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JIMMY MOYAHA: When the subject of minimum wage arises, it often ignites a unique discussion. On one side, there’s advocacy for increasing the minimum wage, while the other side consists of businesses striving to cut costs. Interestingly, some companies opt not to follow the minimum wage regulations even as we push for higher rates.

I’m joined by senior researcher Benjamin Stanwix from the Development and Policy Research Unit at UCT to explore this issue further.

Good evening, Benjamin. I appreciate you being here. Why is it that non-compliance with the minimum wage persists? Isn’t it a legal requirement?

BENJAMIN STANWIX: Hi, Jimmy. Thank you for having me. Yes, you are correct; it is mandated by law. Let me provide some context regarding our research for the National Minimum Wage Commission, which is responsible for overseeing minimum wage regulations.

Essentially, figuring out the right level for the minimum wage involves multiple considerations. Our previous work examined how last year’s minimum wage impacted worker earnings, hours of work, and employment levels. A significant focus of our analysis was to understand how wages respond to changes in minimum wage laws.

Read: The double-edged sword of the minimum wage

While these may seem straightforward, analyzing the outcomes from last year is essential for policymakers as they plan for future actions. This is an important aspect, but it isn’t the only factor to take into account.

Regarding non-compliance, we still see a significant number of workers earning below the national minimum wage, and alarmingly, this percentage has risen in recent years. This problem isn’t new.

South Africa has faced high rates of non-compliance since minimum wage laws were enacted in the early 2000s, and various factors contribute to this ongoing challenge.

A major contributor is the high unemployment rate in South Africa, which weakens the bargaining power of many workers.

Moreover, the government’s capability to effectively inspect and enforce minimum wage regulations is somewhat limited.

JIMMY MOYAHA: There are additional factors to consider, Benjamin. We’ve observed that some companies are reducing worker hours in response to the rising minimum wage. As you noted, there may be pressure from cheaper labor alternatives as well. What can we do to address this issue?

What measures can we implement regarding the national minimum wage to ensure compliance while also safeguarding jobs and industries? Employers have to meet their wage obligations, but workers must earn enough to live above just the minimum wage.

BENJAMIN STANWIX: This is a complex matter, one that policymakers and the Minimum Wage Commission constantly evaluate.

If we take a step back and look at the minimum wage alongside non-compliance, it becomes evident that the effects of minimum wage adjustments in South Africa have been relatively subdued.

When the minimum wage increases, the expected benefits are lessened because some employers choose not to comply, resulting in many workers continuing to earn below the legal minimum.

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