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Minimum wage can't be more than the cost of new technology

Publish date: 06 February 2019
Issue Number: 272
Diary: Legalbrief Workplace
Category: Labour

While seeking to protect low-paid workers, the 13-member national minimum wage commission must also recommend changes to the minimum wage legislation that will be conducive to a reduction in unemployment, writes Isaah Mhlanga, executive chief economist at Alexander Forbes in a Business Day report. He says the commission, announced by Labour Minister Mildred Oliphant last week, will need to consider several aspects to ensure legislation meant to protect poorly paid workers does not become the reason for unemployment remaining high or increasing in the future. He says the fourth industrial revolution promises to create technology that could compete with labour, and it is here to stay. In addition, minimum wages that are too high relative to the cost of technology will only incentivise faster technological adoption at the expense of low-skilled workers. Mhlanga writes that while the minimum wage increases the income of those who have jobs and helps reduce inequality, it has the potential to reinforce the very exclusion from economic participation that the government is trying to eradicate on the part of those who are languishing in unemployment. He makes the point that if those with jobs are at risk of being displaced by machines, those without jobs stand little chance of ever getting into the labour market if minimum wages are too high.

Full Business Day report