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Source: Wikipedia.
Source: Wikipedia.

Prior to the implementation of South Africa’s new national minimum wage, a great deal of investigation and research was done to try and determine what effects the minimum wage might have as well as precisely what it should be set at. Research was done at various universities, with probably the most notable study done at Wits, headed up by PhD student Gilad Isaacs. I attended a talk which Isaacs gave at Rhodes University on the topic of the minimum wage.

Various writers at the Rational Standard have written about the minimum wage here, here and here. Free Market Foundation executive director Leon Louw also gave a spirited criticism of it, wherein he described it as being ‘cruel, inhumane, discriminatory, regressive and oppressive.’ There are a vast number of reasons, economically and morally, why implementing a minimum wage, particularly in a country with 9 million people already unemployed, is a bad idea. And so, I attended Gilad Isaacs’s talk to hear the view from the other side.

During the question-and-answer segment, I posed a question to Isaacs. I had noticed during his talk, not only did he not deny that unemployment would occur as a result of the minimum wage, he even presented a few points which suggested that it would indeed happen as a result, although the data presented suggested that it would be ‘statistically insignificant.’ In the meta-studies presented, there was indeed a loss of jobs and it was also readily stated that minimum wage would reduce profits.

The question I posed to him was this: due to evidence he himself had shown in the talk which suggested that there would indeed be unemployment as a result of the minimum wage, would he be open to some kind of exemption for poor, destitute unemployed people who had been priced out of the job market?

Isaacs had previously called the unemployment which result as being ‘negligible’ or ‘statistically insignificant’ and so I wondered if he would be willing to put aside his minimum wage for the ‘statistically insignificant’ number of people who might otherwise stave.

His response was disgusting. Here follows his answer which I will dissect bit by bit:

With regards to unemployment and… you know, umm… I’m cautious of the language of ‘the destitute’ and ‘the poor’ and things like that…

There is a good reason I used such emotive language: for some people, it’s reality. It is morally abhorrent to artificially price a poor, destitute person out of the job market by your own government mandate. What if one of these ‘statistically insignificant’ number of unemployed people had children to feed? What if it were your family member? What if it was you yourself?

You see, the left’s strategy is often to argue with emotions and, particularly in the case of being champions for the poor and the downtrodden. I have written why this absolutely not the case in reality, and so I was aware that such language would strike a very inconvenient chord to the speaker and those in attendance.

… What we have to recognise is that certain forms of work have been made illegal because they are considered to be beyond the pale of moral acceptability, so, child labour: If we had children at the age of ten who were working, then families who have more children might have more income, right? Whereas the sweat shops, etc.

Ironically, this exactly would highlight my opposition to the minimum wage. The basis for outlawing child labour was that children were unable to consent in a worker-employer relationship. What I had put forward to Isaacs was the notion of a consenting adult voluntarily selling his or her labour to an employer willing to pay them in return. Isaacs would prefer to criminalise that employer should they pay their workers below the wage which government mandates, regardless of how it affects the business balance sheet.

… So there has to a point at which you say that it’s unacceptable for an individual in our society to work for a wage at a certain level…

Clearly ‘being unemployed, poor and starving’ falls under the category of ‘unacceptable’ for the Wits economic intelligentsia.

… and if that was going to radically reduce employment, ok, right? Having that wage at that level, then we’d have to think very carefully about that. We do see in, uh… The impact on employment which we see is a fall of employment from the baseline scenario of [0.3% to 1%] and it’s concentrated in the first few year when the demand impact hasn’t rippled through but what we see is an increase in household income so overall, because the employed and the unemployed share income in households, there is an overall gain in poor households and an overall fall in poverty, and so, I personally consider that an acceptably trail.

I think there is good reason to be sceptical of Isaacs’ claims here, but let’s assume that he’s 100% correct.

Assuming that there are 6 million unemployed people in South Africa (some estimates go up to 9 million), Isaacs quite willingly admits that there will be between 18 000 and 60 000 jobs lost. He tries to mitigate this by stating that unemployed and employed share households, so they’ll therefore share income, but even this statement (if true) means that there will still be unemployed people who will likely be left to be poor in absence of an income. Moreover, it’s likely that these people will be the vulnerable in society: unskilled workers, people with disabilities, the elderly, these are all people who work jobs with some of the lowest wages. Despite this, Isaacs considers it acceptable because of a perceived ‘overall’ gain, but this statement is high immoral as it suggests that there is a net gain by throwing individuals out of work while the rest are fortunate enough to remain employed and get a higher wage, as if by government-mandated natural selection.

… The working class as a whole are better off if our modelling is right, and it’s often through the back door which we say ‘people should have a right to work for, like, any wage’ and it’s a way of justifying a level or ultra-exploitation which I think we can judge as a society to be unacceptable.

It was this statement in particular which I found to the height of the immorality of the minimum wage.

Those implementing this wage would rather see people earn nothing than earn less than the minimum wage. The ‘tolerant left’ perceives earning an income of X, (where 0 < X < Minimum wage) as being exploitation and this is, moreover, seen as being ‘unacceptable.’

Why is it not unacceptable for vulnerable, poor people to go hungry? Why is it not unacceptable that individuals can make consenting decisions about their own employment? Why is poverty seen as a bad thing up until the point where poverty is caused by government intervention which favours those in higher positions? If you were a starving person who had been offered a job less than the minimum wage, the technocrats at the top are quite happy to see you starve so that you don’t live to be ‘exploited.’ The real effects of the minimum wage remain to be seen, but the pure moral abhorrence of those implementing it needs to be known. It is a ruse to think that economic regulations have the poor at heart.

To end off, I’d simply like to make this statement: putting a minimum price on labour in South Africa is just like putting a minimum price on sand in the Sahara Desert with the exception that sand does not feel pain, have a family to look after, or require any other things to live a good life.

I hope that South Africa might, one day, look to raising the wages and employment rate through sustainable, market-orientated means.

  • Solid argument here, nicely done!

    I haven’t seen much written about the intersection of minimum wage and welfare. If minimum wage is going to force people that _want_ to work out of employment, is that not further dehumanizing? Will welfare costs not rise even further, as it becomes the only option for people without the skills or opportunities to find meaningful work?

    I’d rather see this time and energy put into job creation, and connecting a willing workforce with meaningful opportunities.