Not-so-teflon John
John Key has rightly come in for a fair amount of stick for his comment that he would like to see wages drop. My favourite is Victoria University Students Association President, Joel Cosgrove:
It’s all rather funny considering his previous stances of ambitiously increasing doctors fee, ambitiously increasing student fees and now ambitiously slashing wages for working New Zealanders.
John seemed to get the top National Party job because he didn’t make the same gaffes as Don Brash and was less overt about what the party’s long term economic vision for New Zealand is.
Compared to Don Brash he has compared admirably well. Compared to Labour’s accident prone front bench last year he compared favourably. But it will be interesting to see how well he holds up when the pressure of election comes and he’s required to let us see more and more of what he actually thinks.
February 21st, 2008 at 9:17 am
He was talking about Australia.
February 21st, 2008 at 10:27 am
Sorta makes you wonder when there will be a response from across the ditch on this…
February 21st, 2008 at 1:34 pm
My understanding was that although the NZ dollar probably has a bit more purchasing power on some things, if we adjust for comparative income with Australia, we probably still have less net spending power.
I don’t think the comment really makes much sense either way, to be honest. If inflationary wages are strengthening Australia’s economy by sapping our qualified workforce, refusing to resort to inflationary wages here too (and wistfully hoping Australia will drop theirs) is just going to sap our economy of skilled workers and the productivity that Mr. Key is apparently after.
February 21st, 2008 at 3:32 pm
Come on guys, this site is one of the few left leaning sites that usually deals in facts (with the exception of the EFA & S59).
Stirring and pushing untruths is beneath you.
February 21st, 2008 at 3:51 pm
I’m sure this has been covered elsewhere, but what is the ‘untruth’? (presumably you mean ‘lie’?)
I think this would come under ’slightly accident prone’ more than ‘prone to massive Brash-like gaffes’.
February 21st, 2008 at 4:09 pm
The lie is the accusation from the left that John Key wants to drive down wages.
February 21st, 2008 at 4:30 pm
Well he clearly does…but in Australia, yes.
February 21st, 2008 at 4:58 pm
BB said: Come on guys, this site is one of the few left leaning sites that usually deals in facts
But it’s reported in that paragon of factual reporting, the NZ Herald, BB. Just like the Herald editorials on the EFA, how could it possibly be untrue then?
February 21st, 2008 at 5:03 pm
Toad
Read the rest of the press release, he was clearly miss-quoted.
February 22nd, 2008 at 7:14 am
Appears the sarcasm passed you by, BB.
February 23rd, 2008 at 5:18 pm
I am waiting for Key to repeat his classic from 2005, that tax cuts would create an incentive for fathers to work on Saturday mornings rather than watch their children play sport.
I suppose what Key meant if Howard had won the election and introuduced the intended labour reform legislation, wages might have fallen. What this indictaes for his own party’s legislative plans we will have to wait.
The best way to test National, and Labour for that matter, on wages, is to promote continued increases in the minimum wage. $12 1 April 2008 to $15 1 April 2011 - with $1pa increases. The increases are under 10% pa, yet given food and power and housing cost increases and the extent to which these make up the bulk of the spending for those on lower wage levels, this is as much about protecting the poor from adversity than improving their situation.
The same situation also applies to students living off the student allowance or the equivalent borrowed against the student loan (moving them to the adult dole rate and cutting taxes to zero ion the first $10,000).
Taking GST off power with the introduction of carbon charging reduces the impact on the poor and business both.
February 23rd, 2008 at 6:56 pm
Whenever anyone here advocates a minimum wage could they please tell us at he same time how many thousands extra unemployed they anticipate as a result?
Can they explain why the French model - a high minimum wage and high unemployment (particularly amongst youths and ethnic minorities - is one we should follow?
February 23rd, 2008 at 7:36 pm
Yeah i’ve sorta wondered that about the minimum wage re: unemployment - is it worth being employed if you’re only being paid the market rate, which could be well below a ‘living wage’? Is no min wage supposed to suck up all unemployment, creating a labour shortage and thus raising wages?
February 23rd, 2008 at 7:43 pm
Mouldwarp
Throw out your textbook economics.
Our market is now only part of a wider market - which includes us being in Australia’s labour market.
A higher wage for factory workers exporting product offshore might be problematic - but the high dollar caused by the high OCR is already destroying those industries. The export sector is increasingly dominated by the resource sector or skilled worker production (not anywhere near minimum wage levels).
The minimum wage has risen from $7 to 12 (1 April) since 1999 and we have seen unemployment fall and fall until a labour shortage occurred. This is our current situation.
Does Australia’s much higher minmum wage cause unemployment there, no they import our labour at these wages. And they want our lablour at those wages. We need to retain labour by increasing our wages - a surprisingly high number of migrants over the Tasman are workers who are unskilled. Our too low minimum wage is not enticing them to stay.
Now it’s possible if more people stay here because of rising wages that we might overcome the shortage of labour problems which so concerns our business sector. You might cite this as causing falling unemployment to stablise or even rise a little.
I suppose it’s a matter of choices, a continuing fall in unemployment with labour shortages caused by loss of workers, or rising wages and greater economic growth here.
Stephen R
Business used unemployment in the 1990’s (as partner of the ECA) to suppress wage levels, now business uses the ability to replace labour moving to Australia with migrants to keep wages low.
February 23rd, 2008 at 9:24 pm
SPC,
- “Our market is now only part of a wider market - which includes us being in Australia’s labour market..they want our labour at those wages. We need to retain labour by increasing our wages
Given this already very significant upward pressure on wages, and the fact that there are well paid jobs for the taking just over the Tasman, it’s hard to make a case for a higher minimum wage here. NZ companies are already competing fiercely for workers with those Australian companies. If they could pay more they most certainly would.
As far as I am aware, NZ companies do not have a greater level of profitability than Australian ones; in other words they are not retaining greater profits by virtue of paying out less in wages than their Australian counterparts (something that a competitive free market would anyhow preclude). This means that they are already paying the highest wages they can.
- “- a surprisingly high number of migrants over the Tasman are workers who are unskilled. Our too low minimum wage is not enticing them to stay.”
The other interpretation is that the minimum wage in NZ is too high and has rendered them economically unemployable here, able only to find work in Australia’s higher wage economy.
In which case, increasing NZ’s minimum wage will simply add to the number of unskilled people having to look for work in Oz.
- “Does Australia’s much higher minmum wage cause unemployment there, no they import our labour at these wages.”
Of course a higher wage economy can suffer a higher minimum wage rate before it creates significant unemployment. So the real question you should be asking is ‘what makes a higher wage economy’, and you won’t find the answer in more goverment regulation and legislation. But it sounds instead like you just want to wave a magic wand.
NZ is a hick farm at the *rse end of the world. Unless it does something special - like becoming a safe banking haven following the Swiss model, or a low tax haven like the Channel Islands (and why not) - it is always going to be poor compared to other western countries. Just citing other country’s wage levels will get you nowhere, and state legislation such as a high minimum wage will - whilst being very politically astute - only add to the predicament.
Essentially, the Helen Clarks of this world gets elected through legislation like this, because it makes for good political rhetoric, whilst the very real and damaging consequences it has for the low-skilled are not obviously attributable to the bad policy.
February 23rd, 2008 at 9:43 pm
Mouldwarp
Given business is happy to let their staff go off to Australia for the higher wages, rather than pay staff more - this because they can import skilled migrants or unskilled school leavers - there has been insufficient upward movement in wage levels.
Thus increasing the minimum wage has an important purpose. The precedent of past increases from $7 to $12 shows that this is quite sustainable and further increases, to $15 over the next 3 years, would be a slowing of the rate of increase if anything.
And if this is not done, lower wage workers will suffer hardship from rising food power and housing costs. It is thus both necessary socially and possible economically. It’s a no brainer.
It is also important to increase the value of labour to improve productivity. While business can expolit cheap labour, they will not invest to improve productivity.
A vision of a low tax safe banking haven and being an apologist for a low rate minimum wage country is no surprise.
February 23rd, 2008 at 9:48 pm
I should add that during the period of the inrease in the minimum wage from 7 to $12, the number of people working in our economy has increased. This does not bear out claims that it causes unemployment.
February 23rd, 2008 at 10:38 pm
SPC,
- “business is happy to let their staff go off to Australia for the higher wages, rather than pay staff more - this because they can import skilled migrants or unskilled school leavers - there has been insufficient upward movement in wage levels.”
The only way this makes sense is if you are claiming that NZ firms are extra profitable (beyond those high-paying Australian firms) through colluding with each other not to pay higher wages, and instead retaining that money for themselves.
Do you have any evidence that of this? Are NZ companies’ returns on investments higher than Australian ones? If not, then we can assume there is no extra money just waiting to be pried out of them by your legislation and that they are, in fact, paying as much as they can.
- “It is also important to increase the value of labour to improve productivity. While business can expolit cheap labour, they will not invest to improve productivity.”
So now you’re saying jobs *will* be lost, as firms automate to replace workers.
- “I should add that during the period of the inrease in the minimum wage from 7 to $12, the number of people working in our economy has increased. This does not bear out claims that it causes unemployment.”
If a minimum wage doesn’t cause unemployment then let me trump your suggestion and recommend instead a minimum wage of $500 per hour. Who but an evil capitalist could disagree?
- “A vision of a low tax safe banking haven and being an apologist for a low rate minimum wage country is no surprise.”
You do me a disservice. What I’m actually advocating is a vision of a low tax safe banking haven and *no* minimum wage.
The point, of course, is that, given NZ’s geographical disadvantages, the Swiss banking example was offered as one of the few routes I could think of to becoming a *high* wage economy. Sadly, you deliberately misrepresented my position.
And just one question. How many people do *you* employ, at or above your proposed minimum wage level? I’m assuming you wouldn’t be so hypocritical as to denounce others for paying less than you think they should, whilst at the same time not offering employment to anyone at *any* price.
February 23rd, 2008 at 11:23 pm
Mouldwarp, I see four situations that could result by tweaking taxes and minimum wage:
1) Low taxes, low/no minimum wage, drastic wage shortfall issues among the underqualified unable to be mitigated by welfare.
2) Low taxes, high minimum wage, drastic unemployment issues unable to be mitigated by welfare.
3) “High” taxes, low/no minimum wage, minor unemployment issues mitigated by welfare.
4) “High” taxes, high minimum wage, major unemployment issues mitigated by welfare.
Obviously, we’re only looking at the extreme situations here. I think we definitely started off closest to (3) before Labour started raising the minimum wages, but I’m not sure we’re exactly near (4) yet. We don’t seem to be seeing a massive increase in unemployment- in fact there seems to be lots of jobs available, plenty of which are probably paying minimum wage or close to it.
I think it’s a good point that there will be some businesses where there is little incentive for workers to be productive and for employers to pay them more both because of a low minimum wage- it creates a cycle where the workers feel undervalued so they don’t optimise their work so they don’t get paid better so they feel undervalued. In cases like this, minimum wage increases may actually stimulate the business and possibly the economy if such dilemmas form a significant part of it.
Equally, there will be businesses that are only viable because of low wages, such as businesses that employ people who would otherwise be unemployable. The raising of the minimum wage has left provisions in where there are good reasons for paying lower wages, such as inexperience or work-related disability, so any businesses that are going bust or firing low-priority employees will be ones with a very slim margin that can’t raise prices or are offering jobs they don’t really need done- ie. incredibly marginal businesses or jobs.
I’d contend that it’s certainly possible that in our economy, the first case would outweigh the second.
February 23rd, 2008 at 11:49 pm
Mouldward
The question is whether profits are affected by rising wage bills to employers whose workers receive only the minimum wage. A rising minimum wage does not change a firms ability to compete with rivals also paying the minimum wage.
SPC“It is also important to increase the value of labour to improve productivity. While business can expolit cheap labour, they will not invest to improve productivity.�
“So now you’re saying jobs *will* be lost, as firms automate to replace workers.”
Low wage jobs would decline. The number of skilled worker jobs at a higher pay rate would increase. No doubt when NZ Post automated they increased the pay for those staff who remained to manage the new system.
SPC“I should add that during the period of the inrease in the minimum wage from 7 to $12, the number of people working in our economy has increased. This does not bear out claims that it causes unemployment.�
“If a minimum wage doesn’t cause unemployment then let me trump your suggestion and recommend instead a minimum wage of $500 per hour. Who but an evil capitalist could disagree?”
No one proposing minimum wage levels which reflect our place in a trans-Tasman labour market, is trying to end pay relativity.
“And just one question. How many people do *you* employ, at or above your proposed minimum wage level? I’m assuming you wouldn’t be so hypocritical as to denounce others for paying less than you think they should, whilst at the same time not offering employment to anyone at *any* price.”
Typical, yet unsurprising that those proposing no minimum wage, think only those employing others should have any say in setting wages.
Can I presume you think, unions should be baned from workplaces and business unrestrained by civic law and environment standards.
February 24th, 2008 at 12:06 am
Ari
Medium taxes (we are close to this in the OECD), medium level minimum wage (ours are lower than most, but in the context of a lower wage economy in general) - unemployment covered by welfare or low unemployment depending on the time in the economic cycle (this is possible if one carried a budget surplus for the Cullen Fund and occasionally used this in low cycle periods when unemployment rises and company tax receipts fall).
The complicating factor is how our economy and labour market operates increasingly with Australia.
Mouldwarp
As to what is possible - if we joined Australia - we would all suddenly get their award pay rates - medical staff, teachers, soldiers, skilled workers in awards, their minimum wage and to trade globally using their dollar. Compared to that, what exactly does National’s tax cuts mean, jellybeans?
February 24th, 2008 at 1:03 am
I should change my post slightly
Ari
Medium taxes (we are close to the OECD average), medium level minimum wage - thus unemployment covered by welfare or low unemployment depending on the time in the economic cycle (this is possible if one carries a budget surplus for the Cullen Fund and occasionally used this in low cycle periods when unemployment rises and company tax receipts fall).
In 2006 the highest minimum wage was in France – but only a little ahead of the UK and Ireland and more back to Australia. We would be a little further behind if our dollar valuation “corrects� downward. The ratio of the minimum wage to the average wage was higher in Ireland than elsewhere in 2006 (52%). It was the same in Australia and France (47%).
The Australian minimum wage is A$13.74 - NZ$15.84. And remember they have no tax on the first $10,000.
February 24th, 2008 at 1:10 am
If we did continue from a $12 in 2008 to $15 minimum in 2011, we would be moving into a medium to medium high minimum wage category (though the variability of our currency value does complicate assessment). But it would not distort our position in the wider Tasman labour market, just harmonise our place within it.
It would do us no harm politically, as they would have problems with our workers continuing to cross into their market for their higher wage jobs, if unemployment was to rise over there.