation, but such agreements must always be tested against the circumstances of each place of work and its stakeholders. The transformation of an entry-level wage agreement to industry-wide minimum wage determinations through the power of legislation is harmful, regardless of how good the intentions may be,’ Le Roux said.

Le Roux believes that the disadvantage is threefold. ‘First, the jobs of the most vulnerable employees, such as young people who are still at the beginning of their skills trajectory, are sacrificed. Secondly, the process of employing new entry-level workers is hindered or even halted since these workers have often not yet reached a level of skill that would justify the new minimum wage – this makes for unemployment. Thirdly, the economic viability of the industry concerned is undermined which leads to higher consumer prices and the deterioration of employees’ career prospects.’

According to reports as many as 17 000 jobs in the textile industry are hanging in the balance under the threat of retrenchments due to industry-wide minimum wage enforcement. A substantial part of the approximately 660 000 jobs in the agricultural industry also stand to be affected negatively by any significant increase in this industry’s minimum wage.

Le Roux also pointed out that there is an even greater disadvantage to minimum wage determinations than the retrenchment of current employees. ‘The greatest tragedy is that minimum wage determinations are currently preventing many unemployed people from gaining employment. It is an unseen cost and cannot be measured, but is disastrous nevertheless.’

Le Roux emphasised that agreements about entry-level wages between consenting parties could be a meaningful labour practice, and that it should only be seen as detrimental once non-consenting parties are subjected to it.

Sustainable, real wage increases, according to Le Roux, do not flow from industry-wide minimum wage determinations, but from economic growth combined with continual improvement in the differentiated skill levels of employees. ‘Trade unions can make an important contribution by assisting members with negotiations, training, industry safety, labour law concerns and various social vulnerabilities. Precisely because trade unions must have the long-term interests of their members at heart, they should oppose industry-wide minimum wage determinations,’ according to Le Roux.

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