Econ essay

Topics: Minimum wage, Supply and demand, Wage Pages: 6 (1840 words) Published: October 16, 2014
ECO1010F Essay1 2013

Student Number: CHXTAW001
Name: Robert Chao
In South Africa, there are many socio economic issues. The four main issues that the country is dealing with are unemployment, poverty, crime and HIV/AIDS. “South Africa's unemployment rate rose to 25.2% in the first quarter of 2012 compared to 23.9% in the fourth quarter of 2011, says Statistics South Africa (Stats SA, 2013)” As a result, the poor have limited access to economic opportunities and basic services. The most recent farm workers strikes have recently brought this ever-underlying conflict in agricultural sector back to light. The conflict is between the underpaid farm workers and the farmers. The farm workers want a raise in the minimum wages, while the farmers contest the increase as any raise in the wages is unaffordable. [F. Meyer 2012] The aim of any employer is to maximise profit. [D.Hamermesh 1996] Farmers want to maximise profit through paying the bare minimum for the unskilled labour. However, from a farm workers perspective, they want to be paid the highest possible wage. The suggested solution set by the government is to increase minimum wage for unskilled labours. However, in the case of a minimum wage one might argue that regulating a minimum wage is needed to prevent exploitation. [P. Dibben 2011] In the most recent strikes, farm workers demanded an increase of wages from R69 to R105 per day. The issue of increase in minimum wage is yet to be solved. The Minimum Wage

“A Minimum Wage is the lowest hourly, daily or monthly wage that employers may legally pay employees or workers.”[, 2013] Minimum Wages for Farm Workers
All employers in South Africa who employ Farm Workers are legally bound to pay at least the Minimum Wage. Minimum Wages for Farm Workers in South Africa
1 March 2013 to 28 February 2014
1 March 2014 to 29 February 2015
Hourly (R)
Previous years’ wage + CPI*+1.5%
Weekly (R)

Monthly (R)

*CPI (excluding owners’ equivalent rent) has replaced CPIX as the new headline earning. Impact of Minimum wages
Increasing the minimum wages will have an impact upon farm workers and farm owners. [Sapa, 4 Feb 2013] As farm workers are considered in the primary sector, they are likely to be exploited by owners. Due to the low profile job, they can hardly survive base on their low income. Farm workers do not earn enough to access to their basic needs, they are being exploited mentally and physically. With such trauma, workers would go on strike and demand their wages to be increased in order to satisfy their hard work. On the other hand, farm owners would not want to increase the expense of the business, with the increase in minimum wages, they would layoff or retrench workers. In the macro environment, stakeholders like government and trade union would also have an impact. The state needs to decide whether to adjust the minimum wage to satisfied both parties. Economic growth must be taken into consideration, as it will benefit the country’s Gross Domestic Product. (“Market value of all officially recognized final goods and services produced within a country in a given period of time.” [Maskew Miller Longman, 2011]) With economic growth, the economy is likely to create more jobs in each respective sector. Trade Union consists of labours that have common interest to achieve a desired goal, increased in wages. [, 2013] The Union has given labours freedom of speech, right to strike, and right to collective bargaining. Farm workers will be protected. The strike has benefited the workers as they have bargained an increase in wages of R69 to R105 per day. Supply and Demand Framework

A price floor is a regulation that makes it illegal to trade at a price lower than a specified level. [Economics, Parkin, Chap5, 129] When a price floor applied to labour markets, it is called a minimum wage. After the...
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