Impose a minimum wage and see jobs vanish
IT IS lamentable, even potentially tragic, that the gover nment, in cahoots with organised labour, is seriously contemplating the implementation of a statutory minimum wage.
Implementation of this measure would be tantamount to declaring war on the unemployed, the young and the unskilled. More significantly, it would amount to the government turning its back on them and branding them dispensable.
The consequences are so glaringly obvious and foreseeable. The few job opportunities there are would vanish, especially for the young who are inexperienced and unskilled. The entry level in the labour market, which by definition would mean a low wage level, would be slammed shut to them.
Businesses, faced with such a blatant intrusion by external interests, will be forced to resort to investing in capital at the cost of labour – which can only exacerbate the situation. This mechanisation occurs quietly. The casualties fade into the statistics, silently increasing the number of unemployed because the protagonists of minimum wage laws do not relate to them as human beings. And by not acknowledging the cause of job losses and lack of creation of jobs, the labour aristocracy and the government go ahead as if nothing has happened.
South Africa is a developing country. Its economy is labour-intensive rather than capital-intensive.
It would make sense, therefore, for labour policies to be flexible to absorb as much labour as possible. Minimum wage laws or any other intrusive policy measures that restrict entry-level participation in the job market would be devastating and should not be applied.
In an article, “From Minimum Wages to Maximum Politics” (published in Regulation, Summer 2014), Pierre Lemieux – quoting from David Neumark and William Wascher’s widely acclaimed, empirically researched 2008 book, Minimum Wages – writes: “They conclude that there is plenty of evidence that ‘ minimum wages reduce employment opportunities for less-skilled workers’, and they admit that their own research changed their prior views on the weight of evidence regarding the effects of minimum wages.”
In the same Regulation issue, Logan Albright and Ike Brannon, in their article, “A Federal Minimum Wage and The States”, provide tables for a 2016 minimum wage across the US in inflation-adjusted 2012 dollars.
They found a substantial variance in the effect that the minimum wage would have on states.
According to their tables, Puerto Rico would be most seriously affected because 50 percent of its workforce earns less than $10.10 (about R112.50) an hour. It also has a wage distribution much lower than the rest of the country and an economy that has been struggling for more than a decade. The authors estimate that 480 461 workers would be affected by the minimum wage, of whom 203 031 (42.2 percent) would probably lose their jobs. In Alabama, 473 344 workers would be affected and an estimated 25 636 (5.42 percent) would lose their jobs.
We can draw a comparison between South Africa’s city and country areas and the disparities that have been found in the US.
Factories in Newcastle, KwaZulu-Natal, which has a reported unemployment rate of 60 percent, were clearly hit hard by the extension of a bargaining council agreement struck between big business and big labour in the cities. Employers in country towns cannot pay the same wages as those in cities. Attempting to force them to do so guarantees increased unemployment in outlying areas.
Being unemployed exacts a terrible human toll in material, emotional and social suffering. The advocacy of minimum wages is the low moral ground that casts people into an abyss of despair, loss of pride and starvation, with no prospect of income. Such circumstances can impel desperate people to contemplate criminal measures. If you do not believe that half a loaf of bread is better than no bread, ask the unemployed.
Statutorily mandated minimum wages inevitably result in institutionalised unemployment, especially of the young, inexperienced and unskilled – in short, the less desirable of the employed and unemployed.
The fallacious justification and rationalisation for minimum wage laws comes unstuck in the face of the economist Murray Rothbard’s arguments in Outlawing Jobs: The Minimum Wage.
In a self-evident way that leaves no room for debate, Rothbard (19261995) argues: “If the minimum wage is such a wonderful anti-poverty measure, and can have no unemployment effects, why are you such pikers? Why are you helping the working poor by such piddling amounts? Why stop at $4.55 an hour? Why not $10 an hour? $100? $1 000?
“It is obvious that the minimum wage advocates do not pursue their own logic, because if they push it to such heights, virtually the entire force would be disemployed. In short, you can have as much unemployment as you want, simply by pushing the legally minimum wage high enough.”
– A robber depicted in a Zapiro cartoon driving a police van and talking on the radio, with two angry-looking police officers locked in the back. – Sapa
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