Been meaning to share this for a minute now. As the title suggests, this post hasnt been inspired by anything or any event in particular.
There’s a way you can package poison for sale such that the buyers will not only pay top dollar for it, they will kill for the chance to kill themselves with your product.
One of the most fascinating things I have come across this year is the story of how racist South African unions campaigned for minimum wage laws at the height of apartheid as a way of keeping down black labourers in the construction industry. This New York Times article from 1972 sheds some light on the matter.
What had happened was that white labourers were not getting jobs in the construction industry as builders because blacks were repeatedly underpricing them when it came to wages they were willing to accept. Given that blacks were poorer than whites at the time, their needs were probably more modest meaning they could support their lifestyles on much lower wages than whites. Bear in mind Mandela was in prison at this time and apartheid was in full force out there.
Illustrating with some numbers – imagine the going rate for white labourers was say $10/hr. Also imagine that black labourers were willing to work for say $5/hr to do the same job. Now imagine a hardcore racist businessman who is building a block of flats or something to rent out for a profit and therefore requires 100 builders each day for 8hrs to do the job.
If this businessman decided to ignore his economic instincts and go with being the racist he is, it would cost him an extra $4,000 per day just to be racist [100 labourers x 8hrs x ($10 – $5) ]. Bear in mind that being a racist does not confer any obvious economic benefit on him in this scenario, in other words he is only being a racist for his own pocket.
Now you can easily see what will happen here – it is one thing to be a racist with your mouth, it is entirely another thing when it comes to backing up your racism with cold hard cash from your pocket. Afterall, it’s not as if the businessman will be able to charge a premium for his flats if he advertised it as ‘built exclusively with white labour’ or ‘no blacks were involved in the construction of this building’.
Now the South African unions were very clever because they knew that as long as this ‘free market’ prevailed in the labour market, they were never going to be able to compete with cheaper black labour. Furthermore, the more the blacks got jobs, the more skillful they were likely to become meaning their wages would inevitably rise as time went on. Sort of like double jeopardy for the white labourers.
They of course tried to get businessmen to stop hiring black workers but that didnt work because even the most racist businessmen would always turn colour blind at the point of paying money from his pocket. Instead the problem worsened. In 1971, a South African newspaper called The Star, notorious for its racist views came out with the following as an editorial
Grabbing at loopholes in the labour laws has reached the stage now where most new houses are built almost entirely by black Africans. White builders are becoming a thing of the past. Even Inspectors from the Dept of Labour have thrown their hands up in despair and turned a blind eye to blatant contraventions
The last bit is particularly telling as an indication of how widespread the ‘problem’ must have been. It had evidently reached the stage where it was impossible to enforce a ban on the construction industry hiring black workers which the job reservation laws were meant to achieve.
This is where the racists then came up with the idea of repackaging poison. The unions began to campaign for a ‘rate-for-the-job’ law in other words a minimum wage. What was clever about the way they did it was set the target rate at some sort of halfway house in between what whites were commanding and what blacks were getting. So going back to our example above, they floated a ‘rate-for-the-job’ of say $7/hr.
Now looking at that, it does look like a pay cut for the white workers and a pay rise for the black workers doesnt it? I mean, this effecitvely meant that if the law was enforced, no black worker will get less than $7/hr again.
But the real trick was that this law eliminated the cost of racism that businessmen had previously avoided by hiring blacks. So in short, using our previous example, It would now cost you $5,600 (100labourers x 8hrs x $7) to hire a black or a white worker. Racism had been effectively subsidised and had now become affordable for all racist businessmen. It’s important to note that as long as this cost was the same for everybody, then the cost of labour would simply be fed through to the final consumer in terms of higher rents or property prices i.e no businessman could undercut the others by using cheaper black labour and thus increasing his own profits.
I dont think there’s much need to tell how this all went down for black people after the ‘rate-for-the-job’ law was introduced. It goes without saying that it gave the whites who had been pushed out of the market a much needed lifeline and let them get back into the market.
Back to the point of selling posion – it’s interesting that this ‘rate-for-the-job’ policy was supported especially by blacks who already had jobs enticed by the possibility of earning higher wages. It also got a lot of support from civil rights leaders in America who were happy with a policy that seemed to suggest ‘equality’ between blacks and whites. On paper it looked like a winner but aside from eliminating the cost of racism, it also crucially raised the barrier to entry for those who were not yet employed. Imagine you are an unemployed black labourer seeking work at $5/hr and no one will hire you. All of a sudden a new law comes in place and says you are now ‘worth’ $7/hr even though you are still unemployed. It’s hard to see why any employer will suddenly be attracted to you now that you are more expensive for him to hire. On the flipside, imagine you are an unemployed white builder who last earned $10/hr and have some experience on your CV. Now you cost $7 meaning you look like a real bargain to the businessman who is looking to hire.
And this is why I love the free markets – it doesnt eliminate racism of course, it merely places a cost on it and any other kind of bad uneconomic behaviour. It’s the reason why free market policies are always resisted especially by incumbents in any sector and people end up always wanting to use government or any other means foul to protect themselves.
Now tell me something; is this the first time you are hearing of a policy that promises one thing on paper and ends up having the complete opposite effect of what was advertised?
P.S Because you insist – relating this to Nigeria, given that we have a huge army of unemployed people, we really have no business with minimum wage laws. The minimum wage is useful for those who already have jobs but for those who are unemployed, the real minimum wage for them is a big fat zero. They either get it, if they are lucky, or they dont get anything at all.
The correct approach therefore ought to be policies that make it easier and more affordable for businesses to hire people as much as possible. When faced with an unemployment crisis, the first priority ought to be to reduce the unemployment. After that, wages will rise by themselves when there’s competition for labour between firms and not just employers having their pick from a vast army of unemployed. In other words, pay is not the priority when unemployment is staring you in the face so boldly.
But you knew that already.