Wednesday, November 24, 2010

Minister's Economic Proposal Lacks Ambition


With regard to Government's proposed growth path tabled in Parliament yesterday, Economic Development Minister Ebrahim Patel has suggested a cap on increases for people earning more than R20 000 a month. The message it sends out is somewhat dire and logic certainly dictates that in the long term rather than the desired effect, it will impact negatively on the economy.

A very basic example would be of an individual (perhaps middle management) who earns close to the 20k yet has ambitions of doubling that over the next three years. He has invested a lot of money in acquiring skills and is now in a position to capitalise on it. The company he works for sees his potential and have incentivised him to achieve targets, to him the goal of doubling his salary is not unrealistic.

His incentive is to grow revenue by X amount over a said period of time and as he does so, jobs will be created as more people will have to come onboard to service the growing demand.

Ambition results in more revenue, more revenue stimulates job creation.

What the Minister is proposing would remove ambition from the equation. If despite all his best efforts middle management guy is destined to remain in more or less the same income bracket, the urgency to achieve will be far less prevalent. Rather than being master of his own destiny his goal of being the master of minesweep, may well take priority.

What the Minister is essentially saying is if more people earned less, there would be more money available in the economic pool for job creation. What the Minister needs to consider is that if we start capping salaries, those entrusted to drive revenue and create those jobs, will lack the ambition to do so.

Ernest Roper | Webmaster

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1 comment:

Anonymous said...

I Just Got the following tweet:

Economic growth plan is still open for discussion - Patel http://bit.ly/h6gQWQ

Off Course it is ..... Duh Huh

It makes no sense at all, the question is what is the real thinking behind it. Is it to incite perhaps?