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Minimum Wage

Dante Dorr and Katherine Ashley Chen

September 25, 2021

“A Diamond is Forever”: the ad catchphrase from DeBeers that turned diamonds into the massive market that it is today (Sullivan 2013). But its prevalence comes at a cost; many mines that form the backbone of rough diamond production, specifically in diamond-producing african countries, rely on child labour and minimal wages. This isn’t the fun kind of child labour or worker exploitation, however, but rather the kind that involves little to no pay, forcing children and adults alike into malnourishment and abject poverty. Many mining unions and humanitarians have called for higher wages through the establishment of an enforceable minimum wage (ENCA). Yet, proponents of the pro-business community contend that this would cause economic harm through the creation of economic inefficiency. Nonetheless, mere market efficiency as a motivator for economic policy should not outweigh the prevention of starvation and exploitation. Therefore, governments in diamond-producing regions in Africa should implement a higher enforceable minimum wage.

To begin with, it’s important to explore the idea of the creation of market inefficiency. Though the labour market structure varies from region to region, small mines with little to no labour market power produce approximately 15% of rough diamonds and are often the mines that provide smaller wages (brilliantearth). With these characteristics in mind, a perfectly competitive labour market model can (though this a large simplification) illustrate the effects of a minimum wage.

Within this graph, the creation of a minimum wage creates a surplus of labour: more miners will be willing to work than there will be mines willing to hire them. This causes inefficiency as many miners will be left without a job. This is also visible in the creation of deadweight loss, which represents the loss of surplus between the miners and the mines. In comparison, in the same market without a minimum wage, the allocative efficiency would be roughly achieved, minimizing the deadweight loss. The pro-free market argument thus follows that in order to avoid this inefficiency, a minimum wage must be avoided. They believe that this inefficiency would lower the general standard of living for the miners, as less workers would be employed and firms would have less workers at a higher cost.

However, a minimum wage is a policy driven by the goal of equity. In Sierra Leone, a major region for diamond mining, daily wages for miners often “​​ranged from Le 500

to Le 2,000 (approximately US$0.15-US$0.60)” (IHRC). Such wages are shared with over a million miners within the diamond-producing regions of Africa (brilliantearth). This wage, substantially lower than the poverty line, has devastating effects. Many of the miners lack access to “basic necessities such as running water and sanitation” (brilliantearth), and many children report feeling an extreme sense of “fatalism and/or despair” (IHRC) in response to the wages and working conditions. Evidently, the current wage is untenable.

To what extent, then, does the suffering of workers and children justify an increased minimum wage? According to the graph, an increase in the wage will result in higher unemployment–especially bad considering many miners have “no other alternatives” and that mining is the “only way to survive” (IHRC). This theory is based on the fact that firms will be less willing to hire workers in order to maximize profits. Since these mines are largely perfectly competitive, they will have long run normal economic profits. That means that, as a long term solution, it would be impossible to simply mandate that these firms continue hiring at a pre-minimum wage level with a minimum wage, as their economic profit will be negative, meaning that somebody has to compensate firms in order to establish a minimum wage.

Here, however, the solution runs into practical hurdles. How will nations that are already running on a tight budget be supposed to finance such a large social program? After all, raising the wages for over a million miners would require substantial financial investment. While this solution may not pertain to each individual nation–and nations should therefore seek a source of funding that best suits their own socio-political environment– one effective solution could be using public diamond profits to fuel this solution. In Zimbabwe, for example, approximately 15 billion USD of diamond profits for the Government was misappropriated and used to line the pockets of the elite rather than enter the national treasury (GlobalWitness). This amount of money could likely cover the cost of a minimum wage program. In order to overcome the barrier of corruption, it is recommended that all readers of this article write a strongly-worded and thoroughly spell checked email to corrupt governments of certain diamond producing nations, which could potentially result in a change of heart for the politicians who would then opt to fund the minimum wage program. Another means of persuasion would be the use of violent threats through email, which must certainly also be rigorously spell checked, though this venue of change is less likely to be fruitful.

In order to protect the precious children and workers of impoverished nations, who are suffering tremendously under horrendous living conditions, it is imperative that they be granted a living wage. Even though this Government intervention would likely result in inefficiency, this could be fixed through a subsidy funded by the recuperation of misappropriated diamond funds, which were actually originally earned by the workers themselves. Essentially, the proposition and entirety of this article boils down to this: give the miners back their money because they could use it.

Works Cited

"Digging in the Dirt": Child Miners in Sierra Leone's Diamond Industry. International Human Rights Clinic, 2009.

“Labor & Community.” Brilliant Earth, www.brilliantearth.com/conflict-diamond-child-labor/.

“Leave No Stone Unturned: Transforming Zimbabwe's Marange Diamond Sector through Extensive Transparency Reforms.” Global Witness, www.globalwitness.org/en/campaigns/conflict-diamonds/leave-no-stone-unturned/.

Sullivan, J. Courtney. “How Diamonds Became Forever.” The New York Times, 3 May 2013, www.nytimes.com/2013/05/05/fashion/weddings/how-americans-learned-to-love-diamonds.html.