How to put half a billion into working families’ pockets

Marty G
13 years ago
Categories: wages
Tags: kate wilkinson, minimum wage

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.