Government’s proposal for a national minimum wage creates a challenge because if the wage threshold is set too high, it will result in job losses but, if set too low, it becomes meaningless, says National Employers’ Association of South Africa (Neasa) CEO Gerhard Papenfus.

He noted that this was a challenge experienced by all developmental States.

“It is the dilemma governments experience when they want to achieve a particular goal, not believing the dominant influence of market powers. For each ‘solution’ they create, many more quandaries arise; that is because disobeying the ‘rules’ of a free market confuses and eventually weakens the market,” stated Papenfus.

He said government was considering a dispensation to treat each sector differently but warned that this approach was not different from collective bargaining and sectoral determinations.

According to the World Economic Forum’s 2015 Global Competitiveness Index, South Africa ranked last out of 144 countries for the quality of mathematics and science education; 143 in hiring and firing practices; 140 in education; 139 for flexibility in wage determinations, 136 for pay and productivity and 133 for the quality of primary education.

“At least one reason for South Africa's persistently high unemployment must vest in these areas,” said Papenfus.

He believed that there “is no reason to reward or protect” an unskilled and poorly educated workforce with inflexible wage arrangements and high wages, or wages not justified within a market.

“You can’t then, at the same time, ‘reward’ the same workforce, unskilled and perhaps already overpaid, within the context of a global competitive market, with a vast number of rights – one of the most protective dismissal arrangements in the world and imbalances caused by strike arrangements,” he explains.

The employment of an unskilled worker became unattractive within this constraining context and that was where South Africa’s biggest unemployment challenge lay, said Papenfus.

A combination of a largely low-skilled workforce, poor education, extremely rigid labour law arrangement and changes to the minimum wage would lead to higher unemployment.

He asserted that policymakers needed to understand that increased job security, without matching skills and productivity, was not reconcilable with high wages.

Jobs created and paid for in any manner other than at a level determined by market powers were not sustainable and a wage determined outside of market determined parameters would lead to job shedding.

Papenfus pointed out that a recent United Nations Development Inclusiveness Index suggested that South Africa was moving in the wrong direction in terms of inclusive growth.

“Keeping job seekers out of the labour market through a myriad of measures – including minimum wages – to which the market simply won’t respond positively, results in the constant widening of the gap between ‘rich’ and ‘poor’, simply because you cannot replace a job – any job, even a low paid job – with anything else, least of all a grant,” he said.

Although some workers might get temporary relief through the introduction of a minimum wage, universal market powers dictate that good workers do not need that type of relief and, for unproductive workers the relief will only be temporary, says Papenfus. If the value of the performance does not match the wage, the worker will soon find his or her job at risk.

“Setting a minimum wage is riding roughshod over the sacrifices and leadership required for a market-driven formula to succeed. Substituting this market-driven formula with an attempt to simply place the onus on the employer, without the matching performance and productivity by the worker, and completely ignoring the market forces, just won’t suffice. Increased unemployment will be the result,” he concluded.