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Give national minimum wage a chance - Treasury

Jul 07 2018 10:00
Khulekani Magubane

Cape Town – The current proposed national wage formula is different from the data set National Treasury used to develop its initial calculations on the impact of the policy on jobs and the economy, and the policy should be given a chance in its current form. 

This is according to National Treasury, amid much speculation regarding how the national minimum wage will affect both the economy and jobs in the long term.

Treasury's initial research into the national minimum wage in 2016 estimated there would be major job losses if the policy were implemented recklessly. 

However, Treasury has told Fin24 this week this would only occur with the proposed levels it used in its initial research. 

Democratic Alliance leader Mmusi Maimane recently sought clarity from President Cyril Ramaphosa on this through a written question in Parliament.

The national minimum wage will locate its legislative power within the National Minimum Wage Bill, the Basic Conditions of Employment Amendment Bill and the Labour Relations Amendment Bill, which are currently before Parliament.

Responding to questions from Fin24, National Treasury said the impact of the national minimum wage on the economy and jobs would vary, depending on the economic circumstances when it is introduced - not purely on model projections.

"The national minimum wage has been formulated after lengthy consultations among social partners. When we did the initial estimates, we had a set of data and assumptions, including the anticipated level of national minimum wage, all of which have changed since the study was completed," Treasury said.

"The practicalities of how the national minimum wage will be rolled out, including the exemptions process and the simplicity of communications, also affect the final outcomes," said National Treasury.

The independent panel’s analysis highlighted that there were a number of areas of uncertainty in understanding the impact of the national minimum wage, which required detailed further study.

"We have not had a change of heart. We were requested to provide a CGE modelling exercise of the potential impact of a number of scenarios relating to the national minimum wage, which is what was produced," Treasury said.

In a question submitted to Ramaphosa’s office in June, Maimane asked: "What steps will the Government take to mitigate the estimated 715 000 job losses that will ensue as a result of the introduction of the minimum wage, as predicted by the National Treasury in November 2016?”

In response, Ramaphosa said the impact of the national minimum wage on jobs would only be known with certainty in the years following its implementation.

"At present, there are different estimates of potential job losses, if any, but research has also pointed to potential productivity gains associated with higher earnings and the positive effects of increased household expenditure," said Ramaphosa.

National Treasury said it looked forward to gaining a deeper understanding of the labour market from this research.

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