World Bank, ILO dispute minimum wage effects

Labour experts have criticised a World Bank report that suggests that the introduction of a national minimum wage in SA would shift labour demand towards skilled labour. A Business Day report says the conclusions are contained in the 11th edition of the SA Economic Update released in April. In it, the bank writes that the implementation of the minimum wage would deepen the intensity of capital at the expense of unskilled labour and disproportionally affect the price of goods consumed by the poor. While the bank said the effect of the legislation on inequality was not clear-cut given poor enforcement, its micro-economic analysis suggested ‘that the introduction of the national minimum wage would have a positive, but marginal, impact on reducing inequalities, depending on its negative effect on employment’. Business Day understands that local labour institutions are planning to challenge the report and other suggestions shared by the World Bank in a presentation entitled Overcoming Poverty and Inequality in SA. Joni Musabayana, director of the International Labour Organisation (ILO) in Pretoria, said the UN labour agency’s disagreement with the World Bank report was mainly on its assertions that the implementation of the minimum wage would have a ‘less favourable conclusion’.