On the R70 Per Day Minimum Wage and the Farm Strikes

Labour minister Mildred Oliphant said yesterday that “The sectoral [determination] sets out the minimum wages that people need to be paid in that specific sector.” For agricultural, the minimum wage is R70 per day.

The reality that those who blame farmers for paying ‘only’ R70 per day have to deal with, is that government has created a benchmark wage that employers, in this case farmers, will tend to converge on. Why blame farmers for actually meeting the minimum wage that was set by government? No one wants to spend more than is required for bread or a cooldrink, and the same goes for labour. There are literally millions of South Africans who earn less than R70 a day, as in zero Rand a day, because they are unemployed. So those farm workers who are employed should be happy that their wages are not being driven even lower if the market was to clear below the minimum wage. However, who is to say employers will not pay workers more if government removed its benchmark minimum wage and workers were forced to be more productive?

In fact, Oliphant said yesterday that “In the inspections that have been conducted, we have found that some farms paid more than the minimum and I believe that is the right thing to do.” So some farmers are paying their workers more than R70 per day despite the government price control allowing them to pay less.

This is most likely because their staff are more productive and they are able to afford to pay these workers more than the minimum wage.

It is worth noting one final unfair distortion that government price controls on farm labour creates.

Useless and unproductive farm workers should earn less than R70 a day, while the useful and more productive farm workers should earn more than R70 a day. Wages in the free market will differ depending on the marginal value product produced by each worker. By forcing farmers to pay unproductive workers more than they’re worth at the minimum wage, government removes the ability of farmers to increase the wages of those employees who are productive and worth more than R70.

The final reality that interventionists need to deal with is the fact that there are so many unemployed people in the country, which reflects the fact that the market for labour is not clearing, and that minimum wages are set too high, not too low. If government goes and adjusts minimum wages higher after these strikes, it will be thrusting an even bigger wedge between employers and workers that will result in even greater unemployment.