In South Africa, there are many socio economic issues. The four main issues that the country is dealing with are unemployment, poverty, crime and HIVE/AIDS. "South Africans 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 AS, 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 maximize profit.
[D. Hammerers 1996] Farmers want to maximize profit through paying the bare minimum for the unskilled labor. 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 labors.
However, in the case of a minimum wage one eight argue that regulating a minimum wage is needed to prevent exploitation. [P. Dibbed 2011] In the most recent strikes, farm workers demanded an increase of wages from ROR to RI 05 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. "[Manage.
Co. AZ, 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 March 2014 to 29 February 2015 Hourly (R) 11. 66 Previous years' wage + ICP*+I .
5% weekly (R) 525. 00 Monthly (R) 2274. 82 *ICP (excluding owners' equivalent rent) has replaced CHIP as the new headline earning. Http://m. Manage.
Co. AZ/main/salary/minimum-wages/farm-worker-wages Impact of Minimum wages Increasing the minimum wages will have an impact upon farm workers and farm owners. [Spa, 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 Asia 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 Gross Domestic Product. "Market value of all officially recognized final goods and services produced within a country in a given period of time. " [Masked Miller Longhand, 2011]) With economic growth, the economy is likely to create more Jobs in each respective sector. Trade Union consists of labors that have common interest to achieve a desired goal, increased in wages. [Southeaster.
Info, 2013] The Union has given labors 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 ROR to RARE 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, Parking, Cheap, 129] When a price floor applied to labor markets, it is called a minimum wage. After the strike, the minimum wages of low- skilled farm workers has increased from ROR to RI 05.This means that any wages below RARE is illegal. Referring to the graphs, at the minimum wage of IRIS, per month, 160 hours are hired, but there are 200 hours available. Therefore, unemployment will occur from point A to point B (40 hours). Inefficiency of a Minimum Wage In an unregulated labor market, everyone who is willing to work for the going wage rate gets a Job.
And the market allocates the economy's scarce labor resources to the Jobs in which they are valued most highly. [Parking et al, 2010] The minimum wage frustrates the market mechanism and results in unemployment. Wasted labor resources, and an inefficient amount of Job search) Graphs [Parking et al, 2010] Graphs shows the inefficiency of minimum wage. Due to minimum wage, there is a Deadweight loss, the value of the marginal workers exceeds that wage for which arson is willing to work [Koehler, 2012] At this level of employment, unemployed people have a big incentive to spend time ad effort looking for Jobs. The area highlighted in pink shows the potential loss from extra Job search. The loss arises because farmers who find a Job earns RARE but would be keen to work ROR per month.
So everyone who is unemployed has an incentive to search hard and use resources that are worth ROR (RARE-ROR) surplus to find a Job. [Parking et al, 2010] Short Run Effect In the short run, labor is the only factor of production that can be varied. Firms Anton change capital, land and entrepreneurship. [Koehler, 2012] Farmers in the short run can only choose to increase or decrease the labor force, owners have the choice to employ the same number of workers at a higher cost or farmers can employ fewer workers. (Latter choice not productive efficient) As the minimum wage increases, the labor force tends to grow as well.
This is because there are more people willing to work more or longer hours at the higher wage rate. At the same time, the supply of Jobs decreases because the increase in labor costs causes employers to scale back Jobs or hours. The shift of demand curve indicates the increase willingness to work, and the shift of the supply curve indicates the decrease of Jobs available after a new minimum wage intervention. Long Run Effect "The long run is a time frame in which the quantities of all factors of production can be varied. That is, the long run is a period in which the firm can change its factory.
[Koehler, 2012] The long run supply of labor is the relationship between the quantity of labor supplied and the wage rate after enough time has passed for people to enter or leave the low skilled labor market. Demand for skilled labors in he long run is high, as they will lead to an increase in productivity. [D. Card, 1992] Contradictory, the demand for unskilled labors will decrease, as they are an expense to farmers.
Unskilled labors will be layoff or retrenched in the long run because they are not benefiting the business. An increase in minimum wage affects the farmers' decision of employment.Farmers will obviously hire skilled workers to produce efficiently. Graphs depicts a decrease shift of supply curve, due to labors leaving the farm industry. This is a result of the workers, who cannot find a Job, leaving the industry.
[Daniel S. Hammers 1996] If workers who are not able to operate machinery and uneducated are driven out of the particular industry. They will be unemployed and need to spend time on looking for Jobs. The Demand for farm labors in the long run will decrease as farmers do not want to pay a high wage, and they favor in using machinery for long-term solutions. F.
Meyer 2010] New market equilibrium will be formed, the same number of hours of work will be employed, and the labors employed will receive a greater wage. Should the real minimum wage continue to rise? To an extent, there are pros and cons for minimum wage to rise. For an individual, an increase in the minimum wage will benefit himself or herself. One can earn more income, which derives them to spend more on goods and services. It will increase the standard of living for the poorest and most vulnerable class in society and raises average. Liana Fox, 2006] With wage increase incentives, workers will be motivated and encouraged to work harder.
[Richard B. Freeman, 1994] However, from the view of the economy, changing the minimum wage is not a good sight. Employers cannot afford to pay wage increase so employees have to be layoff. Many people who are willing to work cannot find a Job. Minimum wage hurts small business more than large business.
[Lineally H. Rockwell Jar, 2005] Price inflation may occur, as businesses try to compensate by raising the prices of the goods being sold. The Heritage Foundation, 2013] When a minimum wage is increased, the farmers will charge the products at a higher price. Consumers have to pay for a higher price due to minimum wage increase. [A. Kruger 1992] In this case, although consumers have a much bigger spending power than before, but they need to pay for a higher prices in order to attain a certain product.
Minimum wage is set by the government. When he minimum wage is above the market equilibrium, it should not be further increase. Demand and Supply of farm workers both falls and many of them are unemployed.When workers are unemployed, socio-economics issues occur which leads to chaos. There is a flow of economic problems that derives from minimum wages. Conclusion Imposition of minimum wages, which is Just an instance of a wider policy of fixing price floor of goods and services, is now a commonly accepted practice for protecting unskilled labors.
Unfortunately, not all farm workers experience the increase in wages; some are retrenched and unemployed.
