SA needs to reject the dogma that wages are a burden

Brian Ashley (Amandla) 5 December 2025

The recent announcement that South Africa’s inflation target will be reduced to 3% has been greeted with applause by financial commentators and orthodox economists. But for millions of South Africans this shift signals something very different: the entrenchment of a macroeconomic policy regime whose overriding priority is to hold wages down, not to confront the real crisis of our society — mass unemployment, poverty and staggering inequality.

For decades, the economic mainstream — backed by the Treasury, the South African Reserve Bank and organised business — has insisted that wage restraint is essential for growth. Wages, they argue, are a cost to be contained. The proposed lower inflation target is simply the latest instrument in this long-standing strategy. In a country already wracked by deep inequalities and low levels of demand, this approach is not just misguided; it is economically self-destructive.

Who benefits from a lower inflation target?
A lower inflation target narrows the Bank’s room to manoeuvre and almost certainly locks the country into a cycle of persistently high interest rates, the core mechanism of monetarist policy. High interest rates protect financial asset values, reassure investors and keep credit expensive, while constraining household spending, depressing investment in productive sectors and keeping unemployment sky high.

If South Africa’s economic authorities were genuinely concerned about the cost of living for the poor, their actions would look very different. They would:

*Intervene aggressively to cap food prices in a context where food inflation has outpaced CPI year after year.
*Reject harmful proposals such as the VAT increase floated during the 2025/26 budget process, which would have hit the poor hardest.
*Act on the well-documented evidence of price-fixing and profiteering in concentrated agro-food value chains.

Instead, the focus is relentlessly on the public sector wage bill, the supposed need for “discipline”, and creating an environment “friendly” to foreign investors within a broader derisking strategy. This is not a strategy for inclusive development; it is a strategy for reassuring capital that the government will not allow wages — public or private — to rise meaningfully.

Wages are the economy’s lifeblood
We reject the false premise that wages are a drag on economic performance. In a country like ours, where unemployment exceeds 40% on a broad definition, and the majority of households spend nearly all their income on immediate consumption, wages are the economy’s demand engine.

A domestic economy producing sufficient demand would simultaneously go a long way to reducing the permanent scourges of unemployment, poverty and inequality. All that would be required is for the government to accept that, after 30 years of dismally failing neoliberalism, and its freedom given to the flow of capital, it is time for the boldness of trying something else; something, moreover, that has been tried and tested with huge successes elsewhere in the world.

Suppressing wages suppresses demand. Suppressed demand suffocates investment. And suffocated investment ensures we remain trapped in a cycle of stagnation. The view that low wages make South Africa “competitive” is a relic of neoliberal thinking that sees the domestic economy only as a platform to attract globally mobile capital.

Inequality, not high wages, is the real crisis
If economic authorities are serious about financial sustainability, social cohesion and economic dynamism, they must address the real structural problem: the extreme inequality in income distribution. Nowhere is this more visible than within the public sector itself.

Across government departments, wage disparities are vast. Senior officials and managers receive salaries many multiples higher than cleaners, clerks, nurses, community health workers or education support staff. When the Treasury demands percentage-based wage increases, it entrenches this inequity: a 5% increase for someone earning R1.2m a year is 20 times larger than a 5% increase for someone earning R5,000 a month.

This is why public-sector unions should consider following the example set by workers on the platinum belt, who — through the Association of Mineworkers and Construction Union —insisted on flat rand-value increases rather than percentage adjustments. Rand-based increases lift the wages of the lowest-paid meaningfully while tightening wage differentials. By contrast, percentage-based increases widen inequality, reward those already at the top and contribute nothing to reducing the structural imbalances that weaken the public sector. A progressive, redistributive public-sector wage strategy would not only improve equity within the state; it would expand the purchasing power of hundreds of thousands of working-class families. That is the most direct, immediate stimulus the South African economy could receive — far more effective than tax incentives or “investment summits” that yield little in real productive investment.

The mythology of wage discipline
The persistent political narrative that “wage discipline” is required for fiscal consolidation masks a deeper truth: the Treasury and Reserve Bank are operating within a narrow ideological framework that elevates inflation control and investor confidence above all other policy goals. They are not neutral technocrats but actors making political choices — choices that prioritise the interests of capital.

Reducing the inflation target to 3% is not a technical adjustment. It is a political signal that the state will continue to suppress wages, undermine bargaining power and defer to the preferences of financial markets — even as households struggle under rising food, transport, and electricity costs.

South Africa needs a macroeconomic policy orientation built around employment creation, wage-led growth, public investment and economic transformation. Not a policy orientation that assumes the poor must tighten their belts so that investors may relax theirs.

A different path is possible
To reverse decades of stagnation and rising desperation, South Africa must replace its low-wage, low-demand, high-inequality model with one centred on human wellbeing, decent incomes and a dynamic domestic market. That begins with rejecting the dogma that wages are a burden. They are for each individual profit-maximising enterprise, but a disaster for the economy in which they operate, to say nothing of the majority population chained in poverty and unemployment.

Wages are an investment in the growth of South Africa’s desperately needed domestic market, as well as its most important economic resource — its people. If we continue treating them as a cost to be minimised, we should not be surprised when the economy continues to flatline.
https://www.amandla.org.za/sa-needs-to-reject-the-dogma-that-wages-are-a-burden/

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Brian Ashley is co-ordinator at the Alternative Information & Development Centre and a member of Amandla! Collective.




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