Thursday, December 01, 2005

Wage shocker!

Tim Harford ( picks up a story from a South African Blog about the minimum wage and what it should be set at: ( , which I quote below:

“Domestic wage shocker

labour department has announced the new minimum wages for domestic workers effective from Thursday. The increase is 6.7% and in urban areas domestic workers doing more then 27 hours per week must now earn R997.04 and those working less then 27 hours a week must earn R706.63 – in rural areas it is even less.
Disgusting! Who is the government kidding when it says that a person can live on less then R1,000.00 a month?
When these minimum wages were initially proposed the government seriously messed up by setting these wages way below any half decent poverty level. The same problem exists within the taxi industry where the government introduced the new
basic employment conditions for taxi operators with wages between R945 and R1,350.
It is a blight on our new democracy that our government says a person can live on such a minute amount of money every month, if one wants to go the minimum wage route then at least ensure the minimum is a livable amount of money
Posted by zaBlogger on 29 November 29.

The only person who can decide whether a wage on offer is 'too low' is the person to whom it is offered. Third party opinions (especially as they are not paying) usually have other agendas and they cannot take account of the circumstances for each and every transaction.

If the offered wage is too low, then the person can look elsewhere. Maybe a few hours a day suits him or her and the household income is well over R1000; maybe the job is convenient for some reason (location, nearby a school, a safe neighbourhood, not overly strenuous, more a companion than a heavy duty worker, flexibly paid sans taxation, or does not registration with the authorities, or whatever). Who knows but the person involved?

The blogger's conceit leads him or her to assert access to that knowledge:

Disgusting! Who is the government kidding when it says that a person can live on less then R1,000.00 a month?”

Who is the Blogger ‘kidding’ when depriving anybody of a job at R706, and leaving them with zero rand a month, that they “can live on” no rand “a month”? The next logical step is to compel anybody above the national average wage to employ somebody as a domestic, or whatever, at a wage fixed by third parties, who have no idea of the multi-varied circumstances of every single person who might be willing to work for R706.

Interesting that the compulsory billeting of British soldiers in people’s homes was one of the causes of the US War of Independence; compulsory hiring of domestic help at R1,000 (why not 10,000, and really “abolish poverty”!) while not quite as oppressive, it is certainly silly economics.

If poverty could be abolished by raising the pay of those below the average wage, governments would have done it years ago. Those that follow such fantasies eventually impoverish everybody (except themselves). Only the creation of wealth – the annual goods and services produced by an economy, as Adam Smith expressed it – reduces poverty. Governments have never created wealth – only markets can create wealth.


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