Angry Old White Man Party (ACT) Leader Don Brash is to launch another attack on young people. It’s strange that this once significant and principled party has sent its dying days picking the on the young. The latest stupid idea is to remove the minimum wage for under 20s altogether and cut spending to cut taxes that the rich pay.
He said abolishing the minimum wage for those under 20 could see more people in work for lower wages, rather than fewer people working for higher wages.
So, rather than concentrate on creating high wage work, ACT’s vision is everyone hustling for a pittance. What do you call a country where there everyone has to work long hours in low productivity jobs to make a subsistence wage while a small elite enjoy low taxes? A third world country.
“Let’s say there’s someone straight out of school with no qualifications, and maybe he’s had a brush with the law a year ago, and an employer says he’ll hire him for $8 an hour.
“If you mandate a minimum of $9 an hour, that guy has to go back home and watch TV at $4.50 an hour [on a benefit]. You’ve got to ask yourself if that is a sensible thing to do.”
Dr Brash might remember there is a concept in economics called opportunity cost. What is the opportunity cost of creating the possibility for Brash’s made-up kid to get a $8 an hour job? Well, it’s paying the 103,000 15-19 years who have a job at least $13 an hour. Is it worth cutting the wages of 103,000 people, and the flow-on effects of that, just because Brash has a hunch that there might be some lower wage jobs created?
And what about the displacement of older workers? If you can pay a 22 year old the minimum wage to be a cleaner of a 19 year old $7 an hour, which are you going to do? Rather than creating more jobs, Brash’s plan would take jobs off older people.
While the Right uses productivity and wages like a carrot held in front of a donkey – become more productive and we’ll pay you more – it actually works the other way round. Productivity is really in the hands of the boss who provides the capital, the work structures, and the training. Decent wages provide an incentive for bosses to improve productivity, low wages don’t. By setting a minimum wage of $13 an hour, the government is saying, first, that this is the lowest amount a person needs to be compensated for their time and labour and, second, that a job that doesn’t create even $13 an hour of value isn’t something we want as part of building a wealthier future.
It’s sad, but not unexpected, that after 50 years in the field, the best idea Brash has is to make working people poorer based on an unevidenced assumption that this would create a few more low wage jobs, and tax cuts for the rich. Where’s the plan to grow the economy? There isn’t one, this is vampire economics at its worst.
– Bright Red
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