How to put half a billion into working families’ pockets

Written By: - Date published: 6:18 am, March 9th, 2011 - 54 comments
Categories: wages - Tags: ,

I/S at No Right Turn has done more excellent work. He’s revealed the official advice Kate Wilkinson was given on the minimum wage. The advice says there is a trade-off between jobs and the minimum wage, but even an increase to $15 an hour would cause an increase wages for low-income earners well above the cost in jobs.

Here’s the summary of the what the official advice reckons the impact of different increases in the minimum wage would be, remember, Wilkinson and the rest of Key’s governemnt chose a below-inflation increase to $13 an hour:

So, an increase to $13.50 would put $76 million into the pockets of low income workers and their families. The downside would have been about 500 fewer jobs. In other words, there would be $136,000 more for low income families for every $27,000 a year job lost. A $15 an hour minimum wage would make the poorest working families half a billion a year better off by increasing the wages of over a quarter of a million workers. Yup, they reckon there would have been about 5,000 fewer jobs but the gain would have been over $100,000 per job.

The Department of Labour doesn’t reveal its calculations but it doesn’t look like they include the fact that people with higher wages can spend more and that employs more people. Put half a billion into the pockets of low income workers and they’re going to create thousands of jobs, more than enough to offset the jobs that wouldn’t be created due to the higher minimum wage.

Now, the righties, predictable as always, will be saying ‘well, why not increase the minimum wage to $100 an hour if it’s so great’. No-one’s arguing for that. It’s clear that the ‘extra income to jobs lost’ ratio falls the higher you put the minimum wage to the point where it doesn’t work. But $15 an hour, the same as Australia, is clearly viable. It would come at a relatively small cost for the benefit, which would be recycled back into the economy, more than eliminating at job losses.

National don’t do it because they are the short-sighted party of business and they want to make wages drop.

54 comments on “How to put half a billion into working families’ pockets”

  1. Oleolebiscuitbarrell 1

    Socialism at work: put 5,710 more people on the scrap heap so I can earn $2 more an hour. Hardly solidarity forever, is it, now?

    • Marty G 1.1

      Actually, so 275,000 people can earn $2 more an hour bringing half a billion more a year into the economies of New Zealand’s poorest communities.

      Following your logic, there should be zero minimum wage and we could all be employed as slaves.

      • Lanthanide 1.1.1

        “Now, the righties, predictable as always, will be saying ‘well, why not increase the minimum wage to $100 an hour if it’s so great’. No-one’s arguing for that.”

        “Following your logic, there should be zero minimum wage and we could all be employed as slaves.”

        Pot, meet kettle.

      • neoleftie 1.1.2

        we are slaves now me old mate

    • Marty G 1.2

      in the long-run, higher wages mean businesses choose more capital investment to get the most out of their employees. That means higher productivity, which means more wealth all round.

      Keeping wages low stagnates the economy.

    • Colonial Viper 1.3

      Hey biscuit, adding 5,710 more jobs to the economy isn’t that hard, it’s only hard if you keep neo-liberal free marketeers like Bill and John in power.

    • Deadly_NZ 1.4

      Really but the people will spend the extra $$$ thus creating extra jobs which in turn let more people spend and then you can have a nice little circle going.. Unlike the NACTS vicious circle of Cut wages , No one spends , More jobs lost more wages cut and on and on ad infinitum… I know which circle I support but then again thats just me. So you will probably find that the impact on the jobless numbers will be minimal .

  2. Pete 2

    That half a billion has to come from somewhere – it will add to the cost of goods and services, and who will pay for that?

    It will probbaly add more than $0.5b to costs, because it will put pressure on the whole wage structure, for example those already on $15 per hour would want more becasue they presume their work is valued more than the minimum wage workers. And that will push up the line.

    More wage costs = more inflation = reduced spending power. Back to square one, except for the 5,000 or so who have been priced out of the market and have lost their jobs.

    • Marty G 2.1

      The half billion would initially come from businesses’ bottom lines. They would attempt to pass some on to consumers if they could. The DoL thinks it would add 0.25% to inflation. Barely enough to register and significantly less of a reduction in the real value of total employee compensation ($200 million of the $80 billion compensation pool) than the $500 million increase.

      So, Higher wages = slightly higher inflation = higher real wage income for Kiwi families.

      But good to see the Right is true to form and opposing wage increases for working New Zealanders.

      • Pete 2.1.1

        I’m not “the Right” and I’m not opposed to wage increases for working New Zealanders – if they are warranted.

        It’s naive to think that the half billion will come from “businesses’ bottom lines”.

        How much do you think it will push $15+ wages up? What are the calculations on that?

        Have other flow-on effects been considered? How would it impact on the many businesses struggling in Christchurch right now?

        • Marty G

          DoL takes the ‘halo’ effect of minimum wage changes into account in the numbers I’ve provided.

          I think putting half a billion more into the budgets of low income working families is great for Christchurch and the rest of the country. Like I say in the post, all that extra spending would create far more than 5,000 jobs

        • Colonial Viper

          All NZ wages should be pushed up.

          The fact that 50% of full time working NZ’ers are on less than $41K p.a. is disgusting.

          No wonder a quarter of our young graduates have pissed off overseas, as have roughly a million NZ born Kiwi’s, roughly 700,000 of them to Australia.

          You want to see what this short term wage suppression does to NZ?

          Wait 6 months. Wait until you hear the screams from Christchurch projects unable to secure skilled labour, halting the progress of reconstruction.

          NZ is fraking its future by driving its home grown talent away to countries willing to pay decent wages.

          • Pete

            And if Australia see it work so miraculously here and they follow suit and put their minimum wage to some magical arbitrary figure what then?

            How many countries have bumped up their minimum wage by 15% and it has worked fine with no significant adverse affects?

            • Lanthanide

              Australia’s minimum wage is already higher than ours, so how exactly would they be following suit?

              • Pete

                If we bump ours up by 15%, so follow suit and bump theirs up by 15%, or maybe round that up to $18.

                I’m curious as to why Labour have chosen $15 as some magical mininum. Why not $14.75? Or $15.10?

                • felix

                  And what fucking difference would it make to your objections if they had?

                  So why do you ask?

                  • Pete

                    Because I’d like to know if it is a carefully calculated amount that Labour thinks gets the balance about right, or if it is some tidy round figure chosen for it’s perceived marketability.

                    In other words can a very good argument be made for $15 as the best amount? The examples in the post are $13.00, $13.50 and $15.00 – would $14.25 be a less risky and fairer amount? The justification in this post for $15 sounds reverse engineered.

                    $15 sounds suspiciously like election bullshit.

                    • felix

                      You didn’t answer the first question. What difference would it make to your objections it it were $15.324799?

                      So far your objections are that 5000 lose their jobs (which others have already refuted above), that it will affect people on higher wages too (already accounted for thanks), that $15 is unaffordable (says you) and that catching up with the Aussies is a stupid goal because they might be able to run a bit faster too and so what anyway (which is a lucid observation and I hope you don’t forget it).

                      So again, why do you care if it’s $15, $15.11655, or $16.24367788963?

                    • Pete

                      Those amounts wouldn’t change my thinking because they are more than $15 and aren’t being proposed (at this stage).

                      What could change my thinking is somewhere between the just tweaked $13 and $15. It shouldn’t be hard to make a strongish case for $13.50, a push to $14 give ot take a bit wouldn’t be that tall an order, but a jump to a round $15 just sounds like it’s an election idea that is trying now to be justified.

                    • felix

                      You don’t see the irony at all, do you PG?

                      You’re accusing others of pulling numbers out of their arses and to make your case you pull some out of your own and say “THESE numbers might be better for no given reason”

                      Regardless, all of your objections have been addressed above by others and your entire argument boils down to one thing: You don’t want employers to have to pay more for labour.

                      Why don’t you just admit it?

                    • Colonial Viper

                      Yet another blue blood plant.

                    • Pete

                      You’re the one that obviously doesn’t get it Felix. I’m not suggesting other numbers, I’m asking what is the number that gives the best balance – I haven’t seen anyone able or willing to justify $15 as that.

                      CV – a curious trait across the spectrum is to accuse someone of being from the opposite side if they question anything. I’m just not a one way worshiper. Labour are clearly not doing things very well, their tactics should be questioned to work out what they’re doing wrong. I want to see a stronger Labour presence in parliament.

                    • felix

                      Pete you said:

                      “It shouldn’t be hard to make a strongish case for $13.50, a push to $14 give ot take a bit wouldn’t be that tall an order…”

                      You’re claiming those numbers are probably more justifiable than $15 and you’re either too thick to realise that in doing so you’ve totally contradicted your flimsy pretence of an objection (see above) or you think everyone else is too thick to notice.

                      If you’re going to bullshit at least have the decency to do it a thread or two away from your contradictory statements. It’s just embarrassing this way.

                      Or you could just fuck off back to kiwiblog where you’re considered a bit of a fancy thinker.

        • fatty

          “Have other flow-on effects been considered? How would it impact on the many businesses struggling in Christchurch right now?”

          The earthquake excuse….I’ll be using it for late assignments at uni this year…I’ll be using it when I cycle up a one-way street in town…I’ll be using it to avoid social events that I can’t be bothered attending…I’ll be using it for a lot of things, but I won’t be using it to protect the rich and perpetuate poverty.

    • Colonial Viper 2.2

      Half a billion has to come somewhere?

      Well if you consider just the top 100 people on the NZ rich list control about $55B between them, its not like the money is not there.

  3. Colonial Viper 3

    Labour need to rethink its position of raising the minimum wage to $15/hr by the end of its first term in office i.e. by the end of 2014.

    It could (and should) be done sooner.

  4. pmofnz 4

    The title of the post should surely be “How to buy a quarter of a million votes”?

    • Marty G 4.1

      Have you got an actual excuse for opposing a half a billion wage increase for the quarter million lowest paid workers?

    • Colonial Viper 4.2

      Raising the minimum wage to $15/hr would be an extraordinarily effective economic stimulus.

      If Key and English and Wilkinson had any brains they would do that themselves, ASAP.

      It would cost the Government next to nothing, and generate additional income tax and GST receipts for the Government.

      Haha but they are so ideologically gridlocked they won’t do what’s right for NZ workers even if it will help get themselves re-elected.


      • Oleolebiscuitbarrell 4.2.1

        Raising the minimum wage to $15/hr would be an extraordinarily effective economic stimulus.

        Not for the 5,710 people who are unemployed as a result. Fuck ’em, I say.

        • Colonial Viper

          Hey biscuit, the Government can directly employ those 5710 people, helping to rebuild Christchurch.

          Problem solved.

          • Oleolebiscuitbarrel

            Suppose I should have known the answer was for the gummint to fix it.

            • Colonial Viper

              Yeah well the fraking private sector isn’t, so who is left, brainiac?

              If we had some decent corporate and business leadership in this country why the frak do we still have 160,000 unemployed when there is so much social, productive and reconstruction work to do?

              When the private sector is too gutless and self interested to make the difference, then the Government will.

          • Lanthanide

            The point of raising the minimum wage is that it doesn’t directly cost the government anything. If they are going to turn around and employ these people to “rebuild CHCH”, then it is somewhat defeating the point. Never mind that a lot of these newly unemployed people aren’t even going to live in CHCH or the south island. Are they supposed to telecommute to rebuild CHCH? Or go live in tents in Hagley Park?

            Also, what are they going to do? We’ve had this discussion before – apart from digging silt and immediate fix-up work that is all completed within 1-2 months, what large-scale low-skill jobs remain available to employ 5000+ people to do?

            So no, problem not solved, at all. Problem skirted with an unrealistic slogan.

            • The Voice of Reason

              Train ’em up to build wooden houses. That’s how we built our way out of the depression. BTW, wouldn’t the Government do OK out of a $2 per hour wage rise? The tax take would be about 30 cents per worker per hour nationally, which could help fund the rebuild.

              • Lanthanide

                I’d suggest that a lot of the 5000 people losing their jobs due to minimum wage rise aren’t going to be the sort of people who could work in the building industry, or they probably already would be (since it pays better than minimum wage).

                I can envision lots of cleaners and kitchen workers making up that figure.

                • Colonial Viper

                  going to be the sort of people who could work in the building industry, or they probably already would be (since it pays better than minimum wage).

                  The building industry has been a sick child over the last 12 months. Sovereign went into voluntary receivership today.

        • KJT

          More spending power for beneficiaries/waged people. They spend directly into the local economy = more business = more jobs.

          Tax cuts for millionaires/corporates = money spent offshore in luxury goods or the money markets casino.= less money in NZ. Local business goes bust = less employment..

          Anyone who doubts this should have observed businesses in Kaitaia during Ruthenasia.

    • Lanthanide 4.3

      Surely National should have done it then, if they wanted a second term.

      • Colonial Viper 4.3.1

        Like I said, ideological blinkers.

        They won’t be able to do it now because it would be seen as sheer panicky election bribery. Total short termism on their part. They simply gave the absolute minimum they thought they could get away with – but have not factored in how fast prices will be rising this year.

        This is gonna hurt them.

        • Pete

          …it would be seen as sheer panicky election bribery.

          That’s how many will see Labour promoting this.

          • Colonial Viper

            Labour’s been promoting this position for several months now AFAIK (i.e. before election year rolled in), and of course Unite had a big campaign on it last year.

            • Pete

              And Labour seem to still be desperately hoping to ride to victory on Winston Peters, so this policy doesn’t seem to be doing it for them. I’m sure some will vote for more money for themselves, but many will be suspicious of grand ideological handouts of other people’s money.

              • Colonial Viper

                grand ideological handouts of other people’s money.

                Finance companies got gifted $2B by Bill English. That’s ideological.

                Making sure that our poorest working families can afford milk and butter. That’s social democracy.

                And by the way, if the Government requires taxes from you, that money is no longer your money.

  5. MKL 5

    Neither red or blue have a clue how to grow an economy. Both are “ideologically gridlocked”. Reactive minimum wage argument is like squabling over who gets the final piece of pie. Have fun voting for yet another selection of hopeless gobblers this year.

    • Draco T Bastard 5.1

      And, like most people, haven’t realised that we don’t want to grow the economy because doing so is unsustainable. All we really need is better distribution of the wealth that we already have and to ensure that the resources that we use fits within the Renewable Resource Base.

  6. Afewknowthetruth 6

    It’s all pie in the sky.

    What is left of manufacturing is competing with China, where wages are of the order of $2 an hour.

    IT is competing with India ,where the same job can be done for 1/3 the cost.

    Tourism will go into terminal decline as Peak Oil impacts harder and harder.

    The service sector is dependent on everyone else having jobs, money, and affordable fuel and food: -so that will continue its inexorable decline.

    Primary industries are 100% dependent on oil, most of which is imported, so either their costs are going to continue rising or demand for their products is going to plummet. Six months ago Brent oil was around $70; it is now over $110. If the global economy thrives, demand will push the price of oil up and add to costs; if the global economy plunges, lack of demand will push the price of oil down and the plunging global economy will clobber exporters.

    The economic system -of a globalised consumer society based on consumption of oil and other non-renewable resources paid for with money that does not exist- has the makings of it own catstrophic falure build into it. No amount of tweeking the system will prevent business as usual collapsing fairly soon.

    One thing is very clear: they”ll just keep doing it till they can’t. (Keep attempting to prop up BAU.)

    • Lanthanide 6.1

      “IT is competing with India ,where the same job can be done for 1/3 the cost.”

      Often (not always, or mostly, but often) outsourcing IT projects to India ends up costing more in the long run, when things aren’t implemented properly or are done in a shallow way that appears to meet the requirements on paper but actually is inadequate when it is put into real production use. A large part of the problem is Indian companies that see money and will never say ‘no’ to a project, even if it’s something they realistically can’t handle. Likewise the people making the decisions in the western companies see a huge $ saving up front without actually understanding all of the issues around IT projects (particularly maintenance and code quality issues) and so throw better judgement to the wind and go for it.

      • Deadly_NZ 6.1.1

        And if you have ever tried to deal with a call centre that has been relocated overseas, you will know what I mean, what a disaster trying to deal with complex issues with someone who speaks English as a second or third language is hopeless.

        • M

          The two problems I’ve had with call centres being located overseas are:

          1 It has taken a job away from a NZer as well as the local knowledge and vernacular

          2 The person generally does not have the authority to give you a ‘yes’.

          I couldn’t give a stuff about accented English because I reckon as with anyone’s voice you need to get used to the rhythm and cadence of their speech. Having worked with people from the Ukraine, India, Sri Lanka, China, North America, Europe and the ME it’s been their work that has mattered, not their accent. If I were in any of their countries I’d hope they give me a fair go with regard to speaking their mother tongue with an English overlay but then that’s the arrogance of English speakers, they always expect others to learn their language but won’t make the effort to go and learn someone else’s language.

          At college I studied two languages apart from English and think it rounded out my education and enhanced my own native language skills even more.

  7. frizaxojx 7

    Okay so I\’m getting old and maybe my memory is going, but I could swear John Key said something in the 2008 election about wanting to get the minimum wage up to $15 to be level with Oz. Never heard another word about it – was it all my imagination? Anyone got a quote?

    • Jim Nald 7.1

      The spoutings of that year and of that period should be written off as Key saying whatever it takes to get into power.
      Everytime when being reminded that GST is 15%, I recall Key saying GST would not increase.

  8. neoleftie 8

    what happens to the gloabl economy when after some time, wages for the same job under the same conditions are the same…NZ is just further on the system continium than china or india etc..resources and infrastructure will be the key determinants of this century

  9. Sylvia 9

    interesting that DOL acknowledged that option two $13.00 per hour would have no effect on employment because it doesn\’t represent a real increase in wages..

Links to post

Recent Comments

Recent Posts

  • Swiss tax agreement tightens net
    Opportunities to dodge tax are shrinking with the completion of a new tax agreement with Switzerland, Revenue Minister Stuart Nash announced today. Mr Nash and the Swiss Ambassador David Vogelsanger have today signed documents to update the double tax agreement (DTA). The previous DTA was signed in 1980. “Double tax ...
    2 weeks ago
  • Maintaining momentum for small business innovation
    Small Business Minister Stuart Nash says the report of the Small Business Council will help maintain the momentum for innovation and improvements in the sector. Mr Nash has thanked the members of the Small Business Council (SBC) who this week handed over their report, Empowering small businesses to aspire, succeed ...
    2 weeks ago
  • Seventy-eight new Police constables
    Extra Police officers are being deployed from Northland to Southland with the graduation of a new wing of recruits from the Royal New Zealand Police College. “The graduation of 78 constables today means that 1524 new constables have been deployed since the government took office,” says Police Minister Stuart Nash. ...
    3 weeks ago