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Submission made to the Department of Employment and Labour by the SAYEC Economic Policy and Research Office
The South African Youth Economic Council (SAYEC) fully supports and proposes an increase to the national minimum wage. This position is based on three key rationales: the national minimum wage functions as an economic tool to regulate the labour market, a social protection mechanism to safeguard individuals against the rising cost of living, and a social justice measure to uphold the rights and dignity of vulnerable workers.
Recommendation
Historically, the NMW has increased by very small margins between five to ten per cent – see below Table 1. These are arguably good percentage changes, however, in consideration of the very low base of R 20,76, the increases have failed to effect change to minimum wage workers in real terms. For this reason, the Council’s 2025 recommendation moves away from the suggested increase of five to ten per cent, advocating instead for a higher threshold that aligns the minimum wage with a livable monthly income of R6,400. The resulting hourly wage is R 40 and the calculated monthly total that precedes this statement is assumed for a 40-hour work week.
Year | Rate/hr (ZAR) | % change |
2020 | 20.76 |
|
2021 | 21.69 | 4.48% |
2022 | 23.19 | 6.92% |
2023 | 25.42 | 9.62% |
2024 | 27.58 | 8.50% |
This recommendation takes into account the need for workers' dignity, living standards and socioeconomic freedoms. The recommendation accounts for the CPI which was 5.7% in May (at the cusp of exceeding monetary policy inflation target of 3 - 6%), the cost of the average food basket currently and the contingent necessities of participating meaningfully in the economy.
Despite, consumer inflation slowing down and reaching 4.4% in August 2024, several key categories saw divergent trends – most notably in utilities, food and non-alcoholic beverages (NAB), and transport. Housing and utilities accounted for 25% of the total inflation rate, with electricity tariffs increasing by 0.1% month-on-month, bringing the annual rise to 11.5%. Food and NAB inflation, after an eight-month decline, edged higher to 4.7% in August from 4.5% in July. Necessity food categories, such as bread, cereals, and meat, saw significant price hikes. Rice prices surged by 17.3%. Similarly, transport's contribution to overall inflation reached an all-time high of 44% share in mid-2022 and has continued to put pressure on households. These trends reflect the evolving cost pressures in key sectors impacting household budgets.
Below you will find a detailed rationale of the recommendation, given the role of the NMW.
1. Economic Role of the Minimum Wage as a Price Floor
The national minimum wage serves as a critical price floor in the labour market, ensuring that workers receive fair compensation. This is particularly vital in an economy where income inequality is rampant, with the lowest earners significantly lagging behind the median and average wages. In South Africa, income distribution is heavily skewed, reflecting the structural economic marginalisation of low-income workers. Latest research shows that the average paid worker in South Africa’s wholesale and retail sector would have to work for a period of 21 months to earn what the sectors’ average CEO earns in one day. Extrapolated across other sectors, this pattern is observable and grossly concerning given that entry level and semi-skilled workers tend to be young people, looking to make a livelihood, support their families and build a financial profile.
One of the most critical consequences of this inequality is its effect on consumption and demand. When income is concentrated in the hands of a small elite, the purchasing power of the majority of the population is severely weakened. Since consumption is a major driver of economic growth, when most of the population lacks disposable income, the overall demand for goods and services declines. This inequality not only limits the purchasing power of a majority of the population but also stunts economic growth by depressing the overall demand for goods and services. Low-income households spend most of their earnings on necessities, limiting their capacity to contribute to broader economic activities. On the other hand, wealthier households tend to save or invest rather than spend on local goods, exacerbating the imbalance in demand. This dynamic of suppressed consumption creates a feedback loop that entrenches poverty and inequality by limiting economic mobility.
By maintaining a livable minimum wage, the NMW Commission not only protects workers from exploitative practices but also ensure that they earn a living wage. This safeguards their ability to afford basic needs such as food, housing, and healthcare, ultimately improving their quality of life and reducing income inequality. Furthermore, contrary to the belief that higher wages lead to increased unemployment, evidence shows that minimum wage increases stimulate local economies by boosting disposable income and consumption. However, non-compliance remains a significant challenge, with approximately 44% of covered workers earning below the legislated minimum wage. Effective enforcement is crucial to ensuring that these workers receive the protection and benefits intended by the policy.
On this frontier, our current minimum wage of R27.58 fails dismally. It is therefore the unequivocal stance of SAYEC that the NMW Commission must not only consider but enforce a raise to the minimum wage. While it is not the subject of this submission to critique the current wage floor, it is a necessary discussion to highlight the inadequacy of the current minimum wage rate and to underscore the rationale for a vast improvement of at least 45% to R40 per hour.
To illustrate the point – the average monthly salary in South Africa currently is R 26,894, using the benchmark of R 40 per hour, a labourer earning at this rate would make a monthly salary of R 6 400 which falls far below the average range. The calculation of the current minimum wage of R 27.58 is even more dismal – R 4 412.8.
These wages depict the severity of the issue of income inequality which a national minimum wage should in fact (by its definition) circumvent. The council calls for an increase in the minimum wage rate and an interrogation of the effectiveness of the minimum wage that will be proposed in combating the issue of income equality.
2. Social Protection Role of the Minimum Wage
The national minimum wage (NMW) in South Africa is a vital tool for social protection, ensuring that incomes do not fall below a minimum threshold, thereby safeguarding a fair standard of living amid rising living costs. This function is particularly crucial in a country grappling with high levels of poverty, unemployment, and inequality.
The primary goal of the minimum wage is to provide workers with a baseline income that meets essential living expenses. This is particularly important in South Africa, where many workers, especially in low-wage sectors, struggle to afford necessities.
The NMW should protect workers from poverty by ensuring that their earnings are sufficient to cover basic living costs. This function is analogous to social protection mechanisms which by their design aim to circumvent the loss of human dignity at the hands of poverty. The notion of social protection necessarily derives its function as a moral and constitutional framework which protects citizen’s humanity and dignity. A national minimum wage, which sits as a labour market tool, also bears the responsibility to protect human dignity through wages that can sustain individuals as their dependents. It necessarily means that the mechanism must help address the rising cost of living by regularly adjusting the wage floor in line with inflation, helping workers maintain their purchasing power and standard of living.
In light of the National Minimum Wage (NMW) serving as a mechanism of social protection, it is crucial that the next sitting of the commission advocate for an increase. As of March 2024, the cost of a basic nutritional food basket for a family of four in South Africa stands at R3,694.62. The current minimum wage may reduce the incidence of food poverty but leaves significant gaps in addressing poverty across other dimensions. Food poverty encompasses both the lack of physical access to food and nutritional deficiencies. However, when considering other essential household expenses, such as electricity, education-related costs, transport, and rent, sustains overall income poverty. This is because it is not viable with the remaining R1 500 all the remaining economic and social costs. Thus minimum wage employees and their families continue to live below the necessary income threshold to meet their basic needs, such as shelter, healthcare, and education, both in absolute and relative terms.
3. Social Justice Role of the Minimum Wage
The national minimum wage also serves a critical social justice function by promoting fairness and equality within the labour market. It embodies principles of both libertarian social justice — emphasising individual freedom through fair compensation—and Rawlsian social justice, which focuses on ensuring that the least advantaged benefit from economic arrangements.
From a libertarian perspective, a fair wage enhances individual autonomy and protects workers from exploitation, enabling them to escape cycles of poverty. From a Rawlsian perspective, the NMW helps reduce inequality by ensuring that even the most vulnerable workers can meet their basic needs, thereby promoting greater economic stability and social cohesion. This is particularly important in South Africa, where historical injustices have created profound disparities in wealth and opportunity.
Consequently, a minimum wage that fails to reduce poverty and income inequality undermines its role as a social justice mechanism for several reasons. The current minimum wage of only R27.58 is insufficient to lift workers out of poverty, and thus it does not achieve this social protection justice. Workers continue to face economic hardship, remaining dependent on contingent social welfare programs or informal support systems, which contradicts the libertarian goal of autonomy and self-sufficiency. Such a situation upholds the cycle of poverty rather than empowering workers to escape it, thus failing to uphold individual freedom and fairness. Moreover, the minimum wage does not significantly improve the living standards of low-income workers or reduce income inequality, and thus it fails the Rawlsian test. The wage floor is supposed to ensure that those at the bottom of the economic hierarchy are able to lead dignified lives. A wage that is too low to meet basic needs means that the least advantaged continue to struggle with housing, food, healthcare, and education, exacerbating economic inequality.
SAYEC implores the NMW Commission to increase the minimum wage such that it becomes a tool that upholds social justice. Any outcome that fails to do this fails to address historical injustices that have trapped minimum wage workers like domestic and farm workers in exploitative employment conditions. Any outcome other than an increase will not uplift the most disadvantaged and will undermine social cohesion, as disenfranchised and marginalised demographics will rightfully perceive that the system is inherently unjust.
In summation, the national minimum wage is more than an economic policy—it is a fundamental tool for safeguarding social protection and advancing social justice. As the NMW Commission considers increasing the minimum wage, it is essential to recognise the role it plays in improving the livelihoods of workers, promoting fairness in the labour market, and fostering greater economic equity. SAYEC strongly supports the increase and urges policymakers to ensure effective enforcement of a livable wage that is in line with the cost of living to maximise its benefits.
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