Tough questions for political parties (Part One) — the DA and the National Minimum Wage

The DA is opposed to the National Minimum Wage (NMW) on the basis that it destroys jobs and worsens poverty. However, there is no evidence for this in research on the South African labour market, and the international literature.

If anything, as we show below, the evidence suggests that removing the NMW, or reducing the wages of the low-paid, will increase poverty and hunger and won’t achieve the objective of employment creation.

Let us look at the evidence about farmworker wages in South Africa, one of the lowest wage sectors in the SA economy, over the last five to six years. During this period, when the NMW was introduced, there was a significant real increase in farmworker wages — their (nominal) wages have increased by nearly 80% since 2018 (see charts below).

According to the DA’s theory, the introduction of the NMW should have led to large-scale job destruction in the agricultural sector. But the opposite has happened: instead of the predicted jobs bloodbath, agricultural employment over this period increased by nearly 12% or 91,000 jobs. This is despite the devastating loss of jobs during the 2020/21 Covid period.

The reality is that in the agricultural sector, as in all other sectors, there is no automatic relationship between the level of wages and the level of employment. Employment levels depend on a range of economic conditions, including the macroeconomic environment, industrial policies, trade, domestic demand, etc.

Following the DA’s logic, we could disingenuously argue, based on this example of farmworker wages, that the increase in minimum wages leads to an increase in employment and income. But this would be to confuse correlation with causation.

Equally, there is no credible evidence in South Africa’s history, or internationally, that depressing wages automatically leads to job creation. What it does lead to is the deepening of poverty and inequality.







The second leg of the DA’s argument is that promoting low-wage jobs would combat poverty and hunger. This argument is advanced on the assumption that additional jobs would be created and that this would combat poverty, no matter how low the wage. 

However, the logic of the DA’s proposals would be to displace workers currently protected by the NMW with ultralow-wage younger workers, desperate to accept jobs at any wage, who would sign a bizarrely named “opportunity certificate” agreeing to be employed at any wage, no matter how low. Experience and evidence suggest that existing jobs would be degraded, without any significant job creation. 

While the DA claims it wouldn’t remove the minimum wage for existing workers (probably because its members are afraid of alienating the roughly six million workers who have benefited from the NMW), exploitative employers would use the DA scheme to seize on the opportunity to replace their existing workers with ultracheap labour.

The probable result of this would be a displacement effect, which has been documented, for example, with the youth wage subsidy, which shows no meaningful creation of new jobs: instead of new jobs being created, older minimum-wage workers will be replaced by ultra-exploited young workers.

Third, the #DA assumes that getting young people into these low-paid jobs will combat poverty and hunger. But its proposals will have the opposite effect: worsening poverty and hunger among workers and their families by depressing wages below the level required to meet basic necessities. 

South Africa already has a major problem of working poverty — ie, serious poverty and hunger among workers, even though they have full-time jobs. The challenge is to improve wages to combat working poverty. This was the intention of the NMW. By depressing already low wages, the DA would plunge thousands of workers deeper into hunger and poverty. 

A 2023 Wits University national study on hunger — see below — found that the level of hunger was alarming among households with an income of less than R5,000 per month (roughly the current level of the NMW for a 45-hour working week). About 40% of households with an income of between R2,000 and R5,000 experienced food insecurity or were at risk of hunger and around 50% of households with an income of between R400 and R2,000 experienced food insecurity or were at risk of hunger. 

In other words, the DA’s proposals to suppress the wages of low-paid workers below the current NMW will, if implemented, plunge hundreds of thousands of workers and families into hunger and poverty, contrary to the noble intentions claimed.

Hunger and income