Imraan Valodia and David Francis defend their primary role in advising the government to adopt the national minimum wage (NMW), which became law on January 1 (“Much too early to blame minimum wage for rising rate of joblessness”, May 24).

They submit a “not guilty” plea regarding the fact that Stats SA’s 2019 first-quarter figures show a leap in the broadly defined number of unemployed to a startling 9.994-million unfortunates, which included an additional 15,000 domestic workers.

The National Minimum Wage Act is based on faulty economics. That an NMW would cause increased hardship for the young, old, long-term unemployed and otherwise disadvantaged was a given, which the panel chose to ignore. The job losses started well before January 1 as individual and business employers anticipated the negative effects on their budgets.

An egregious aspect of the NMW was that the implementers turned a deaf ear to warnings that imposing the same minimum wage on urban and rural employers and their employees would cause havoc in rural economies.

Even an example did not deter them, such as the tragedy that occurred in the US dependencies of Puerto Rico (rapid increase in unemployment, and GDP per capita down by almost 7% between 2007 and 2013), American Samoa (high unemployment and real per capita GDP down 10%) and Northern Mariana Islands (35% job losses and per capita GDP down 23%). The cause: imposition of an NMW at the same level as mainland US with its higher GDP per capita.

The authors state that “in all sectors of the economy businesses that may not be able to pay at the level of the NMW are able to apply for an exemption”, obviously unaware that the labour department, by regulation, reinterpreted the word “exemption” to mean a “discount” of 10%. In practice it means there have been no exemptions.

Eustace Davie
Free Market Foundation