Question

DOMESTIC workers will no longer be subjected to meagre salaries as the government has
adjusted the minimum wage for domestic workers, with effect from December last year.
The announcement was made by the Department of Labour Minister Mildred Oliphant and it
coincided with the signing into law of the National Minimum Wage Bill by President Cyril
Ramaphosa.
According to the Department of Labour’s new rates, domestic workers working in Area A (bigger
metropolitan areas) who work more than 27 ordinary hours per week, must be paid a minimum
of R13,69 per hour.
Workers who work fewer than 27 hours per week, must be paid a minimum of R16,03 per hour.
This will mean that a domestic worker who works 45 hours per week will now earn a minimum of
R2 669,24 a month.
Gardeners, drivers or people who look after children, the aged, sick, frail or disabled in a private
household, all qualify as domestic workers.
Source: https://www.news24.com/SouthAfrica/Local/Stanger-Weekly/sa-domestic-workers-toget-
higher-minimum-wage-20190109-2 Accessed 24/09/2019

With the aid of a diagram, discuss the welfare effect of this new legislation if the new minimum
wage is (1) below the equilibrium wage and (2) above the equilibrium wage rate with labour
hours as your quantity variable.

Answer 1