IndexChap. Section PageIntroduction 31 Economic efficiency of the minimum wage 3 - 42 The effect on unemployment 43 The effect on the use and cost of capital in production 44 The effect on the cost of production and inflation 45 The effect on productivity 46 L effect on international competitiveness 47 The consequences for sustainable economic growth and long-term stability 4 - 58 The social consequences 59 Wage discrimination 510 Tips for tackling unemployment 511 Literature consulted 5IntroductionMinimum wage legislation was introduced in other countries as early as 1894 in New Zealand, followed by Australia in 1896, the United Kingdom in 1909 and North America in 1912 (WordIQ (online), http://www .wordiq.com/definition/Minimum_wage August 10); common to all these introductions and also to South Africa are conflicting opinions on advantages and disadvantages. Economists, HR consultants and human rights activists all have different respective arguments; however, common to all is the governments' approach aimed at obtaining the favor of the majority of voters. The question still remains: how beneficial is minimum wage legislation then? Although the new legislation has given some rights to employees and improved the lives of many; it has brought with it noticeable changes in the South African labor market, society and economy. This work aims to illustrate the effects of the legislation on the minimum wage, highlighting its potential negative aspects.1. Economic Efficiency of the Minimum Wage South Africa has suffered economically for decades due to numerous factors ranging from apartheid to the collapse of the world economy; we suffered double-digit inflation that reigned from 2974 to 1992 and which left considerable scars. Although inflation has been reduced to single-digit levels around 7.8% over the past decade (Reserve Bank (online), http://www.reservebank.co.za/internet/Publications.nsf August 10), this is still too high for a struggling economy and society to improve basic living standards. Studies have shown an inverse relationship between the implementation of a minimum wage and the demand for labor, as illustrated below: "DD" and "SS" are the demand and supply of labor respectively. The original equilibrium wage is “We” and the quantity of labor employed is “Ne”. Imposing a minimum wage at “Wm” reduces the quantity of labor required to “Nm” and therefore causes unemployment. (Mohr, Fourie, associates, 2000:389) The resulting beneficial effects could be: • Reduced dependence of low-paid workers on state benefits, which may lead to lower taxes • Stimulation of economic growth by discouraging high-intensity industries of manpower. the disadvantages can be:• Increased unemployment for low-wage workers• Raising employment barriers for people with little or no work experience• Restraining economic growth due to rising labor costs• Work becomes more expensive with consequent discouragement of investments