PAUL MARITZ: SA’s problem isn’t low wages, it’s no wages

The real minimum wage in SA isn’t R28.79 an hour — it’s zero. That’s the brutal reality for millions of unemployed South Africans, for whom the minimum wage is not a safeguard but a locked door keeping them out of the job market entirely.

Instead of addressing this crisis of exclusion, employment & labour minister Nomakhosazana Meth has chosen to make it even worse. Her unilateral decision to impose a 4.2% increase in the national minimum wage isn’t just legally suspect — it is economically reckless. By bypassing public consultation, parliamentary oversight and the necessary due process, she has side-stepped what should have been a potential policy debate.

But beyond the procedural illegality, the bigger question remains: what good is a minimum wage when millions have no wage at all? While Free SA and other advocacy groups are rightly challenging the minister’s procedural overreach, there is a larger and far more tragic reality at play: SA’s crisis is not about low wages; it is about no wages at all. 

Mirage of higher wages amid unemployment 

There is something perversely ironic about politicians celebrating higher wages in a country where millions cannot find work at any wage. The latest Quarterly Labour Force Survey for the fourth quarter of 2024 shows a slight dip in the official unemployment rate from 32.1% to 31.9%, with 132,000 more people employed and 20,000 fewer unemployed. But in a labour market where more than 7-million South Africans remain jobless, this is a hollow victory.

Raising the minimum wage does not change this grim reality. If anything, it worsens the problem. Businesses struggling with load-shedding, weak demand and suffocating regulations do not have the luxury of simply absorbing wage hikes. They react by shedding jobs, automating processes or shifting to informal labour, where workers have no legal protections at all.

This is not theoretical scaremongering. According to the government’s own data, the last minimum wage hike in 2024 resulted in the loss of 280,000 jobs. That is not an abstract number — it represents families plunged into further economic despair, young people losing their first job opportunities, and small businesses closing their doors forever. 

Minimum wage policy as political fig leaf 

One of the great contradictions of SA’s minimum wage laws is that they are routinely ignored. About 5.3-million people already work for less than the legal minimum wage. This tells us something fundamental: laws do not dictate economic reality. Instead of helping workers, the minimum wage has simply driven employment underground, where informal and unprotected work thrives.

It is worth asking: who benefits from a minimum wage increase that cannot be enforced? Certainly not the millions who remain unemployed. Not the small business owners forced to let go of employees. Not the farmworkers whose jobs are mechanised in response to rising labour costs. The only real winners are politicians and labour unions who get to claim a "victory" for workers while ensuring that fewer of them are actually employed.

At its core, the minimum wage debate in SA has become a convenient distraction from the country’s real economic failures. It allows the government to appear proactive in supporting workers while avoiding the hard discussions about why businesses are reluctant to hire in the first place. High wages do not create jobs — growth does. Yet, government policies continue to undermine investment, job creation and entrepreneurship. Until unemployment is addressed, a minimum wage will become a luxurious item on a political checklist, an item we can clearly ill afford.

If the state were serious about tackling unemployment, it would not be fixated on setting this higher wage floor that businesses cannot afford. It would be reforming labour laws to make it easier to hire, cutting red tape for small businesses, and investing in skills training that makes workers more valuable to employers. Instead of the common sense approach, the government seems to be clinging to an ideological commitment to wage regulation, even as unemployment remains one of the highest in the world.

At this point I can’t help remembering the words of the Bolshevik revolutionary Nikolai Bukharin, who in the early 1920s, as Russia was struggling under famine and extreme poverty, said of the Soviet economic approach: “We are making economic concessions to avoid political concessions.” A century later, instead of admitting that its ideology is a flawed base, the SA government is again trying to force an economy into following its ideological world view. If it didn’t work in 1920s Russia, why would it work in 2020s SA?

Rather than protecting the working class, the minimum wage disproportionately harms the poorest South Africans — the unemployed and informal workers. While unions and politically connected sectors benefit from wage hikes, those at the economic margins are priced out of the labour market entirely. The poorest workers are not bargaining for better wages; they are bargaining for any wage at all. At some point, surely, the minister must allow policy to be informed by reality? 

SA already operates a de facto two-tier economy: one where formal businesses are forced to comply with minimum wage laws; and another where millions of informal workers and small businesses simply ignore them. This means in practice the state is merely increasing the compliance burden on formal employers while leaving much of the economy untouched. This incentivises businesses to either exit the formal sector or hire informally, worsening tax compliance and labour protections. 

From minimum wages to maximum jobs 

SA simply does not have a low-wage crisis; it has a no-wage crisis. Until we start addressing the real reasons businesses are not hiring, all the minimum wage increases in the world will do nothing to improve the lives of the unemployed. A fair wage is one that is earned, not one that is legislated into existence. And the first step to achieving that is to ensure that more South Africans can enter the workforce in the first place.

To compete in a fast-paced international economy where other countries are being proactive and striving for real growth, we must be able to compete. Current legislation is causing the SA economy to have another break-pedal where the gas-pedal should have been. 

The dignity of work is not found in the wording of a government gazette, nor can prosperity be decreed into existence. SA’s path out of mass unemployment lies not in mandating higher wages, but in ensuring that more people have the chance to earn them.

A labour market that prioritises inclusion over ideology, and opportunity over regulation, is the only real solution. Until then, the country’s minimum wage will remain exactly that — for millions of South Africans it will be nothing at all. 

• Maritz is director of Free SA.