DA wants to phase out minimum wage

Official opposition says baseline pay prevents job creation by pricing workers out of the market

● If the DA comes to power after the May 29 elections, the national minimum wage of R27.58 an hour, or R4,412 a month, will be phased out.

This is one of the proposals the DA has made in its economic policy released on Friday — its first in more than a decade. Labour and employment minister Thulas Nxesi increased the national minimum wage, paid to blue-collar workers, from R25 an hour to just under R28 an hour in February.

But in its latest economic blueprint, the DA says the minimum wage is harmful to job creation, as it is expensive for companies, especially small, medium and micro enterprises.

John Steenhuisen’s party says if it wins the elections the minimum wage will not be increased “any further”, and its monetary value will be allowed to be “eroded” by inflation.

“The DA will address the harmful effects of the minimum wage on job creation and empower the unemployed by leaving the existing minimum wage in place without increasing it further,” reads the economic policy document. This will allow inflation to gradually erode its value, thereby progressively providing more opportunities for individuals to enter the labour market at wages they find acceptable.”

But the proposal has been slammed by trade union federation Cosatu, which said the DA was proving itself to be a party hostile to workers.

“We appreciate that the DA is being honest about how it hates workers and how it doesn’t want to see them earn a living wage,” said Matthew Parks, Cosatu’s parliamentary co-ordinator and acting national spokesperson.

“A farmworker wanting simply to be able to buy a loaf of bread and pay for transport, buy electricity and feed his children — that they have a problem with. The DA hates workers and wants them to be treated like slaves.”

Matthew Cuthbert, the DA’s head of policy, said yesterday the current minimum wage exaggerated the cost of labour.

“The supply and demand for labour follow the same market forces as other goods. When the labour supply exceeds its demand, as is the case in South Africa, the price of labour will fall.

“While the intentions of South Africa’s labour laws may be good, their outcomes are ultimately bad, as fewer businesses are prepared to hire [employees], resulting in increased levels of unemployment, poverty and inequality,” he said.

Cuthbert also indicated his party believed most unemployed people would be willing to join the ranks of the employed by working for less than the current minimum wage.

“However, with this minimum in place, an employer will only hire a person if they believe they will receive more value than what they must pay the employee. The minimum wage thus hinders hiring and results in a situation where new jobs are not created,” he said.

The DA also wants to reduce the number of sectors of the economy where prices are administered, citing electricity in particular.

It says administrative prices have risen radically in the last few years, pushing up both the cost of living and the cost of doing business.

Cuthbert cited a 2018 National Treasury report that said administrative prices had been increasing by an average of 7.8% a year since 1994, while non-administered prices had grown by an average of 5.5% a year.

“This means administered prices have increased by about 150% since 1994, while non-administered prices have increased by about 75%.

“The government has been unable to resist the temptation to raise administered prices above the inflation rate to supplement deteriorating tax revenues,” he argued.

“Administered prices tend to be on input costs such as fuel and electricity, which often hurt the poor the most.

“Cheaper input costs would reduce the cost of doing business and reduce inflationary pressures on both the consumer and businesses, thus contributing to economic growth. This would increase the amount of revenue collected by the state, reducing the government’s reliance on administered prices to supplement revenue shortfalls.”

But Cosatu also slammed this policy.

“The DA is not being honest about wanting to slash administered pricing. The city of Cape Town charges higher electricity tariffs than other municipalities in the country. They exceed what Nersa allows them to do,” said Parks.

The government’s current minimum wage policy attempts to reduce inequality by keeping the market price of labour artificially high Matthew Cuthbert