South Africa’s national minimum wage (NMW) legislation is supposed to guarantee a basic level of income for workers, but its real effect is to exacerbate unemployment. Those who are sincere about solving the joblessness crisis in South Africa should reject the minimum wage in favour of an alternative approach.

The Department of Labour and Employment, through the National Minimum Wage Commission, recently invited written representations on possible adjustments to the NMW. As a think tank dedicated to market liberalisation, the Free Market Foundation (FMF) added its voice by making its own submission on 3 September 2026.

Spoiler alert: the FMF opposes any upwards adjustment to the NMW. It has a valid reason for doing so.

Crisis, What Crisis?

After so many years, it is trite to say that South Africa has a jobs crisis, but it’s worth looking at the data to understand just how serious a problem unemployment really is.

Statistics South Africa’s most recent Quarterly Labour Force Survey (published on 11 August 2026) revealed that for the second quarter of 2026, the official unemployment rate rose to 33.6%, an increase of 0.9 percentage points from 32.7% in the first quarter.

During the same period, the number of unemployed people increased by 345 000 to 8.481 million, while the number of people with a job declined by 16 000 to 16.739 million.

This is an unconscionable failure of South Africa’s labour regulatory regime, of which the NMW is a key component. This regime only succeeds in one respect: “protecting” people into poverty.

Helping or Hurting?

The minimum wage currently sits at R30.23 per ordinary hour (effective 1 March 2026).

The FMF opposes an increase not because we are heartless bastards who want to pay poor people less, but because economic theory and empirical evidence show that minimum wages are harmful to that very same group of people.

The submission was authored by FMF policy officer Zakhele Mthembu, who drew heavily on over a decade of FMF labour policy research, as well as his recent paper for our Liberty First policy agenda.

In his paper, entitled Defusing the Joblessness Timebomb: Restoring Dignity and Choice Through Labour Regulation Exemption, Mthembu highlights how raising the marginal cost of labour reduces demand for the lowest-productivity workers:

“South Africa’s low-skilled labour force is particularly vulnerable. When the legal floor is set above the market-clearing wage for large cohorts of young and inexperienced workers, employers rationally substitute capital for labour, reduce hours, hire only higher-skilled applicants, or simply do not expand their operations.”

In 1850, the French liberal political economist Frédéric Bastiat wrote about the “seen and the unseen” effects of dirigiste laws. The immediate effect is easily observable, Bastiat argued, but interventions in the economy create countless second-order effects and opportunity costs that are invisible to the naked eye.

Minimum wages are the perfect illustration of the phenomenon Bastiat described, says Mthembu:

“Policy must be judged by its impact, not its intent. The ‘seen’ benefits of the NMW for those who remain employed are purchased at the ‘unseen’ cost of millions denied any wage at all. The real choice for the low-skilled is rarely between a high regulated wage and a lower market wage; it is between a market wage and a wage of zero.”

 Simple Solution

The FMF’s alternative solution is to implement a Job Seekers Exemption Certificate (JSEC), a policy proposal first put forward by FMF president Eustace Davie.

A JSEC would be a voluntary exemption certificate for applicants who have been unemployed for six months or more. As Mthembu explains in his submission to the NMW Commission:

“Upon issuance, the certificate suspends the application of all labour legislation, including the National Minimum Wage Act, relevant provisions of the Basic Conditions of Employment Act, extensions of bargaining-council agreements under the Labour Relations Act, rigid dismissal procedures, and equity targets, to the holder, for a period of 24 months.”

Mthembu also notes that the JSEC would be “immediately revocable by the holder at any time” and “employers who hire JSEC holders would be protected from prosecution for non-compliance with the suspended laws in respect of those workers”.

The certificate would expire after two years, but the worker would now be equipped with skills and experience acquired on the job, enabling them to seek out further work opportunities in the market.

Luxury Beliefs

Luxury beliefs are ideas typically held by the privileged elite that are intended to signal a virtuous social attitude. In a cultural context where ostentatious displays of wealth are frowned upon, luxury beliefs are a way for the elite to reinforce their high social status while remaining unaffected from the consequences of these ideas.

The NMW is one of the clearest examples of a luxury belief in the South African context. Academics, leaders of big businesses, politicians, and government officials love the idea of a minimum wage.

Supporting a NMW allows them to show that they are “doing something” about poverty without bearing any of the costs themselves. That burden falls on the hapless poor who are deprived of their agency.

Poor people tend to lack skills, a capital base, or a social network. Often the only competitive edge they have is their willingness to work. A NMW takes away their ability to find their own way out of poverty.

If we really care about improving the lot of poor people, we should give them the one thing they crave the most: a choice.

Ansara is CEO of the Free Market Foundation.