Why minimum wages will devastate SA economy - Fin24 user | Fin24
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Why minimum wages will devastate SA economy - Fin24 user

Nov 07 2016 19:17

Cape Town - As South Africa moves towards the realisation of a national minimum wage, an entrepreneur adds his voice to the debate.

Deputy President Cyril Ramaphosa appointed a panel to deliberate on an appropriate national minimum wage.

However, economists and business have mixed views, with some argueing that it will reduce poverty and boost economic growth, while others believe it will hamper job creation in South Africa.

Wynand Meyering writes:

The minimum wage is nonsense, you see the government or business has to do something in the economy. Lets say build a building - if you have hundreds of workers that now demand high minimum wages, you automatically can't afford to build the building or build as many buildings.

Now extend that to everything else: imagine you can build far less homes, far less roads, far less hospitals, far less schools, far less highways, far less cars, far less of everything. Building stuff, doing anything that involves labour will become far more expensive.

We will be able to build and do less and less the higher the labour costs increases. The labour may get a wage increase, but the entrepreneur still has the same amount of money in his pocket that he started with and he can now do far less, buy far less than usual.

And what does labour usually spend their money on? Food. So unless the entrepreneur sells food, he won't be getting his money back. So wages increases for the labour, but the income doesn't increase for 95% of the entrepreneurs in the economy, only the supermarkets.

The poor generally spend their money on imports. Lets say the person buys petrol and oil, that is a win for Saudi Arabia and Iran. If they buy clothes that will benefit India and China.

We won't see any of that money in terms of higher incomes because the money will leave the country. So South Africa will be able to produce and do far less year by year, the higher the minimum wages is increased to.

Disclaimer: All letters and comments published in Fin24 have been independently written by members of the Fin24 community. The views are therefore their own and do not necessarily represent those of Fin24.

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