R20 can trickle down

WHEN crossing the road we should look both left and right. The new National Minimum Wage Act is slated by some, who argue it will lead to higher unemployment because higher wage bills will be unaffordable. These people paint a dark picture of layoffs and of manufacturing in retreat.

But if you look to the left, you see new consumers who can afford goods they could not have before. Production increases to cope with the new demand. More employees, not less.

There is some truth in both scenarios. Minimum wages tied to inflation tends to benefit small businesses selling goods small wage earners can afford.

They may not be able to afford a new Mercedes-Benz but it is universally accepted that it is small businesses that drive the economy, not a few big factories.

The big companies complain about pressure on their wage bill, but they can easily finance any increase in minimum wages with small trims to the bonuses and salaries of just one or two top executives. No need for layoffs.

When I was a young boy in Lesseyton at the foot of Mount Lukhanji just outside Komani, very few people could afford to buy a whole loaf of bread. You bought a quarter or half a loaf. If you had store credit you might swing a whole loaf, but this was for big spenders. It took merchants several days and several buyers to sell one loaf of bread. With increased wages, however, the time it took to sell a loaf of bread declined.

If we add R20 to our worker’s wages they may be able to buy more bread. If the corner store sells more bread the kid down the street may score a part-time job for school supplies.

– Wongaletu Vanda, via e-mail