Minimum wage helps SA skirt development traps
A national minimum wage can play an important role in reducing inequality and contributing to sustained development in SA, writes Hansjörg Herr
SA’s lacklustre rates of economic growth and high unemployment may indicate that it is caught in a "development trap". These traps can occur because of a lack of productivity growth that fails to catch up to levels in developed counties; bad macroeconomic management, for example high inflation or financial crises; or high levels of inequality. SA may suffer from all three development traps that need to be overcome in order to secure economic development. Inequality appears to be the most serious of the three, with SA belonging to the group of countries with the highest inequality in the world. A national minimum wage can play an important role in reducing inequality and contributing to sustained development in SA. Researchers from the International Monetary Fund and elsewhere have concluded, on the basis of large empirical studies, that inequality is a major factor that holds back development. Long-term and sustainable growth periods are especially unlikely for countries with high i...