• Minimum Wage Hurts The Poor

      Today’s New York Times has an article appropriately titled: “Wage Laws Squeeze South Africa’s Poor.” It starts:

      The sheriff arrived at the factory here to shut it down, part of a national enforcement drive against clothing manufacturers who violate the minimum wage. But women working on the factory floor — the supposed beneficiaries of the crackdown — clambered atop cutting tables and ironing boards to raise anguished cries against it.

      “Why? Why?” shouted Nokuthula Masango, 25, after the authorities carted away bolts of gaily colored fabric. She made just $36 a week, $21 less than the minimum wage, but needed the meager pay to help support a large extended family that includes her five unemployed siblings and their children.

      A law requiring higher wages hurts the poor? How could that be? The Times’ editorial board must be floored – after all, last year they wrote an editorial demanding an increase in the US minimum wage beyond the one that had just gone into effect. They called the increase from $6.55 to $7.25 an hou:

      [B]adly needed… also wholly inadequate...

      The Labor Department must also ensure that low-paid workers are not exploited.

      That sounds nice. But what the Times calls “exploitation” is what others call “ an opportunity.”

      Fortunately, the US minimum wage is still low enough that it only affects about 5% of the workforce. But South Africa is an example of what would happen if it were increased:

      If the more than 300 factories violating minimum wages ultimately close down, 20,000 more jobs could vanish…

      While officials wrangle, the unemployment crisis festers in places like Newcastle. During the rowdy protests at the factory last month, the police warned that the situation could turn violent...  The factory closed.

      But broader resistance from Newcastle factory owners and concerns about large job losses led to a monthlong moratorium on factory shutdowns after 26 were closed nationally. Officials from the government and the bargaining council are now pushing offending factories to come up with plans to pay minimum wage.

      I wish the Times editorial board members read their own paper.

      Free Market
      Unintended Consequences