South Africa

Paul Harris says scrapping the minimum wage for anyone under 25 will help reduce unemployment

FirstRand co-founder and former CEO Paul Harris said scrapping the minimum wage for anyone under 25 would help address the country’s unemployment crisis.

Harris recently told the Financial Mail how he would solve South Africa’s problems and turn the country around. 

He suggested the country scrap the minimum wage for anyone under 25 and make it easier to hire and fire employees. 

“At present, people get the social grant without working, but the youth can’t enter the job market by voluntarily working for less than the minimum wage,” he explained. 

“The outcome of minimum wages has been more unemployment and fewer viable SMMEs; they employ fewer people, and more go bust.” 

The government should stand up in support of the unemployed – they haven’t got a union.”

Small business perspective

Harris is not alone in his concern that the country’s national minimum wage (NMW) could increase unemployment.

National collective bargaining co-ordinator for the Consolidated Employers’ Organisation, Daniel van der Merwe, said that the NWM Commission ignored pleas from small businesses when deciding to implement a 9.6% increase in the NMW.

He said small to medium enterprises (SMEs) in South Africa may struggle to afford the new NMW increase, which could lead to an uptick in unemployment and business failures.

The NMW Commission announced on 21 February that the minimum hourly wage would increase to R25.42 starting from March 2023. Currently, the NMW is R23.19 per hour.

SMEs are the country’s largest employers and a significant contributor to GDP. 

Businesses in South Africa are already struggling to overcome worsening load-shedding, which has led to big and small enterprises laying off staff.

It has led to a sharp rise in unemployment, which Van der Merwe warned would only increase more due to the increased minimum wage.

“One should never ignore the hardships faced by many minimum wage earners in South Africa and the dire economic circumstances they find themselves in,” he said. “The purpose of the NMW is to ensure a living wage.”

However, he said South Africa’s current economic environment had placed both wage earners and SME employers in a difficult position.