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Sat May 27 23:11:29 SAST 2017

Minimum wage 'will boost GDP'

Penwell Dlamini | 2016-02-03 00:54:07.0
Mandela notes. File photo.
Image by: SIPHIWE SIBEKO / REUTERS

The benefits that South Africa will reap in adopting a minimum wage far outweigh the negative impact that the policy could have on the labour sector and the economy.

This was the overwhelming view of experts at a symposium hosted by the University of the Witwatersrand to discuss the pros and cons of a national minimum wage in South Africa.

At present, South Africa has 11 sectoral labour determinations that cover 45% of vulnerable workers.

Gilad Isaacs, researcher at Wits School of Economic and Business Science said the adoption of the minimum wage would help address some of the country's inequality problems.

"The outcome of our statistical modelling shows that an increase of wages through a national minimum wage can have a positive impact on wages, demand for goods, output and therefore on growth. We see a minor negative impact on employment, which is offset by large gains in the decline of inequality and poverty," said Isaacs.

He said research showed that the average worker would need R4125 to cover costs. This is the estimated national minimum wage.

"Anyone under this amount is classified as working poor."

But the implementation would need to have targets for it to achieve its objectives.

"We need to think about how we set it, so that it reduces inequality. For us to do that the national minimum wage has to increase every year faster than average wages or we are not going to achieve the kind of inequality impact we desire," said Isaacs.

Senior researcher Lotta Takala-Greenish said there were considerations to be made when implementing the minimum wage as sectors would respond differently.

"You need to remember that when you introduce minimum wages at national level, some areas of the economy will struggle and some areas will benefit. Some sectors of the economy are more labour-intensive, some pay lower wages than others.

"It becomes all about understanding the economy. You may say that companies in this sector must be given a specific subsidy to phase in the national minimum wage slowly," said Takala-Greenish.

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