Just as a general comment:

Productivity per worker is a good measure for a company but a poor measure for a country. This is because, while a company can fire employees and thus increase its productivity per worker, a state retains citizens and must actually support them when out of work (effectively creating a negative productivity). Since citizens cost resources to support “productivity per citizen” is a far superior measure for countries.

Also, the 8,100 should not be taken as a general rule. Rather this low amount is reflective of the fact we have been experiencing a recession and thus many of those on the low wage jobs that were at least semi-elastic have lost their jobs as a result of decreased demand and thus a shift in the marginal benefit of each additional worker. Were the minimum wage lower many of those people may not have lost their jobs. Were we not in a recession we would see far larger numbers.

That said, the ill effects of unemployment can be effectively neutralised with the appropriate measures and thus the point at which the minimum wage should be set is purely one of economic reasoning. Because of this I can not state if the wage should go up or go down as I do not have the needed numbers.

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SPC – your comments make no sense. If most minimum wage jobs are not price sensitive, then why not double them instead of just a 20% increase?

You don’t know any business who can’t pass on minimum wage increases? What? How about any business producing products that are exported, or any compete against imports – they will all stuggle with increased wages. Think food, wine, fruit etc, any clothing, appliances etc. Major NZ companies have recently set up offshore factories because they can’t compete using NZ labour – appliances tapware etc.

Others can’t compete because of labour costs and have closed up shop or gone bust include vineyards, orchards, and food producers.

And then you think there’s no difference between good times and a recession – what planet do you live on?

How many business owners have you talked to in the last year? With all due respect, do you have any idea of what has been happening in the last year?

Also you think 8000 people who go from working to not working make no difference in productivity?

I don’t give a toss how you measure productivity, or spin the figure – any fool can see that 8000 people working will always be more productive than the same 8000 people not working, (in addition to sucking up benefits paid for by those who do work).

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photonz, your post could have been made before the Treasury forecast of only 5400-8100 jobs being lost.

Their assessment clearly shows that most low wage jobs are not that price sensitive and your alarm to be misplaced. Can you even name businesses reliant on minimum wage labour that could not pass on their costs?

You presume that the jobs not so price sensitive in good times would become price sensitive during a downturn. That is unlikely, people still buy at supermarkets, theatres are still open, operating businesses still need cleaners, rest homes need carers and support staff, and also do hospitals.

Besides has the government not already reduced public sector jobs by thousands during a recession. Their rationale is that it reduces the budget deficit, and so might well a $15 an hour minimum wage.

“SPC – did you factor in loss of productivity to companies and the country of 8000 less workers?”

A countrry’s productivity is not actually measured that way. If it were there would have been improved productivity with falling unemployment (1999-2007). As it happens the reverse is true, because the more productive workers are always employed (and that is how it is emasured by those working).

And if that were the economic concept, the RB’s policy setting which is to maintain a reserve pool of unemployed would be a cause of lower productivity and thus be inconsistent with policy to improve productivity. That policy has much greater impact on employment levels than any minimum wage under $25.

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SPC – did you factor in loss of productivity to companies and the country of 8000 less workers?

Increases in the minimum wage need to reflect the state of the economy – larger increases when companies are doing well and can afford it without job losses, and business closures.

And small inflation only increases when there is high unemployment and when times are so tight that businesses are having to lay off people even without having large increases in pay costs enforced upon them.

Many companies are currently cutting overtime, cutting hours or working days, freezing and reducing pays – all to keep workers on.

Asking for a massive 20% increase (nearly ten years worth of inflation rises)at the current time is absurd.

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SPC,

Actually, I reconsidered my position prior to the first posting of those statistics. The post where I state as much comes chronologically before the statistics on (I believe) the same thread. My previous position was based on the assumption that a lower level of unemployment was generally desirable for the good of society. While this is true, the accounts of my uncle -a government employee somewhat of an expert on the matter- have given me a historical perspective that leads me to believe I was overstating the undesirability the present level of unemployment. Unless we can decrease our spending and/or increase our tax income then this level of unemployment is excessively high as we need to raise our gross product to correct our account balance. All the treasury statistics have indicated is that money could, potentially, be saved by raising the minimum wage; if this can be shown to be sufficient then I would support it.

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Sapient, the issue is not that they forecast job loss, but how little job loss. Which even moved you to reconsider your own position.

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SPC,

The non-working partner should, so long as they are genuinely seeking work, be paid the dole. That they are not is not a problem relating to the minimum wage but to the way the dole is legislated. The solution is to fix the legislation.

You argue that reduction of the minimum wage such that a couple can not support a family on the minimum wage will increase costs to the tax payer as a result of WfF. You are correct. Your solution is not. The problem is WtF; replace WfF with the “Citizens Loan” (think multi-purpose student loan with discounted interest rates).

As to unions, they are powerless because they are useless. They should be able to adapt easily. That thy cant is the fault of organizers and the stickiness of employees.

They state clearly that increasing the minimum wage will cause job loss. Your conclusion that increasing the minimum wage does not cause job loss is hardly supported by that statement.

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Sapient, while there is no eligibility for the non working partner to get the dole, your arguement needs to be stated as, if there was any significant reduction in mimnium wage there would have to be eligibility to the dole for the non working partner.

But the problem is, many couples have children and are eligible for minimum family income under WFF – so if you lowered the employers wage cost you would increase cost to government/taxpayer.

Within current policy settings – which are bi-partisan, an increase in the minimum wage to $15 makes the most sense.

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Sapient, unions are not useless – but the combination of ECA, global free market free trade and RB policy settings to maintain a permanent pool of unemployed – totally depowered them.

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Your problem? Their conclusion of few job losses, speaks to them not accepting classic market ideology – which would forecast higher job loss. It surely speaks to some assessment of the employment market concerned to ascertain why classic theory does not apply (post free global free trade market economic policy settings, few remaining local low wage jobs are subject to competitive market price pressure).

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If unions were not totally useless then there would be no point in even having a minimum wage.

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SPC,

While the non-working partner is not eligible for the dole the law should be getting repealed. There is no need for such stop gap measures as raising the minimum wage to account for two individuals when the needed change could be done much more simply and with far less cost.

Wage subsidy is an option, but only as a one off. This subsidy should only be available for the time that individual is meant to stay in the workforce and for individuals unlikely to be able to re-skill given their age and condition. Of course, that does have the potential to create a succession problem as older workers are retained at the cost of younger workers simply because older workers are cheaper. I prefer the railways option; though obviously not on the railways.

I will apologise for my 11:41 PM post. It infuriates me when people have something explained to them time and time again, as simplistically as possible, why their point is worthless and yet they still bring it up. It is no different from creationists.

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SPC,

But I would imagine Treasury has been looking at why so few jobs were lost with the previous rise in minimum wage (7 to $12 1999-2008), and gained sufficient knowledge about the employment market here to dismiss the market ideology and explain why it fails to apply.

I know that treasury screws up often, but I don’t think they are quite on your level.

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Sapient, while the non working partner is not eligible for the dole the minimum wage really should be sufficient to support two people.

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Sapient, I doubt any job losses would really result in a higher level of unemployment over the medium term – the RB’s anti-inflation policy is premised around one tool being maintaining a pool of unemployment (certainly Brash saw it that way), which continues to apply in any case.

Remember a lot of the low wage jobs are done by people who are students who upskill (if they work less hours because they can earn more per hour, this frees up work hours to others).

The real issue is whether some unskilled older workers refind work easily or not. If not, the answer is wage subsidy (the government pays the single rate dole to the employer who pays them minimum wage – say for the first year. even better where there is some on the job training involved).

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Charles,

I am generally against any increases in the minimum wage. I do believe, though, that it is what most benefits society that ought be sought. If an increase in the minimum wage may be shown to provide more benefit than detriment then I will support it.

Normally, I advocate that the minimum wage be sufficiently low that there is no sacrifice of employment but sufficiently high that a single individual may support themselves without state support. The latter takes priority to me and must take priority to anyone whom cares about society else revolution seize it.

A minimum wage of $15 is cited by treasury -a source that, if anything, has an interest in over-citing the figure- as resulting in only 8,100. now, it is true that 8,100 is about a 7th of the total unemployed at present but I would point out that five years ago unemployment was 90,000 rather than 60,000 and government was worried that the pool of unemployed was too small and was in crisis over the matter.

By no means am I sold on the matter of a minimum wage increase as I have yet to establish what I consider to be a sustainable level of unemployment and am unsure precisely what effect it will have on the economy. I am merely stating that I admit it may be plausible if we can get our budget to balance out first. I do not have the numbers to do a complex analysis but assuming that each person whom becomes unemployed is single and receives $300 per week ($217.60 gross UB plus some form of accommodation supplement) and assuming that only a quarter (25,000) of those whom were on the minimum wage were receiving benefits exceeding $100 (and assuming all the others received no assistance) then the increase breaks even in terms of state expenditure. That is excluding the 350,000 bellow the $15 mark whom may also benefit and save money. There will be less tax take as a result of a lower tax for people on lower incomes relative to companies. As I have said, I do not have the data for a complex analysis but it does seem plausible, though until I see all the data I will remain unconvinced.

As for suffering, there are easy ways around that; could even turn a profit.

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Charles the figure of 5400 to 8100 comes from Treasury, quite an objective source. If anything any “ideological” bias would be to exaggeratring the number of lost jobs.

But I would imagine Treasury has been looking at why so few jobs were lost with the previous rise in minimum wage (7 to $12 1999-2008), and gained sufficient knowledge about the employment market here to dismiss the market ideology and explain why it fails to apply.

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“sapient” who do you think are the people that will suffer the most? “that ratio” is not exactly from an objective source as George pointed out…. Are you saying that 8000 people should loose jobs so that others can get paid a little bit more? I mean.. 2.5 for 8000 jobs…

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I should clarify that as being desirable only if there are substantial cuts to WfF exceeding the value of benefits for those made unemployed.

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SPC,

Yes, at that ratio I am inclined to support the move; though it may be a less than ideal solution. I am still on the fence as to if the extra unemployment is actually desirable though; I have yet to settle on a unemployment target.

That said, the tax revenue could decrease. We do not have a flat tax rate so we collect just under half the revenue per dollar from the workers comparative to the company. The money is more likely to circle through the economy again but I do not know if that will equalise the tax take.

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