Sri Lanka to raise minimum wage by 25-pct

ECONOMYNEXT – Sri Lanka is to raise the minimum wage by 25 percent by government decree, to 12,500 rupees, under a proposal approved by the cabinet of ministers, the state information office said.

Sri Lanka set a minimum wage of 10,000 rupees in 2015 along with a host of ‘neo-illiberal’ policies including price controls and unsound money in the form of monetary instability and currency depreciation which formed the foundation of the policy framework.

The minimum monthly wage will be raised to 12,500 rupees and the minimum daily wage will be raised by 100 rupees to 500 rupees.

A decree will be issued under a 2016 Minimum Wage law which will be published in the gazette and later presented to parliament.

A tool of eugenecists and Racists

Minimum wage laws were first enacted in the West by eugenicists who wanted to keep ‘undesirable’ handicapped people and women out of the workforce.

They were later followed by race driven nationalists in both the US and South Africa who wanted to stop black workers from competing against white or unionized labour.

Similar minimum laws had been brought in Canada in the 1920s to block Japanese workers.

Walter E. Williams, an African American professor, and author of the book South Africa’s War Against Capitalism, says superiorists in the country, were the major supporters of the minimum wage for blacks.

“So they recognized that if they could raise the wage, contractors would hire white workers instead of black workers,” Williams explains.





He says the minimum was is “one of the most effective tools in the arsenals of racists everywhere around the world.”

But, to keep the least qualified workers and minorities out of employment, the minimum wage has to be set above the market clearing price of labour in a particular area.

The minimum wage also has to be effectively enforced by a government agency, or the less qualified – especially those who migrate to an area from rural areas or outside the country – will compete against the better qualified or the majority race and ‘steal’ their jobs by breaking the law.

In the US the gap between white and black unemployment did not emerge until after the minimum wage, economist Thomas Sowell, an African American has pointed out.

“Minimum wage laws prevent transmission of knowledge of labor available that costs which would induce its employment,” Sowell writes in his book Knowledge and Decisions.

“By mis-stating the cost of such labor, it causes some of the labor to be unemployed, even though perfectly willing to work for wages which others are perfectly willing to pay.

“In the case of the so called minimum wage law, the empirical evidence has been growing, that it not only increases unemployment, but that it does so most among the most disadvantaged workers.”

Wage Divide

In 1931, a minimum wage law, the Davis-Bacon Act of 1931 was brought by the Hoover administration during an economic downturn, when government projects were started in many areas to generate jobs.

Many jobs were taken by black people from poorer areas working for liberal-capitalist contractors who bid lower prices than those who only hired white unionized local labor.

“The Davis Bacon Act tends to discriminate against non-union labor,” Williams says. “And most blacks in construction, are in the non-union sector.”

A Federal minimum wage law was brought in 1938.

Sowell says black unemployment started to rise after the Federal minimum wage law. But in the late 1940s when there was high inflation the minimum wages were made irrelevant, helping blacks.

“So in other words, the minimum wage law had for all practical purposes, been repealed by inflation,” explains Sowell.

“And at that time, unemployment rates for for black teenagers were a fraction of what they were at any time since then.”

Later black unemployment again started to rise.

“Because in 1950, they started increasing the minimum wage to catch up with inflation, and spread the coverage,” explains Sowell. “And that’s when you got these double digit unemployment rates for black teenager, even during the height of prosperity.”

Williams says black teenage unemployment eventually rose to around 55 percent eventually. But in 1948 black teenage unemployment was less than white teenage unemployment at around 9.2 compared to 10.10 percent.

America, says Sowell was not less racist then than now.

Long term effects

Sowell says he managed to get work and made many mistakes and learned, and as an adult feels sorry for his employer then.

One of sad effects of the minimum wage he says is that black teenagers today do not get the chances he had to make mistakes when young and learn to get used to the working in the real world.

Sowell eventually graduated from Harvard, read for his Masters at Columbia and a earned his doctorate from the University of Chicago.

He says both the economist profession and the media are responsible for not educating politicians about the real effects of the minimum wage.

In Sri Lanka however the minimum wage at 12,500 rupees is probably below the market clearing wage and may not do any real harm. (Colombo/Oct18/2019 – Update IV)

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