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Richard Grant: Why a minimum wage doesn’t equal employment

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One could argue it’s another classic capitalist versus socialist argument in confused South Africa – the case for a minimum wage. The capitalists arguing against it because it will hurt the bottom line and jobs, while the socialists argue for it because it will up living standards. And in the piece below Richard Grant argues against the use of a minimum wage to ease unemployment. The professor of finance and economics says those who attribute productivity gains to increases in a minimum wage, confuse the horse with the cart. He says it also has a negative impact on youth unemployment, as first starters find it more difficult to find a job, as experience doesn’t weigh up with the minimum salary. Not a good sign in a country that has a 54 percent youth unemployment rate. – Stuart Lowman

By Richard Grant*

South Africa began 2016 with an official unemployment rate of 26.7% in the first quarter. The expanded measure of unemployment – which includes working age people who have become “disillusioned” with their employment prospects and have dropped out of the labour force – was officially greater than 36%. This means that at least one third of the potential labour force is presently either unable or unwilling to engage in productive activities for pay – at least not in the documented economy. Why?

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