by Keith Locke
Too many New Zealand workers earn either the minimum wage or something close to it. They won’t be much happier with this week’s miserly increase from $12.75 an hour to $13.
The procedure for increasing the minimum wage is all wrong. Those on it never know when it might be increased or by how much. It is at the whim of the government of the day. And the National government is quite scrooge-like.
Why do we have such an arbitrary minimum wage fixing system? The government should look at how its own MPs’ salaries are determined. Every year the Remuneration Authority studies the salaries of private executives and increases MPs’ salaries accordingly.
Surely, ‘relativities’ should also determine the minimum wage. Wouldn’t it be good for the minimum wage to be always 66% of the average wage. $15 an hour, as asked for by the Greens, Labour and the Maori Party, would get us well on the way to this 66%. Currently the average wage is $25.83 an hour.
The business lobbyists tell John Key that any movement upwards in the minimum wage will cost jobs. Funny, they don’t seem to use that argument when determining their own salaries.
In fact, what is costing jobs at the moment is workers cutting back on spending due to low wages, which aren’t keeping up with inflation. And Australia seems to be doing ok with a minimum wage of $A15.
Some of the hardest workers in New Zealand – like cleaners and aged care workers – are on the minimum wage. Let’s make sure they get a much better deal.
Published in Economy, Work, & Welfare | Featured by Keith Locke on Wed, February 9th, 2011
Tags: Minimum wage, Remuneration authority
More posts by Keith Locke | more about Keith Locke
on the trolls and those who are unable to keep on topic
Loading...
It sounds great, and I want nothing more than a fairer minimum wage, but I would like to hear the Greens’ strategy for encouraging saving. As Metiria pointed out yesterday in her compelling address to the House – higher minimum wages would encourage higher domestic consumption, as minimum wage employees tend to spend all their income. BUT, as Colin James points out, New Zealand “requires a massive shift from consumption to exports”, and he suggests starting with “a $5 billion lift in savings just to hold net liabilities at 85 per cent. That requires both a mindset shift and an interlocking set of policies: tax (more to do yet), savings (some initial ideas from the working group), more rigorous asset funding and management (the December investment statement and the SOE selldowns), tighter management and trimming of welfare rolls (the working group reports in two weeks) and maybe a bit more support for innovation.”
What say you?
Like or Dislike:
2 
1 (+1)
I quite agree Keith. I also would have thought increasing the minimum wage would have a positive effect on our domestic economy as spending from our lower wage earners goes directly into everyday commodities.
Like or Dislike:
3 
4 (-1)
Why does NZ need to shift to exports? Is it really wise for NZ to be swapping biscuits etc with Australia, in the age of peak oil there needs to be a lot more discussion around local economies, and less of the exporting coal to Newcastle mindset.
Not privatising assets is one way to help savings. Co ops and local economies keep money in communities, allowing for the possibility of more saving. Exporting jobs via free trade and wealth via asset sales is the opposite of saving, it is short term boom bust economics, which is also ecologically unsustainable as well as socially.
Like or Dislike:
6 
6 (0)
Like or Dislike:
6 
2 (+4)
Why 66% of the average wage? Why not 75%? Or, for that matter, 50%? Then the rise to $13/hour would get us all the way there.
Like or Dislike:
0 
0 (0)
Wrong.
Whereas the 25c rise (2%) and the tax cuts (3.5% extra for someone on the minumum wage) give a total increase of 5.5% against inflation for the year of 4%.
Like or Dislike:
9 
1 (+8)
Prices were increased over and above GST when it was applied. Didn’t you notice?
Like or Dislike:
0 
4 (-4)
photonz1- your odd obsession with percentages justifying the current situation is sad. Applying increases with a fixed percentage always supports the wealthy and increases inequities. When someone earning $100,000 gets a 2% increase it means $2000 in their pocket, for a solo parent with a $10,000 a year part time job it is only $200 a year or not quite $4.00 a week. A cup of coffee in a cafe or a small bag of apples a week is not going to make a noticeable difference and I haven’t even factored in GST. I can’t see how you stridently support such cruelty.
Like or Dislike:
4 
4 (0)
When one does the sums, one has to recognize that the inequality in the system has grown.
Dammit Photonz, the GINI went up damn near 10 points in the past 25 years. Fat cats are eating caviar and the rest of the population is being sold as “mexicans with cellphones”. Skilled work isn’t done here and the owners are just as happy. THEY don’t need work or an income here in NZ.
The rest of us, the ones who actually work for a living and produce products that we use…. we’re the ones being raped over the coals.
You’ve come to a place where we actually know the importance of promoting equality, and touting the advantages of inequality. WE know that it increases crime, social disorder and usually results in revolution.
You seem to not know the lessons of history.
I suggest that they are more important than the theories of economics.
BJ
Like or Dislike:
5 
4 (+1)
Put the minimum wage up to $15 already, and raise it agressively thereafter.
Yes, there will be job losses. Entire businesses will be forced to close. But that’s OK, because any business that can’t afford to pay it’s workers a decent wage is a business we don’t need. Either the business does something that we don’t need doing, or that we do need doing and thus consumers should be willing to pay the price required.
Yes, that will increase unemployment. But people on minimum wage are getting state support anyway, so its an incremental cost change, not a huge difference.
Yes, minimum wage is unfair to well run businesses as they need to compete with low value workers who can be lowly paid as they are subsidised by the state.
Its time to tackle employers who cant or wont pay decent wages head on.
Obviously there more to do than just fix the bottom end of the employment market, the wages issue is just one important part. We need to fix the Kiwi compulsion to borrow money for stuff we cant afford and dont need (eg: a tax on loan repayments, sliding scale, 1% for first mortgage, 20% for plasma tellys), and we need to get away from being an agricultural economy to a high tech (eg: focus on doubling the amount of film production work we do from 0.1% to 0.2% of the global film economy)
New Zealand could have a future, but competing to be the lowest paid economy in the world is not a strategy that will undo half a century of our economy being driven in the wrong direction.
Like or Dislike:
3 
6 (-3)
I think the main companies we’re talking about can easily increase wages.
http://tvnz.co.nz/business-news/recession-causes-kiwis-loosen-belts-3436552
“Restaurant Brands, which boast some of the big fast food names like KFC and Pizza Hut, is expecting a massive jump in profits of almost 70%.”
http://www.marketwatch.com/story/mcdonalds-profit-up-10-2010-10-21
“McDonald’s has been a solid performer during the worldwide recession, as consumers “trade down” from more expensive restaurant fare. It also has revamped its menu, lowering prices on some items, while adding new products and expanding opening hours. Depressed commodity and labor costs have worked to the company’s benefit as well. “
Like or Dislike:
6 
4 (+2)
We’re paying for their workers, the product and the ill effects such food causes on the population. What is the real cost of that hamburger huh?
Like or Dislike:
7 
4 (+3)
Its also a market distortion, as employers who pay decent wages don’t get that employee subsidy.
Like or Dislike:
3 
0 (+3)
Very few jobs amongst the total affected will be lost. There was apparently an estimate of 6000 jobs at risk – whereas over a hundred thousand will gain in higher wages. The dole cost of the 6000 jobs will be more than compensated for by the tax revenue from the wage increases etc.
The same government citing the 6000 jobs at risk promised to cap public service job numbers – has already cut job numbers by 5% and wants to cut yet more jobs. Their professed concern for preserving jobs here is a novelty for them – they do tend to favour foreign firms and foreign owned banks for government work/service contracts after all.
Like or Dislike:
3 
0 (+3)
Perhaps the argument for the $15 an hour wage should be based on common labour market with Australia and matching their minimum wage – $A15 an hour. If anyone points out their $ is worth more than ours and in $NZ would be closer to 20, simply note this shows how conservative the increase proposed actually is.
At the current level people can get a 50% increase in pay by simply doing the same minimim wage job they do here in Australia ($NZ13 to $A15 worth nearly $NZ20). At $15 the difference falls to 25-33% (depending on the cross rate at the time).
Like or Dislike:
1 
1 (0)
What! Do you mean MPs’ salaries can never go down? Why does the Authority peg the rises to what private executives get? Ah, I suppose there isn’t a comparative group who just want to do their bit to help New Zealanders, so let’s use private executives.
Well, yes, except that it can never be 66% of the average wage, because increasing the minimum wage will increase the average wage, which means the minimum wage will need to be increased, which will increase the average wage, …
Of course, I’m only slightly joking. Maybe the number of workers on the minimum wage is so tiny that it won’t affect the average wage at all. Is it tiny?
Like or Dislike:
0 
0 (0)
treesoftomorrow,
Excellent points. I’m glad to see someone here who understands that our behaviour is unsustainable.
Like or Dislike:
0 
1 (-1)
In my opinion minimum wages should not be fixed by government, liberal economy will define min by itself. These policies just cut jobs and raise unemployment
Like or Dislike:
1 
3 (-2)
Peter, that’s the economic theory according to McDonalds or liberal market talk back radio but bears no relationship to reality.
The advice government got was that few jobs would be lost (6000 even if the minimum wage was increased to $15) – the government has cut more jobs in the government sector (despite promosing in 2008 to only cap jobs).
The market theory about jobs only applies in a closed market, rather than a global economy. In a global economy all the cheap production job go to the lower wage economy offshore. We don’t have any left. That leaves the labour market inelastic, as all competition to the domestic services (that still provided by low wage labour) comes from the same labour market. Meaning that the only impact of raising the minimum wage is an increase in cost of labour in the total service delivery cost. But don’t let the facts get in the way of the dribble down pseudo knowledge people learn in economics 101 theory.
Like or Dislike:
2 
2 (0)
SPC, it might be noted that if the price increases enough to compensate for the wage increase, then demand might fall to the point where there would be a loss of hours and potentially employment.
When I was in Brisbane in last year, I noticed that in a suburban mall, over half the shops were closed on a Sunday – presumably, the cost of the staff outweighs any sales that could be made. It was rare to find a supermarket that was open past 9pm on a weekday, 6pm on a Saturday and 5pm on a Sunday. Again, the cost of the staff would outweigh any sales that could be made.
This compares with Auckland where virtually all shops are open on a Sunday, and supermarkets are open till at least 10pm all days of the week. If we had to take the Australian approach to minimum wages, then we do risk shops closing earlier, and we do risk conditions for workers in those places getting worse, especially conditions that people do not often consider (for instance, one supermarket chain does not replace shifts with other people when the person who was supposed to do that shift called in sick – being less one person causes problems at the front end).
I am in favour though of a Remuneration Authority approach to the minimum wage. The authority should have the power to alter the minimum wage once a year, provided that it does not cause an increase in unemployment over the medium to long term, with the goal level being 4% (to be honest, once you are at 4% unemployment, long term unemployment has dropped to virtually 0)
Like or Dislike:
4 
0 (+4)
I believe that to increase the minimum wage is to guarantee the economic health. Major salary, major consumption, major productivity.
Like or Dislike:
1 
0 (+1)
john-ston – minimum wage retail jobs occur in supermarkets and fast food – which do not decline during a recession.
Retail supplying goods not neccessities naturally decline in a recession and hours reduce to cut costs – but this has nothing to do with the minimum wage being paid.
Like or Dislike:
0 
1 (-1)
Paul suggested trimming the welfare rolls…. I wonder where the new jobs will appear from? As for the substantive, I support Keith, 66% of average wage provides certainty and takes the issue of minimum wage setting out of the political arena. Who knows, over time it might reduce in monetary terms … just as the average wage has in real terms … but then that is another debate
Like or Dislike:
0 
1 (-1)
SPC, if the price for fast food increases to the point that people move their custom elsewhere, then chances are that there will be a reduction in opening hours and a reduction in the number of stores – that will have the result of an increase in unemployment.
Similar with supermarkets; if the wage costs get too high, then instead of the supermarket closing at 10pm, you might see them close at 9pm – that is a reduction of a decent level of hours when you consider that you would not need to pay a checkout operator for an hour, a checkout supervisor for an hour, a duty manager for an hour and any other staff that are on the floor. Furthermore, you could see consolidation of supermarkets (and this would be especially so among the Progressive stable, where you have supermarkets within a stones throw of each other – literally!).
Like or Dislike:
0 
0 (0)
john-ston – supermarkets provide necessities, even during a recession people eat. It’s perverse but fast food does not get cut back in recessions – I think it’s because the middle class go from restaurants to pizza and KFC and compensate for the underclass who cut back here. Cleaning and carers are also recession proof jobs. All minimum wage.
As to supermarkets – they are still increasing in number during the recession – population increasing etc and competition for market share.
Like or Dislike:
0 
0 (0)
SPC says “I think it’s because the middle class go from restaurants to pizza and KFC and compensate for the underclass who cut back here”
Nonsense.
It’s very well known that poor people eat much more fast food than middle class and wealthy people.
“… children in poor areas were much more likely to eat fast food that often than those who lived in more affluent areas….”
From “fast foods and who eats them” see
http://liveto100.everybody.co.nz/nutrition/fast-food
Like or Dislike:
1 
0 (+1)
You’re being an idiot here photonz, follow the debate that has occured earlier before making a fool of yourself. Keep up.
No one was saying that the poor do not eat more of the fast food, john-ston was however claiming that there would be a decline in fast food sold during a recession. I simply explained this was not the case, as despite the fact that some of the poor could no longer afford to eat as much, some of the middle saved by going from restaurant food to fast food – so total sales did not decline even during a recession.
Like or Dislike:
0 
1 (-1)
graham says “Who knows, over time it might reduce in monetary terms … just as the average wage has in real terms”
Nonsense. Average wage increased 45% in a decade against 30% inflation.
SPC – fast food is largely driven by people with less money. This is a much bigger factor that middle class dropping from restaurants to fast food (though no doubt this happens to an extent.
However john-ston is wrong and you are correct about fast food in recsssions. Financially speaking, fast food is usually a pretty good performer in recessions – it’s common that sales increase, along with other industries that often have increased sales in a recession i.e. alcohol sales.
Like or Dislike:
1 
0 (+1)
john-ston, I should respond to your point about a higher minimum wage leading to lower sales/recession in fast food and (supermarkets) – the minimum wage increased from 9 to $12 from 2006-2008 and there was no decline in fast food (or supermarket) sales.
There are two reasons, the retail/staff wage component is a low portion of the cost and thus there is little impact on the total price and where there is an impact it happens on the whole industry sector equally. So the result is consumer choice – necessities in supermarkets will continue to be purchased and the rubber only hits the road where there is need to make a discretionary choice.
If they choose to continue their fast food buying habit (convenience) they economise elsewhere in secondary choices. Food is a primary choice.
In our recession, loss of income may require some cutting back on fast food, but as I said middle class transfer from restaurants seems to compensate.
Like or Dislike:
0 
0 (0)
photonz, there is a decline in the amount of fast food that the underclass can afford during a recession – and after all home cooked food is cheaper. The issue is why total sales do not decline despite this – restaurant sales do decline, so we can follow the trail of those economising by moving to cheaper fast food or home entertaining (special meals with wine and guests etc).
It is generally true that an underclass can get into the mentality of not being active, and thus the resort to convenience food (apart from the comfort food factor also inherent in high levels of alcohol sales in underclass area liquor outlets).
Like or Dislike:
1 
1 (0)
Your selective memory process phot is not helpful to the debate.
Like or Dislike:
0 
1 (-1)
your odd obsession with percentages justifying the current situation is sad. Applying increases with a fixed percentage always supports the wealthy and increases inequities. When someone earning $100,000 gets a 2% increase it means $2000 in their pocket, for a solo parent with a $10,000 a year part time job it is only $200 a year or not quite $4.00 a week. A cup of coffee in a cafe or a small bag of apples a week is not going to make a noticeable difference and I haven’t even factored in GST. I can’t see how you stridently support such cruelty.
Like or Dislike:
0 
0 (0)