Part II: A Case Against Minimum Wage Laws: Profit Is the Price Society Pays for Innovation.

Before I move on with my discussion, let me make this point clear: I am NOT against the good intentions behind minimum wage laws, nor am I against poor people who are truly struggling to make ends meet. I, myself, have been poor and, to a certain extent, still am. So, could we please refrain from accusing each other of having inferior motives just because we cannot refute the arguments presented?

The purpose of these articles is to highlight what actually happens in reality. The truth is that the government and people may have the best of intentions, but if the outcomes of these intentions lead to unintended consequences, what should we do? Should we continue applying methods that are ineffective? Albert Einstein once said, “Insanity is doing the same thing over and over again and expecting different results.” Should we not instead revise our methods, observe the outcomes, and reassess whether we need to revise our methods yet again? Good intentions do not necessarily lead to good outcomes. I wish this were understood by the human race, especially by those who enact laws.

Someone accused me of commending employers for maneuvering within the law by hiring foreign workers who work remotely. My response is that description does not equate to prescription. It is very important for people to understand this distinction. Just because I am describing a set of events does not mean that I commend or condemn those events; I am merely an observer stating what I see. Furthermore, I want people to understand that I am not writing these articles for fun. Like everyone else, I am concerned about the society in which I live and wish to effect positive change for humanity. I could spend my time on other pursuits, but I choose to dedicate it to this cause because I believe it is my way of contributing to the community by discussing important issues.

I am tempted to present empirical evidence that supports my observations and my basic understanding of economics. However, I feel there is much to be said about this issue even in conceptual terms. For instance, the fight for an increase in minimum wage, I believe, is based on a misunderstanding of what wages—or prices—really represent in an economy. We are focusing on an indicator (wages) instead of addressing the primary factor. As mentioned earlier, wages are driven by value, which in turn is driven by experience and education. The focus should be on providing South Africans with experience and education, rather than having the Department of Labour expend public resources on setting minimum wages.

In his book “Rich Dad Poor Dad,” Robert Kiyosaki emphasizes the importance of not working for money, but rather having money work for you. This means educating yourself as much as you can and gaining as much experience as possible. By doing so, you will find people willing to pay you well above the current minimum wage of R27.58 per hour. For example, individuals with degrees often earn significantly more than this rate. Even StatsSA points out that the unemployment rate is lower among those with tertiary qualifications. How about, as a nation, we work towards encouraging more students to study Maths, Science, and Commerce in school to better educate our youth? Another avenue worth exploring is investing in sports, particularly in public schools, to give students opportunities to showcase their talents and potentially feed themselves and their families.

Minimum wage increases unemployment, which is why it is a flawed policy. Astute businesspeople understand that the drivers of employment in an economy are small to medium-sized enterprises (SMMEs). These businesses may not have the financial resources to pay the minimum wage to their employees and, as a result, may hire fewer people rather than more. A country like ours should not be impeding the growth of SMMEs and, by extension, our economy with such laws; it is detrimental to society at large.

Jobs give people dignity and a sense of purpose. As already indicated, minimum wage disproportionately affects young people. Young people have high levels of energy; energy cannot be destroyed, it can only be transferred. South Africa has a youthful population; where do you think these high levels of energy are going to be transferred? Is it not going to be transferred to crime, sex, and drugs? So, policies that hinder the employment of young people are disastrous, even in social terms, not just economic terms. Even if someone is earning R15 per hour, the fact that they are productive with their time can be of psychological benefit to them, which in turn leads to social benefits as they will be too occupied to use their energy in wrong activities.

I believe I have said enough on this issue. The criticism I have received, so far, is weak and does not warrant a continuation of this discussion. Instead of addressing my arguments, people have accused me of having bad intentions, which is astounding to witness. I will be writing my final and bonus article next week. Stay tuned…