Mandatory above-inflation minimum wage increases will fuel job-shedding and hamstring small businesses

Issued by Dr Michael Cardo MP and Jan de Villiers MP –
22 Feb 2023 in News

The DA is concerned with the recent announcement of a 9.7% increase in the national minimum wage. This is a significant increase, well above the National Minimum Wage Commission’s original recommendation of inflation plus 50 or 100 basis points.

With inflation hovering around 6.9%, a more reasonable increase would have been 7.9%. The fact that the government has chosen to ignore this recommendation is a clear indication of its disregard for the well-being of small businesses and the unemployed. Few sectors will be able to absorb such steep increases at a time of serious economic decline.

The government’s decision to implement this above-inflationary increase in the minimum wage will have a detrimental effect on small and medium-sized businesses; they are already struggling to cope with rampant load shedding, rising inflation, and other economic challenges.

This increase will only add to the burden of businesses, which will be forced to absorb the additional costs and pass them on to consumers, thereby exacerbate the cost-of-living crisis which is already affecting millions of South Africans.

Small businesses are the backbone of our economy; they have enormous potential to create jobs. These businesses will be disproportionally affected by the 9.7% minimum wage increase. They cannot be expected to bear the brunt of government’s failure to adopt a more inclusive labour market framework, and this above-inflationary increase which will leave them with no other choice but to shed jobs, thus fuelling South Africa’s already high unemployment rate.

It is imperative to liberalize the labour market and promote a more business-friendly environment. The current approach of imposing above-inflationary increases in the minimum wage without considering the impact on small businesses is counterproductive and unsustainable.

We call on the government to reconsider the above inflationary increase in minimum wages. In a country with unemployment as high as South Africa’s, we should be pricing people into jobs, not out of them. The DA remains committed to fighting for the rights and well-being of small businesses and the unemployed.