Nicholas Woode-Smith: Here’s how minimum wage has killed 430 000 SA jobs in five years

Key topics.Minimum wage destroys jobs, with 430,000 lost in five years.Businesses can't afford to pay workers more than their value.Deregulation is key to reducing unemployment and boosting the economy..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..The seventh BizNews Conference, BNC#7, is to be held in Hermanus from March 11 to 13, 2025. The 2025 BizNews Conference is designed to provide an excellent opportunity for members of the BizNews community to interact directly with the keynote speakers, old (and new) friends from previous BNC events – and to interact with members of the BizNews team. Register for BNC#7 here..If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Nicholas Woode-Smith*.The National Minimum Wage doesn't benefit the unemployed. And as over 32.1% of South Africans remain jobless (with many more simply giving up trying to find a job altogether), our focus should not be on applying regulations to artificially raise wages, but rather to enable more people to be able and free to work..The Institute of Race Relations has found that, due to the National Minimum Wage, an estimated 430,000 jobs have been lost over the last five years. In 2024 alone an estimated 227,800 jobs were destroyed. And that is simply because many employers were forced to comply with the minimum wage..A further estimated 5.3 million people earn below the minimum wage. The fact that so many people are willing to work for below the minimum wage should indicate how ineffective the regulation is, and how important it is for South Africans on the ground to work for any amount of money that is available..The fact of the matter is that the minimum wage does not reflect reality. It is a thumb-sucked number generated by politicians to decide what people should charge for their labour. But it doesn't matter how much money you want a worker to be paid. What matters is how much their employer is willing to pay them..If the minimum wage is R27.58 an hour, as it currently stands, then you cannot expect a business to employ someone unless they can produce more than that per an hour in value for the business. If a business is forced to pay a worker more than they are worth, then they'll seek alternatives..Read more: Rob Hersov on Trump's plans for 'Iran-pal' SA; why GNU must hold and more.Such alternatives will be that people will either non-compliant employees willing to work illegally for lower pay, mechanisation, or businesses will downscale. Alternatively, the business may just abolish the job altogether. At the end of the day, a business exists to make a profit. If a worker is not generating a profit, then there is no point employing them..Efforts to raise the minimum wage will only push more and more less profitable jobs out the window. Already, many businesses run very tight margins. Agricultural workers do not produce huge profits per an hour of their time. Push their wages too high, and their employers will need to let them go – or face bankruptcy..We shouldn't be trying to cheat our way into creating high paying jobs. The path to high paying jobs is for individuals to equip themselves with valuable skills that are desirable in the workplace. This doesn't mean getting a university degree – far from it. For most people, a vocational college, apprenticeship, or learning a valuable skill online will already put them ahead of their peers..Read more: RW Johnson: How Davos investors would have questioned Cyril – if SA wasn't off their radar.On the policy front, there are reams of regulations that need to be abolished or amended to make it easier for businesses to want to hire workers. As it stands, labour unions wield far too much control over policy and actively push for legislation that makes it harder for businesses to create jobs. Regulations overly favour the worker over the employer to the point where many businesses don't want to hire anyone. And BEE policies impose racial quotas on a business that disincentivise any business from wanting to grow their business – lest they have to hand over control of it to a politician hiding behind affirmative action policies..Our number one priority as a country should be eliminating unemployment. And the only way to do this is to embrace the liberalisation of the economy. The government needs to embrace pro-free market policies that incentivise the creation of more jobs. Even with a better education system that builds valuable skills, if there are no employers creating jobs, then unemployment will persist..So, rather than raising the minimum wage, it should be abolished, along with any regulation that contributes to unemployment. That is how we fix this country..Read also:.BizNews Briefing: DA stays in GNU, Hersov applauds, but Transnet flashpoint loomsAnother GNU flashpoint looms on ANC's Transnet Bailout call, DA says "inconceivable"FT's Gideon Rachman: What the Global South, SA included, gets wrong about Trump.*Nicholas Woode-Smith is a senior associate of the Free Market Foundation. He writes in his personal capacity.

Nicholas Woode-Smith: Here’s how minimum wage has killed 430 000 SA jobs in five years

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