If the National minimum wage increases and is above the market clearing rate, a situation of excess supply would prevail in the South African economy. If R 12 per hour is the market clearing wage rate, the demand for labour would equal the demand for labour supply creating a state of equilibrium.
However, if the Government raises the wage rate to R 15 per hour, it would distort market behaviour and disequilibrium would prevail. At this rate, the number of workers would increase. However, unemployment would increase as firms would only hire few workers due to the increased wage rate.
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