High unemployment causing massive inequality


Unemployment in the formal sector is the main cause of South Africa’s high level of inequality. Peter Attard Montalto, an Executive Director and Emerging Markets Economist at the Japanese investment bank Nomura, made this observation in a review of  the World Bank’s recent report on South Africa.
While praising the government’s well financed and highly effective social grant system, Montalto said it did not fully address the root cause of inequality.
“The problem is that this is only papering over inequality caused by unemployment. It is not addressing the real problem of boosting private sector job creation through decent, non-invasive, microeconomic policies.”
He explained that one of the main factors which scared off foreign capital was the inflexibility of the unions in wage negotiation.
”:It is important to take a stance now already against the idea of a national minimum wage, because of its potentially incredibly destructive impact,” warned Montalto .

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