Grasping basic value subjectivity would dramatically cool South Africa’s toxic debates on unemployment, immigration, and “exploitation”.
Until we reject the academised labour theory of value and embrace economic reality, comforting falsehoods will be stuck with jobless youth and political temperatures running dangerously high.
A few days ago on X, my colleague, Ayanda Zulu, tried to inject a dose of economic understanding into the heated debate over youth unemployment and immigration.
Ayanda laid out the two paths young protesters could take: the comforting but false one that blames immigrants and promises that jobs will become available for locals once the immigrants are kicked out, or the discomforting truth that South Africa’s rigid labour laws are the real barrier to employment.
I stated the underlying reality of the equation with a concrete example:
Suppose I (or any employer: a roadside gogo needing help, or a big business CEO) have a job that needs doing. I value that work at R2,000 per month. An unquantifiable number of factors constitute this value, and all are subjective to me and my perception of the world.
I would rather do this job myself, or see it go undone entirely, than pay more. But if someone is willing to do it for up to R2,000, great.
An immigrant – often with precarious status – is happy to take the job. Synergy! The job gets done, and both parties are better off than before.
Now expel the immigrant. Does a South African suddenly slot straight into that role?
No.
My subjective valuation of the job has not changed by one rand. I still only value it being done at a maximum of R2,000.
If the law tries to force me to pay the statutory minimum wage above that figure, the job simply disappears. I will do the work myself, or the work will not get done.
The immigrant loses their income. No local gains a job. I have to spend my time on something I’d rather not be doing. Only wealth destruction has occurred.
Seeking to solve unemployment through strict immigration policy is an economic non-starter.
Sabelo Chalufu, a civic activist, responded to our thread. In a post that quickly racked up dozens of likes and reposts, he accuses the Free Market Foundation (FMF) of deliberately wanting a pool of “exploitable” workers. Immigration has been allowed to run riot, he says, precisely so businesses can browbeat locals into submission. Labour laws are rejected, he claims, because they make exploitation harder.
Chalufu is not alone in this reaction. Many South Africans read our plain description of how markets and the innate laws of economy actually work, and see red: This is justifying exploitation!
Value subjectivity
This is hardly the case.
As the Austrian thinkers Carl Menger, Ludwig von Mises, and FA Hayek, among others, have noted: Value is not an objective quantity embedded in a service or product by the amount of sweat poured into it. Value is what you and I decide a thing or service is worth to us, right here, right now, given our own circumstances, preferences, and perceived alternatives. Value, in other words, is inherently subjective.
That is why the R2,000 job exists in the first place.
The employer does not “exploit” the worker. The employer and worker meet at a price both voluntarily accept. The workers prefer R2,000 (or whatever they negotiate within the employer’s upper limit) to unemployment or their perceived next-best option. The employer prefers paying R2,000 to doing the work himself or leaving it undone. Both gain.
That is the very opposite of exploitation.
Labour theory of value
The Marxist labour theory of value – the intellectual root of the “exploitation” charge – says otherwise.
It insists that the true value of a good or service is the socially necessary labour time required to produce it. The capitalist pays the worker only enough to reproduce his labour-power (essentially, subsistence wages), but sells the output from the worker’s labour for more. The difference – called “surplus value” – is value allegedly “stolen” from the worker, thus “exploitation”.
Use-value (subjective usefulness) is acknowledged by Marx as a precondition, but the magnitude of exchange-value is supposed to be determined objectively by labour.
Academisation of reality
This framework is elegant on the blackboard of theory. In the real world of human action, it is pure academisation.
No buyer or seller ever “strips away” – as Marx asks us to do in determining exchange-value – the specific usefulness of a good or service to discover its “congealed abstract labour”. They simply ask: Is this worth it to me at this price?
Exchange happens only where subjective valuations meet. If workers value their labour at more than R2,000 per month, they will not (this is a hard rule) accept a job at less than that amount. If employers value their R2,000 more than what the worker offers, they will not (this is a hard rule) employ the worker at more than that amount.
So-called “market price” or “market rate” – the closest reasonable approximation of Marx’s exchange-value – are not veils hiding objective labour quanta, but the often-low-resolution aggregation of millions of individual subjective rankings.
Public policy
South Africa’s policy environment makes the point brutally clear.
Minimum wages, rigid dismissal rules, and centralised bargaining raise the wage floor above the amount at which many employers subjectively value certain entry-level work. Immigrants (legal or not) are often willing to operate below that floor. Removing them by force does not magically make the employer’s valuation rise to meet the statutory minimum. The job simply vanishes or is never advertised, and unemployment statistics remain grim.
The same dynamic applies to locals who would gladly take the work at R2,000, but are forbidden by law from doing so. Unfortunately, socio-political dynamics in South Africa make it more common for locals to rat out their employers than would undocumented foreigners, and like it or not, micro-, medium-, and even large employers will always factor this in.
None of this is about dunking on workers or South Africans.
Employers are not benevolent philanthropists, but they are not cartoon villains either. They will try to pay as little as possible, just as workers will try to earn as much as possible. Negotiation happens within the band set by the employer’s subjective ceiling and the worker’s subjective floor.
If you truly value the work at R2,000, you will pay up to R2,000 rather than lose the service. The worker who accepts knows his alternatives are worse. That mutual acceptance can never be honestly described as “exploitation” – this is simply the impersonal market process revealing preferences.
Real abuse like physical coercion, stealing employees’ passports, or locking them in backrooms, obviously exists, and is rightly criminal under common law. Practices like these violate basic principles of law recognised for millennia (as opposed to new contrivances dreamed up by legislators based on textbook ideology). But equating this with a voluntary wage agreement because academics dislike the number on the payslip is not real economics.
“But the data shows…”
Critics of value subjectivity often try to rebut arguments against minimum wages by pointing to empirical studies that appear to show little or no rise in unemployment after wage floors are introduced or hiked. “See?” they say. “The data proves minimum wages don’t destroy jobs, so the economic case against them collapses.”
This misses basic realities.
Subjective valuation is not an empirical hypothesis that can be falsified by regression tables, but an intrinsic feature of human action.
Every employer has a personal ceiling: the maximum they subjectively value a particular job at, given their own circumstances, perceived alternatives, and the marginal productivity they anticipate from the worker.
If the statutory minimum wage sits below that ceiling, employers will naturally comply without firing anyone. The law simply ratifies what they were already willing to pay. No disemployment occurs because the regulation never binds against the employer’s true valuation. The employer might have offered the job at R1,500 but subjectively valued it at R2,000, meaning if the law sets the minimum at R1,900 the employer will be willing to raise the wage. The job continues to exist, not because the minimum wage “worked”, but because it was set too low to disrupt the voluntary exchange.
In South Africa’s context, some studies of the 2019 National Minimum Wage (and earlier sectoral determinations) found wage increases for low earners with muted or statistically insignificant unemployment effects in the immediate period.
Non-compliance is widespread, especially in informal or small-scale settings, which further blurs the measured impact. These findings are real, but they do not refute the underlying logic. They simply illustrate the fact that the floor is non-binding, or that other factors (enforcement gaps, short time horizons, or shifts in hours/productivity) mask the effect.
The real test comes when the minimum wage exceeds the amount at which the employer subjectively values the job.
In that case, the job is lost or simply not offered. The vacancy might thus never appear in the statistics: No before-and-after employment drop is recorded because the position was never created in the first place.
This is “the unseen” that the likes of Frédéric Bastiat and Henry Hazlitt warned about, and that those engaged in superficial economic analysis will necessarily miss: the forgone opportunities that econometric studies struggle to capture, especially in a high-unemployment economy like South Africa’s where many potential entry-level roles for the unskilled or youth just never materialise.
Perversity of minimum wages
There is an additional perverse incentive.
Suppose an employer subjectively values a job at R2,000 per month. Without any minimum wage, market negotiation might settle somewhere in a band below that figure, depending on the worker’s alternatives and bargaining.
But if the law sets the floor at R1,500, the employer – who, like all economic actors, prefers to pay as little as possible while still securing the service – now has a clear policy anchor. Why offer more than the statutory minimum when the law declares R1,500 “fair”?
The result could be that wages cluster at the floor even when the employer would have been willing to pay higher in a freer negotiation. Workers who might have earned R1,800 or R1,900 through voluntary agreement are now stuck at R1,500.
The minimum wage does not just fail to help – it can actively compress wages downwards towards the legal floor within the employer’s subjective band.
This is why empirical “no effect” findings cannot overturn the logic of subjective value. They observe outcomes where the regulation does not bite against valuations, or where effects are hidden in non-creation of jobs, reduced hours, non-compliance, or shifts to informal arrangements.
But where the minimum wage does exceed an employer’s ceiling for a given role, that role disappears by definition. No amount of data on published job ads or existing payrolls can measure the counterfactual realities that were never born. The logic of human action dictates that employers do not and will not hire at a loss relative to their own valuation.
A better alternative
The tragedy is how this pseudo-economic notion poisons discourse.
It turns economic co-creators into class enemies. It fuels conspiracy theories: They want cheap labour; they hate South Africans; they engineered the immigration wave to suppress wages. It raises the political temperature and blocks necessary reform.
If protesters absorbed the subjective reality of value instead, they would see that the real enemy is not the immigrant next door or the employer down the street, but the policies that prevent willing buyers and sellers from actualising their meeting of minds.
Expelling immigrants will not recreate the jobs they currently fill for locals – I promise!
Only relaxing the labour laws that price those jobs out of existence can do that, through voluntary opt-outs like the FMF’s proposed Job Seekers’ Exemption Certificate (JSEC).
Until South Africans grasp that value is subjective, not an objective substance to be redistributed, we will keep chasing comforting falsehoods. Unemployment will stay stubbornly high. And the real victims, those desperate for any foothold on the ladder, will carry on paying the price.
The market is not perfect when measured against our idealised notions of how things ought to be. But it is honest and sincere. It reflects what people actually value. Pretending otherwise, no matter how righteous it might feel, only makes the problem worse.
[Image: Hennie Stander on Unsplash]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
If you like what you have just read, support the Daily Friend