On minimum wages

There’s a nice little story in the Herald today about the Greens’ youth campaign launch, and especially our policy to raise the minimum wage to $12 for all workers aged 16 and above. This is effectively a 58 percent increase in the minimum wage for 16- and 17-year-olds. Now, Business NZ CEO Phil O’Reilly made the same old argument against the policy that right-wingers always make against a minimum wage of any kind: it will force people out of jobs. O’Reilly said:

Young people aged 15, 16 and 17 often have not only no formal skills, but also no work experience, so this is their first job. They need to learn some of those very basic skills about work such as timeliness. So the reason the youth wage is there is to encourage employers to take them on. What this [policy] is likely to lead to is that if you have a choice between someone a bit older and someone younger, you will take the older because they are more likely to have those skills.

Umm, 16- and 17-year-olds don’t know how to turn up on time, yet 18-year-olds do, and that’s why you should pay the 18-year-olds a couple of a dollars more an hour to do the same work as the 16- and 17-year-olds? Yeah, right. And the experience thing? I would have thought work experience would be a very case-by-case issue. At present, McDonalds must, by law, pay a pampered 20-year-old helped by his parents through university and branching into his first job more than a 17-year-old out of school for a year who has worked for the fast food chain for twelve months. No, I think the equal pay for equal work principle is a pretty good one 🙂

Of course, there is no evidence that minimum wages drive people out of jobs. Right-wingers (including Don Brash) have argued against having a minimum wage at all, and also against every rise there has ever been to the minimum wage. However, its effect has actually been simply to see wages rise across the board, not to push people at the lower end out of the workforce.

Indeed, if you think that people on the youth minimum wage now won’t have jobs if the Green policy is introduced, then I ask you this: who will do the work that they do now? Will McDonald’s and Reading Cinema just stop employing people to man the tills? The truth is that all that will result from this policy is that many low-income Kiwis will get a fairer wage, while companies profits will be reduced slightly.

23 Comments Posted

  1. for anyone that would like a well rounded researched opinion on sustainability and unconstrained growth maybe you should look into this site http://www.potluck.com/offerings/increase.pdf
    And for the record i agree with you BJ, USA is unsustainable as the FX base standard and global consumer with the attitude they have toward unconstrained consumption and their level of debt

  2. Toa – I am more comfortable with a targeted tax cut/benefit rise than I am with a blanket tax cut that benefits the wealthiest most.

    The middle class in NZ suffers a 90% effective marginal rate. The person on 200K gets a 40% marginal rate… and the question of who needs it and where it’s healthiest to have it are important to me.

    The future is NOT so rosy. My guess is that the best thing to do with any “surplus” is to pay down debt, which is part of Labour’s economic plan. National’s plan is to increase debt.

    If the US hits the wall the way I think it will there will be wrecked business models all over the place. You are right in at least one sense. Growth IS good, it is biologically necessary for survival, but uncontrolled growth has a name too… it is called cancer. Greens stand for growth within the limits of the ecosystem and THAT is contrary to much of what has happened in most of the world over the past 100 years. Business has adapted efficiently to the “commons” of air, water and petroleum based resources. Peak Oil and Global Warming will therefore alter the business landscape as well as the natural landscape, and we will be very fortunate indeed to live in NZ when that happens.

    Little wonder that the Business community as a group tends to be in the Climate Change Denier category.

    We may not be comfortable as Greens in NZ, but we can probably stay in business… I am not so certain of the viability of the rest of the world.



  3. Hi BJ,

    It isn’t broke now but with the amount of spending proposed by your coalition partner (and also National), the warnings from various organisations of a softening economy, the skyrocketing petrol prices, rising inflation etc you may find the future is not so rosy. Of course when the economy slows down the first to suffer will be those at the bottom of the socio-economic scale.

    I am not an economist but I am a small business owner with three employees. The reality is that if my business grows then I can reward my employees with well deserved bonuses and wage increases. If my business declines then you have to cut back or close down. Obviously the best option is to continually grow your business.

    One last thing. “Money is not the source of all troubles, it is usually the mismanagement of money that causes the troubles”. I have seen high-income people live beyond their means and I have seen low-income people live within their means. As I said in an earlier post it is all about adopting a balanced approach and that is what I like about NZFirst Policy.

    Cheers Toa

  4. a ‘civilized’ man consumes 27 times the amount of an undeveloped man that is fed, sheltered and happy.Yet always we blame the population of the poor that ‘stretch resources’.
    Escapism is tricky to see through, especially when your escaping from yourself

  5. bravo bj, eloquent and on the ticket mate, no need for my input on this issue i agree 120% w/ u, people should stop spouting production increase as a measure of how we benefit..in 30 years US’s economy has boomed enormously but real purchasing poweris unchanged for the lower 80%!!…. and kane 9 i commend you i have a finance degree and refuse to use it because of the implications to the people that do use it. The mindset that we have to consume and grow happier is the most destructive meme in our culture. Nobody needs a V8 and a hallway big enough for that indoor golf cart, and a society that glorify these abuses is self-destructive. Kane bro you’d prob like ishmael, it’s the book that turned me from capitalist Finance student to someone approaching decent.
    Ponder?? Are we successful and intelligent where to survive our culture must always grow because our own resources cannot satisfy, and the destiny of man is for all man to grow?? or the aboriginal more intelligent because he can sustain his entire community sustainably?? No less qualitively intelligent, in 12000 years the individual intelligence capcity of man has hardly grown just the acumulation of other peoples, and by some analogies we’re actually stupider, with less senses, strngth and bond to the environment we live in?????????
    To reject it you got a learn about it so don’t be hasty

  6. With an increase in the minimum wage to $12, I would reap a pay increase 400% greater than Nationals tax cut. Neither are necessary, I can learn to live on less. I am 32 and have a degree in geology/physics, but choose to work hard at a physical, export income earning job and consume less. In a finite world I don’t see it as ethical, nor should it be socially acceptable for people to amass individual wealth and indulge in disproportionate consumption of energy and material resources just because they can. They grow fat and lazy. Often I see a queue of five or so SUVs of European signature lined up at the local ‘Drive Thru Cafe’, pudgy hands thrusting dollars through the window in exchange for various combinations of fat, sugar and caffeine – the epitome of the direction this culture is taking. My boss is such a person, yet he sports a ‘Keep NZ GE free’ sticker on his bulky vehicle and always votes green. He flys all over the globe and takes ski holidays with the family, luxuriating in the affluence the lucrative export business provides. I view him as a complete failure in respect to his self proclaimed eco-friendly greenyism. In the past three years there has not been even a slight pay increase, and I will not be asking, just noting the greed. His time will soon come.

  7. Inflation and high-wage-high-growth have their roots in the money supply and they get their impetus from the central bank and the fiat currency. I don’t think we really want to go this route… not just now at least. Could accomplish the same thing by dropping the interest rate. Big economic stimulus is easy, but there’s some inelasticity here as most of us are already fully employed.

    In other words Toa, what is it that you see that is so broken that you want to be fixing it?

    Creative enterprise and improved productivity? There’s no shortage of that here. Kiwi’s work harder for their money than Americans do. Do more for the same money as a rule. No shortage of that. Don’t be fooled by the US measures of productivity – THEY do a thing called “hedonic adjustment”… your computer is 160 x faster than the computer you had 4 years ago so you must be 160 x more productive… and so on… There isn’t a statistic coming out of the US that means anything anymore. Unemployment, GDP, Inflation, Debt — it is all garbage.

    Increasing the minimum wage is the issue and the small increase we see bruited about here will mean nothing in this economy.


  8. There has to be a balanced approach so that workers, employers and the NZ economy win. A better Policy would be to raise the minimum wage to $12 an hour and reduce the company tax rate to 30%. In this scenario you dramatically increase the minimum wage for those on low incomes and effectively help those who are most needy. The reduction of company tax makes it affordable for companies to pay the minimum wage increases as well as the major spin-off effects of additional profit (thereby enabling companies to afford general pay rises to all employees-Unions will need to work on this of course) and making NZ more competitive to attract more overseas companies. Also as the average wage increases (ideally across the board) then PAYE tax take increase, more companies setup in New Zealand (because of the 30% tax rate), more employed, wages get driven higher (because of high worker demand and a measured immigration policy) then so does the total tax take increase over the long term thereby enabling delivery of more public services and a high wage growing economy.

    BTW this is a fundamental NZFirst Policy which is based upon stimulating a high wage and growing economy. Neither Labour or National have anything near this policy and the cost of their current tax packages will mean real delays in achieving this goal. Anyway I am sure you will hear more about this over the next 9 days.

  9. won’t it just increase inflation?

    HIgher wages for employees, more money to spend, less profit for Businesses, increased cost of services… ?

  10. Hey, I am all for raising the minimum wage. And then for everyone else getting a raise so they are no worse off either. And for employers to raise prices to be able to actually pay people the higher wages.

    It’s called inflation, folks. Just a short-term fix for the real problem: lack of creative enterprise and improved productivity.

  11. Well, minimum wages might get too high. Classically, that can lead to manufacturers moving to lower-wage countries (but hey it’s already happened), or to jobs getting outsourced. But I can’t see that being a major risk, as long as NZ stays a low-wage economy. (with wages so low, I don’t understand why there isn’t more outsourcing TO NZ. In IT for example.)

    The question is : if the economy is booming, and unemployment stays low, then logically there should be nobody much left on the minimum wage, because
    1) employers are good-hearted people and they want to share the wealth their employees help to create, right?
    2) employers will be competing for scarce labour
    (… take your pick.)

    If this doesn’t work, for some mysterious reason, then forcing up the miminum wage might well be a beneficial option, in economic terms… the extra money will get spent, people get a higher standard of living, the economy grows. Companies that employ a large proportion of minimum-wage earners may suffer, but are they really adding a lot of value to the economy? Perhaps they are standing in the way of the move towards a high-wage economy, which (personally) I think would be a good thing.

  12. as a voter i don’t agree with this policy. I’m only 20, and a minimum wagfe effects me too, but your claims of “while companies profits will be reduced slightly” sound understated, to say the least.

  13. Another thought – if you’re under 18 then chances are you live at home and have few actual expenses… I dunno, I just can’t get worked up about youth rates. Sorry, I’m a bad lefty.

  14. You’re arguing that the key difference is between 18 yr olds and younger kids. Well, no – it’s everyone 18 and older. From experience in my workplace (I’m not the employer) it is the loyal older mothers returning to the workforce that we want, because we know they’ll stick around. Kids are great, but they are unreliable. Whether an 18 yr old is more so is academic. Fact is, young people are not likely to stick around.

  15. “under labour the minimum wage has risen significantly (albeit not enough);
    new zealand’s unemployment rate, especially among Maori, has significantly fallen, to the lowest in the western world in fact.
    the old lie of the right is totally disproved.”

    Ah, the old correlation=causation logical fallacy. Again, why not raise it to $100?

    “also, don brash opposes the minimum wage.
    this is totally unacceptable to mainstream new zealanders. slavery would help big business prosper, but that doesn’t make it a good idea.”

    Are you aware that many employees get paid more than the minimum wage, and that employers pay these wages without any government or union pressure? Do you understand why this is?

  16. in addition to your point frog:

    under labour the minimum wage has risen significantly (albeit not enough);
    new zealand’s unemployment rate, especially among Maori, has significantly fallen, to the lowest in the western world in fact.
    the old lie of the right is totally disproved.

    also, don brash opposes the minimum wage.
    this is totally unacceptable to mainstream new zealanders. slavery would help big business prosper, but that doesn’t make it a good idea.

  17. fwog fascists agree that one of the fundamental failure in NZ society is low wage, and like it easy to say like we do that wage minimum concensus be about $20 adult, i dont think you can force it but you can say it, thats what the right really needs to do, get wages up, as well as business, in a way that everyone thrive, but for us we also have to remember least rules the better,

  18. If what you say is true then there is no reason not to up the minimum wage to $100 dollars per hour.

    You cruel, heartless people, wanting to keep the poor stuck in $12 buck jobs when they could be earning $100!

  19. Frog

    Like anything else a minimum wage can be overdone. Most Right-Wing complaints have their source in the extremes of Left-Wing policy, taking an argument to an absurd point. I suspect that they haven’t yet outgrown Ayn Rand.

    The problem for them is that societies don’t much flourish under extremes. Communism and Capitalism in their pure form are total failures leading to totalitarian states in historical heartbeats. The most successful societies on earth blend socialism and capitalism together in some mix that restrains the excesses of business and cares enough for the less fortunate members of the society to level the field.

    The point I am making is mild, that a too-high starting wage DOES make it hard to hire someone as a new-hire. That $12 an hour might be too high however, is ludicrous.


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