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READ THE NEWS EXTRACT AND ANSWER QUESTION 1 It’s official: South Africa’s first National Minimum Wage becomes law The divisive National Minimum Wage Bill has been ratified by Cyril Ramaphosa. But is it enough for South Africa's poorest citizens? by SAnews 2018-11-26 19:05 President Cyril Ramaphosa has signed into law the National Minimum Wage Bill, which sets a historic precedent in the protection of low-earning workers. The Bill provides a platform for reducing inequality in society and decreasing huge disparities in income in the national labour market. The National Minimum Wage Act will come into force on a date to be determined by the President by proclamation. How much is the National Minimum Wage in South Africa? The Act sets a floor for R20 per hour for the majority of the country’s workers, which will raise the earnings of an estimated six million South Africans, more than half of the labour force, who earn below this level at present. The National Minimum Wage Act sets South Africa’s first National Minimum Wage at R20 an hour, equivalent to R3 500 per month, depending on the number of hours worked, and creates a phase-in period for farm workers, forestry workers, domestic workers, welfare sector and care workers, due to their vulnerability to disemployment.

The Presidency said in a statement:

“The President’s signing of the new law comes four years, to the month, after the National Economic Development and Labour Council (Nedlac) first began deliberations on the protection of low-paid workers, fair and effective competition in the labour market, and the challenges of labour instability, caused by violent strikes and the duration of strikes and wage inequality.” National Minimum Wage – a journey: Following these deliberations and recommendations by an advisory panel chaired by Professor Imraan Valodia of the University of the Witwatersrand, President Ramaphosa has also assented to the Basic Conditions of Employment Amendment Bill and Labour Relations Amendment Bill, which were negotiated by Nedlac at the same time as the National Minimum Wage. Taken together, these Bills introduce a National Minimum Wage and provide for the technical arrangements needed to support implementation of the NMW. The National Minimum Wage Act recognises South Africa as one of the most unequal societies and notes the need to eradicate poverty and inequality. President Ramaphosa has reiterated his appreciation to all stakeholders engaged in the development of the legislation for their focus on creating a new dispensation for the country’s most vulnerable workers and for bringing South Africa into line with international best practice. The President has also underscored that while the National Minimum Wage will not end income inequality, it provides a firm and unassailable foundation which is agreed to by all social partners from which to advance the struggle for a living wage.

Question 1 (Demand, Supply and the Labour Market) As business manager of a big construction firm, you were requested to present to the board the possible impact of the new minimum wage policy on the industry. In your write-up, you are expected to cover the following questions sent to you by the board in preparation for the meeting:

a. Suppose the minimum wage policy prevents the wage from balancing supply and demand, how does the new law affect the wage, employment and the level of unemployment in South Africa. [ 15 marks]

b. The construction sector relies more on the unskilled labour force. If the demand for unskilled labour were inelastic, what would be the impact of the proposed changes in the minimum wage on employers and employees? [10 Marks]

Answer 1