Minimum wage increase, what will it be?

Written By: - Date published: 8:21 am, January 19th, 2010 - 22 comments
Categories: minimum wage, national/act government - Tags:

John Key has ruled out a $2.50 an hour pay increase for New Zealand’s lowest paid workers but won’t give any indication of what increase he does think is right. He claims that an increase to $15 an hour would cost jobs. I would love to see the advice he got on that.

Anyhow, Employers and Manufacturers’ Association (Northern) chief executive Alasdair Thompson effectively put in the minimum bid for the Right when he suggested an increase of 25-50 cents an hour. 25 cents would be less than inflation, so that’s not a serious proposition unless Key wants to return to the dark days of the 50s-90s when National routinely let the minimum wage fall in real terms. A 50 cent increase would barely keep the minimum wage steady as a % of the average wage. So, $13 an hour is business’s bid.

On the Left, Unite is leading the campaign for a $15 an hour minimum wage. You can support their campaign to get a referendum on the issue here. That would lift the minimum wage nearly back above 60% of the average wage, where it traditionally was before the neoliberal revolution. For the leftish centre, that representative of all things moderate, Trevor Mallard, suggests that with $15 is out for now the government should lift the minimum wage to $13.75 this year, then $15 an hour the next.

Lets see how the options stack up:

In the last few years under Labour, the average wage was going up so fast that even increases of $1.75 over two years was barely enough to keep up. Now that average wage growth is set to slow, there is a chance to make a game-changing move, rather than dick around at 50% or slowly creep up, a decisive move to $15 an hour would restore the minimum wage to around 60% of the average. That option being too much like strong leadership for our Prime Minister, the best option then is the Mallard route, a series of $1.25 increases over 3-4 years would get the minimum wage back into the 66% range where it should be.

Of course, we all fear that Key will do what business wants and go for just $13 an hour. But Key showed last year that he will bend to concerted public pressure on this issue, and that poll showing 61% of Kiwis want a $15 minimum wage will have given him pause. He’s a cunning player of popular opinion, Key. He knows you always give the people half of what they want so you can give them the rest later. I think he will choose to go for $13.75.

22 comments on “Minimum wage increase, what will it be?”

  1. Pete 1

    “He’s a cunning player of popular opinion, Key. He knows you always give the people half of what they want so you can give them the rest later.”

    …or not. I thought being ‘moderate’ for Key is going halfway between the status quo and any ideological (right) extremes proposed to resolve the latest headline issue.

    • Marty G 1.1

      I’m trying to encourage him, pete. But I do think he would find it hard to just ignore that poll result.

      • DPF noted the poll is shonky, and I tend to agree in this case. It gave respondents only three options: reduce the minimum wage; hold minimum wage steady at $12.50/hour; increase minimum wage to $15/hour.

        I’m perfectly willing to believe 60% of kiwis want a $15/hour minimum wage, but only if I saw that number drop out of a poll that gives respondents intermediate and further options (or, better yet, asks respondents to nominate a value).

        Captcha: memorys. Clever: it should beat bots that rely on a spellchecker.

  2. TightyRighty 2

    “In the last few years under Labour, the average wage was going up so fast that even increases of $1.75 over two years was barely enough to keep up”

    isn’t this because the public service grew at an unprecedented rate and public service wages grew faster than the national average? so now private employers have to pay for government largesse? as if they haven’t already. nice cheerleading though, you almost made it sound like a completely positive thing.

    • Marty G 2.1

      No. The growth was driven by the private sector.

      Remember there are only 40,000 core public servants out of 2 million workers. (I assume you don’t oppose wage increases for teachers, doctors, nurses). Such a small number can’t affect the average significantly.

      “so now private employers have to pay for government largesse?”

      Um. private employers got a reduction in the corporate tax rate of nearly 10% under Labour. So, private employers are paying less for ‘government largesse’.

      Try again once the secretary has brought you your coffee, tighty.

      • TightyRighty 2.1.1

        oooo 10%, i just bowed down the busines gods that were labour. they balanced the cheque book for so many years because of all the extra funds coming in, when the funds dried up the cupboard became bare very quickly. not just for the government but many private sector firms to. yet you still want the national party to impose a nineteen percent increase in the minimum wage after 18 months in office, when the best labour acheived was an (and good on them for it) approximate average of 6% per year. this is still above inflation. why don’t you demand that the minimum wage stay on this growth track? as it’s above inflation – good – it keeps increasing the spending power of societies most vulnerable – good – and will likely be acceptable to businsess. or at least more so than 19% in one hit. which also will likely be the only one for a while.

        • Marty G 2.1.1.1

          “why don’t you demand that the minimum wage stay on this growth track? ”

          Because it will be insufficient to get the minimum wage back to 66% of the minimum wage. It is barely enough to keep up with wage growth. In the last two years, Labour increased the minimum wage by 15%.

          And you mock a 10% cut in the corporate tax rate but National hasn’t delivered one in decades, and it directly contradicts your claim that private employers were being forced to pay for government largesse.

          • TightyRighty 2.1.1.1.1

            I mock it because it was a move that was designed to bring it into line with international tax levels. it’s not the government “granting” the “right” for business to keep more of their own money. If the last government was serious on tax it would have lowered the personal tax rates, or at least introduced a tax free bracket in exchange for viciously and vindictively increasing top tax rates overnight. but anyway. Taxpayer pay for government largesse in all it’s forms. i know you don’t think that way, but it’s true.

            the minimum wage to sixty-six percent of the average wage? maybe not straight away but if inflation is at 2%, and the average wage growth is around 5%, the a yearly increase of 6-7% percent would mean it is continuously affordable and can be planned for.

            • Bright Red 2.1.1.1.1.1

              I see you’ve now given up claiming that private employers were forced to pay for governemnt largesse and swtiched to personal tax. Schooled by marty again, eh tighty? And it’s not even morning tea time.

              In 1999, Labour openly ran on bringing the 39% rate in and the Alliance wanted more rates above that. It was no secret. And the people overwhelming voted for it.

              And Labour did bring down personal tax rates in 2008, the largest part bring a reduction in the bottom rate. Cullen opposed tax-free brackets on some economic grounds, like the fact it would make a very large gap between the bottom bracket and the one above it, which encrouages tricky tax dealings and the moral idea that all people earning money should contribute something to the cost of providing public services. But for the vast majority of taxpayers, the bottom rate reduction had the same effect as a $2,500 tax-free bracket.

              • TightyRighty

                “In 1999, Labour openly ran on bringing the 39% rate in and the Alliance wanted more rates above that. It was no secret. And the people overwhelming voted for it.”

                National Standards anyone?

                Not schooled by marty Brighty, rather acknowledging that labour did drop the rate, but not for any altruistic reason, rather to keep business here.

              • Lanthanide

                Yeah, because there were so many businesses that were going to leave NZ if the rate wasn’t dropped. I remember The Warehouse, Telecom and the power generators all saying the rate had to be dropped, or they would leave NZ and we wouldn’t have cheap department stores, phone lines or electricity.

                I also remember the plethora of small mom and pop shops saying that if the rate wasn’t dropped, they would all leave and go to Australia.

                Oh wait, no I don’t. My mistake.

                Also, less facetiously, the US has markedly different tax rates for companies between states. It is true that many corporations are incorporated in particular cities or states to gain tax benefits, but at the same time you don’t see a complete lack of any business in a particular state because it has a tax rate 3% higher than the neighboring state. The simple fact is, if a market exists, companies will move there to serve the market and make a profit. If it means they have to raise their prices to help cover the tax charged by the state, then that is what happens. You just don’t see an area that has no providers of a particular type of good at all, because when that happens it is an obvious ‘open market’ for anyone offering such goods to come in and charge whatever price they want.

  3. I’m pretty much agnostic on the minimum wage at this stage, so I won’t comment on that here, but I will offer a correction:

    “That would lift the minimum wage nearly back above 60% of the average wage, where it traditionally was before the neoliberal revolution.”

    I wouldn’t go blaming the “neoliberal revolution”. Minimum wage was 84% of average wage in 1946, but declined bit by bit to as low as 34% under Muldoon.

    http://blog.greens.org.nz/2010/01/18/the-minimum-wage/

    • Marty G 3.1

      yeah but prior to the neoliberal revolution Labour would always move much more strongly to restore the minimum wage to above 66%.

  4. big bruv 4

    Now is not the time to increase the minimum wage, in fact there is a very good argument for lowering it given our high rate of unemployment.

    Of course any lowering of the minimum wage must be matched by a lowering of welfare benefits.

    Once the economy picks up again we can look at increasing the minimum wage and lowering benefit levels even more.

    • Bright Red 4.1

      “Now is not the time to increase the minimum wage, in fact there is a very good argument for lowering it given our high rate of unemployment”

      What is that argument? Is it called ‘further impoverish hundreds of thousands New Zealanders?’

      “Of course any lowering of the minimum wage must be matched by a lowering of welfare benefits.”

      Why? They aren’t related costs. Minimum wage increases come out of companies’ bottom lines. Benefits come from the government.

      • big bruv 4.1.1

        “Benefits come from the government”

        LOL!

        Utter rubbish, benefits come from the tax payer, it is money taken from us against our will and given away (mostly) to those who cannot be bothered working.

  5. @Marty: Yeah, I can buy that.

    Actually, you might be able to help: I’m looking for a decent data series on the NZ minimum wage (and other wage regulation), but I can’t find one after half an hour or so of Googling. Ideally, I’d be able to go back as far as the Wage Board days, but failing that, then at least as far back as 1946. Could you point me in the right direction?

    (Sorry, I think I posted this comment in the wrong spot. I am incompetent.)

  6. Ed 6

    I recall quite a bit of fuss about the ‘dishonesty’ of adjustments to tax thresholds being called ‘tax cuts’ when they were really indexation to stop bracket creep. Surely it would make sense for the minimum wage to be similarly indexed to a percentage of average weekly earnings – or don’t National believe their own rhetoric from opposition?

    The only question then is what the percentage should be – it would highlight a policy decision by the government, and enable comparisons with opposition parties. It may also enable economists to talk about long term implications of a steady and predictable policy rather than periodic ad-hoc decisions.

  7. todd 7

    Stop fucking around and just increase it to $25-30 min if you think it will work for you..Anyone who thinks that increasing minumum wage wont hurt employment is living in la la land.

  8. BusinessOwner 8

    I can’t understand why people can’t see what happens. I own a business that employs numerous minimum wage people. The next day after the minimum wage goes I put all my prices up. I have to to stay in business. Every week after this we get letters in the mail from all our suppliers who have done the same thing. This usually goes on for 6 months. Over this six month period we continue to put our prices up to cover our supplier price increase. This happens all over town, I’ve been observing now for years. Soon, my employees who earn higher than minimum wage come to me and compare their existing wage with that of their younger less experienced peers. Consequently their wage creeps up taking with it the AVERAGE wage of all income earners. No one is better off because all prices across the country have gone up. Meanwhile the government has had a huge increase in tax take. My young people earn considerably more now than they did a few years ago, strangely though, none of them tell me they are any better off. Welcome any feedback in case I’ve missed something here.

    • Daveo 8.1

      Welcome any feedback in case I’ve missed something here.

      The minimum wage has risen significantly faster than inflation as a result of Labour’s minimum wage increases from 2000-2008. Your minimum wage workers are objectively better off, even after inflation.

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