The moral case for a decent minimum wage

Written By: - Date published: 2:10 pm, January 19th, 2010 - 68 comments
Categories: minimum wage - Tags:

There was quite an interesting discussion on the minimum wage yesterday after a poll showed 61% of Kiwis back a $15 an hour minimum wage, and I thought it would be good to lay out my thoughts.

First, increasing the minimum wage changes the division of wealth between labour and capital. It gives more wealth to the poorest workers by taking a little from what are, by and large, big wealthy foreign-owned companies (the supermarkets, the fast food brands, the retail chains).

Now, I know you righties are all modern-day marvels. Born in a log cabin, you have pulled yourself up with no help from anyone except a public school system, public health system, the minimum wage, and all those other trappings of socialism. If you can do it, why can’t everyone else?

Well, leaving all that rightwing myth-making aside, let’s think about this. In our economy we can’t all be lawyers, managers, techs and the like. People in those jobs can only function thanks to people doing the often unpleasant, oftern dangerous, less-rewarded jobs – cleaners, factory workers, labourers, and so on. The work needs doing and the people need to work.

Now, the question is: what is the minimum decent amount a person should have to work for? What is the minimum fair amount for a human being to give over their labour? Unless you support slavery, you must agree the amount is greater than zero. So, we’re in agreement that a minimum wage is just, now we only need determine what level it should be.

The poverty level is generally recognised as 66% of the average income. It seems unjust that any person working full-time should be below the poverty line. So, a minimum wage of at least 66% of the average wage seems like a good target to me*. Hence why Labour initially set the minimum wage at 83% of the average wage (and, to the neoliberal economists’ eternal confusion, unemployment didn’t skyrocket and the economy didn’t collapse) and has sought – ever more gradually, unfortunately – to restore the minimum wage to a level above the poverty line.

Ok, last point. The more sophisticated righties like to pretend their objection to the minimum wage is not because they want labour to be cheap and capital to get the lion’s share of wealth but because they are concerned for the poor. Apparently, raising the minimum wage by a 20% would see thousands of jobs disappear. ‘You have to be underpaid. It’s for your own good’ they say while clamouring for tax cuts for themselves.

The problem is, no-one can present any serious evidence of this, only a few neoliberal papers that inevitably have a piece of mathematical circular logic hidden in their depths that mean the conclusions always magically match the economists’ pre-concieved beliefs (economics really is nothing more than politics in the disguise of maths). The reality, as we know from looking at the way labour is underutilised and employers don’t bother to invest in tools and training in places like India compared to places like Sweden, is that higher wages encourage employers to get more out of their workers leading to a more productive and more prosperous society.

Every time the minimum wage has gone up in the past we have failed to see the rise in unemployment routinely predicted by representatives of the Right like the Business Roundtable. Instead, we have seen thousands of Kiwi workers and their families lifted out of poverty and their children given a better shot at life, and no evidence of job losses.

So, a minimum wage of at least 66% of the average wage is just, we have had it in the past without problems, and it would hugely improve thousands of Kiwi families’ lives. Seems like the right thing to do to me.

*(I know, the average wage and the average income are different things but I think it works as a rule of thumb)

68 comments on “The moral case for a decent minimum wage”

  1. Gosman 1

    “Now, the question is: what is the minimum decent amount a person should have to work for? What is the minimum fair amount for a human being to give over their labour? Unless you support slavery, you must agree the amount is greater than zero. ”

    Ummmmm….. I think you will find that most people who support the free market believe that it up to individuals involved in the labour market to freely decide that level and not the Government.

    This means the rest of your point about everyone agreeing it must be greater than zero is actually just you taking an ideologically driven position.

    People might freely give their labour for free if they so desire. Who are you to stop them doing so?

    • roger nome 1.1

      “I think you will find that most people who support the free market believe that it up to individuals”

      oh – so if someone’s facing financial ruin, they’re “free” to agree to work for penuts? Come off it, that’s fallacious bullshit.

      This is the real world. We live in a democracy – now see how many NZers support that argument, you might get the Act supporters, but that would be about it. Certainly it wouldn’t be any more than 10%. So Take that shit to Somalia Gos. Go on. I bet no one would miss you.

      • Gosman 1.1.1

        Interesting you are advising me to go live in Somalia. Taking the same approach I could suggest you go live in Zimbabwe. The Zanu-PF regime there had a similar view about prices of goods that you and other left wing people have over the price of labour. They thought that there was some ‘fair and reasonable’ value which the Government could just dictate and everybody would be happy. Do you know what happened when they tried to do that?

        • roger nome 1.1.1.1

          Gos – don’t think Mugabe is a social democrat. However, there is no minimum wage in Somalia.

          • Gosman 1.1.1.1.1

            Mugabe is a Socialist who professes to believe in democracy and even holds elections. Obviously it is his kind of democracy and his kind of elections but if you are using Somalia as an example of free market thinking then Zimbabwe is an example of Democratic Socialism.

            So, do you know what happened in Zimbabwe when they attempted to impose a ‘fair and just’ value for goods in the country?

  2. toad 2

    This literature review on minimum wages (PDF 460kB) should be a must read for the neo-libs – or at least for those who are open to a debate about the evidence, rather than just spouting ideology.

    It pretty much debunks the “increasing the minimum wage will cause massive job losses” argument.

    • From the quick look at that paper its main focus seems to be on income inequality and the effects of the minimum wage on that. As far as the effects on unemployment of the relative groups goes they summarise their position as

      “Econometric studies on the impact of changes in minimum wages have yielded ambiguous results. The work of Card and Krueger, and subsequent studies using similar methods suggests that, in some cases, increases in minimum wages may have no effect, or even a positive effect, on unemployment.”

      But they also have to admit “The results of Card and Krueger were, not surprisingly, controversial. and strenuous efforts were made to reproduce or refute them. Critics have included Burkhauser, Couch and Wittenburg (2000), Neumark (2001), Neumark and Wascher (1995, 2000), Partridge and Partridge (1999a,b) and Williams and Mills (2001). Most of these critics endorse the view of Ehrenberg (1995) that, in the context of the simple partial equilibrium model above, ‘the finding of a positive employment response to increases in minimum wages amounts to a denial of the “law of demand”.” And they are right in that a denial of the law of demand is controversial and that reproducing those results has proved difficult. Also a number of the critics have argued there are faults in the Card and Krueger paper. See Minimum Wages’ by David Neumark and William L. Wascher, Cambridge: MIT Press, 2008 for a discussion of the Card and Krueger paper.

      “It pretty much debunks the “increasing the minimum wage will cause massive job losses’ argument.”

      It does not debunk that argument because no one makes such an argument. The argument made is that is that there will be a reduction in employment opportunities for the low-skilled and directly affected workers. The overall unemployment rate will not be affected in any serious way. So you will not see “massive job losses” due to an increase in the minimum wages because those affected by the minimum wage are a small subset of the total labour market.

      • roger nome 2.1.1

        “The argument made is that is that there will be a reduction in employment opportunities for the low-skilled and directly affected workers”

        The studies i’ve read purport that a significant increase in the minimum wage simply results in increases in the prices of goods and services involving workers who are affected by minimum wage jobs, coupled with a reduction in operating surplus – not a decease in job opportunities.

        So Paul, can you produce just one empirical study that shows a significant increase in unemployment due to an incerase in the minimum wage? I bet you can’t.

        • Paul Walker 2.1.1.1

          “The studies i’ve read purport that a significant increase in the minimum wage simply results in increases in the prices of goods and services involving workers who are affected by minimum wage jobs, coupled with a reduction in operating surplus not a decease in job opportunities.”

          Interesting. Can you give the cite for this?

          “So Paul, can you produce just one empirical study that shows a significant increase in unemployment due to an incerase in the minimum wage?”

          Well no because we would never expect there to be an increase in unemployment due to an increase in the minimum wage. The claim made is that there will be a reduction in employment opportunities for the low-skilled and directly affected workers. The overall unemployment rate will not be affected in any serious way since those affected by the minimum wage are a small section of the overall labour market. On the evidence of the effects of the minimum wage see Minimum Wages’ by David Neumark and William L. Wascher, Cambridge: MIT Press, 2008.

    • I also found this comment in the paper interesting:

      “We present evidence confirming previous findings that countries with regulated labour markets have been able to resist the global trend towards rising inequality without suffering either higher unemployment or lower employment than countries with deregulated labour markets.”

      I think that has to be true, almost by definition. To see this take an extreme example, assume it is illegal to ever fire anyone. That is an extremely regulated labour market and then it would not be at all surprising that inequality would not increase or that you won’t see an increase in unemployment. The point being that if you regulated the market enough then of course you would not see changes in inequality or unemployment.

      • roger nome 2.2.1

        So Paul – you’re fine with the fact that there’s been no real wage growth for people who are working in the minimum wage industries over the last 20 years? i wonder how happy other NZers are with that?

        http://2.bp.blogspot.com/_t8KNMT03MmI/SIaccCQtcoI/AAAAAAAAAD4/dqFNJsKsEEU/s1600-h/Wages.jpg

        • Paul Walker 2.2.1.1

          Is this relevant to my posting?

          • roger nome 2.2.1.1.1

            Good point Paul – what the hell are you arguning for anyhow. Clarify your position? or do you not have one, because you don’t know what the hell you’re going on about?

        • Pascal's bookie 2.2.1.2

          @ roger

          So has there been no productvity improvement in that sector over that time, (hard to believe), or does it suggest that the link between the two isn’t magical but dependent on labour laws, union freedom, political action and other such variables?

          • roger nome 2.2.1.2.1

            PB – when economies were by and large national productivity and wages were linked, but this is no longer the case. See this for instance:

            http://news.bbc.co.uk/2/hi/business/5303590.stm

            to answer your other question, there have been small productivity increases wach year in the fast-food industry, that have probably amounted to about 20% over the last 20 years (read some papers a couple of years ago, so the memory’s a bit foggy.), but no concurrent increase in wages has resulted.

  3. vidiot 3

    “61% of Kiwis back a $15 an hour minimum wage”

    Actually, 61% of Kiwis back a raise to $15 an hour minimum wage when they were only given the options of reduce the minimum wage, leave it $12.50 or raise it to $15.00

    Am sure results would have been different if a 4th option of say $13.25 (6% increase) was also tossed in to the mix.

    • “Every time the minimum wage has gone up in the past we have failed to see the rise in unemployment routinely predicted by representatives of the Right like the Business Roundtable. Instead, we have seen thousands of Kiwi workers and their families lifted out of poverty and their children given a better shot at life, and no evidence of job losses.”

      But no one actually makes this claim, so why are you saying they do?

      The claim made, with evidence to back it up, see Minimum Wages” by David Neumark and William L. Wascher, Cambridge: MIT Press, 2008 for a recent survey of the economics literature on the minimum wage, is that there will be a reduction in employment opportunities for the low-skilled and directly affected workers. The overall unemployment rate will not be affected in any serious way.

    • Bright Red 3.2

      “Actually, 61% of Kiwis back a raise to $15 an hour minimum wage when they were only given the options of reduce the minimum wage, leave it $12.50 or raise it to $15.00”

      If people thought $15 was too much, they could have chosen the option to leave it at $12.50.

      You’re right that support for any increase may be higher than support for specifically $15 an hour but $15 an hour is the option on the petition, so that’s why they asked.

      • vidiot 3.2.1

        Ah but 94% of people would agree that increasing it and the tax brackets at a rate higher than inflation is also fair. It’s just a pity that it took 9 years for the tax brackets to change.

  4. “The problem is, no-one can present any serious evidence of this, only a few neoliberal papers that inevitably have a piece of mathematical circular logic hidden in their depths that mean the conclusions always magically match the economists’ pre-concieved beliefs”

    Out of morbid fascination, would you care to cite such an article that makes the stated claim (that jobs disappear on a large scale, not merely that potential jobs for marginal workers eventuate at a lower rate) & offer an explanation of where the logic is circular?

    I mean, that’s quite an assertion you’ve made, and it would be very interesting if true.

  5. Bill 5

    Since the wage system exists to provide material advantages to owners and controllers of capital, it would seem to run counter to the logic of the whole system to award workers guaranteed minimum wage levels that diminished the aforementioned advantage.

    Just saying.

    Historically, such a thing was probably only established and accepted as a compromise in the face of the real possibility of communism being a draw card for workers. Those days are long gone.

    Even the Labour Parties of the west have disavowed at best, all but the softest of soft expressions of socialism. That’s probably being far too generous, but no matter.

    Why compromise with workers now? Is there a realistic and immediate threat to the status quo coming from workers? Is there any reason to not continue holding down and where possible, rolling back gains made by labour from the 30s through to the very early 70s?

    Anyone or anything to stop us getting back to playing this thing just exactly the way we want it played?

    Didn’t think so.

  6. “The problem is, no-one can present any serious evidence of this, only a few neoliberal papers that inevitably have a piece of mathematical circular logic hidden in their depths that mean the conclusions always magically match the economists’ pre-concieved beliefs (economics really is nothing more than politics in the disguise of maths).”

    Can you give an example? Which papers have “a piece of mathematical circular logic hidden in their depths” and can you show this particular piece of maths?

    “higher wages encourage employers to get more out of their workers leading to a more productive and more prosperous society.”

    You’re right there is an relationship between wages and productivity.Unfortunately it runs the other way. Even the likes of Paul Krugman have noted this. He writes,

    “As it happens, the past 40 years offer considerable evidence on what happens to the wages of a country whose productivity gains on that of higher-wage nations. Four decades ago, productivity in Europe was well below U.S. levels in most industries, and Japan lagged even further; since then, productivity levels in the advanced world have converged, although most measures still suggest that the United States retains some edge. More recently, a group of “newly industrializing economies” in Asia has achieved spectacular productivity increases starting from a very low base. Given these dramatic changes in relative productivity, what has happened to relative wages?

    The answer is that wages have risen in each country, more or less in line with productivity. Table 2-3 shows data on long-run increases in productivity and real wages in several representative countries. Bearing in mind that there are some slippages in the data (for example, there are a number of technical problems in the way that both productivity and real wages are calculated), the basic picture is one in which converging productivity has produced a convergence in wages, just as the theoretical analysis would predict.

    Notice that we do not have good data on South Korean wages over the full sample. However, the United States government has been collecting hourly compensation (wages plus benefits) data for the industrial sector of several newly industrializing countries since the mid 1970s. According to these data, South Korean compensation rose from only 5 percent of the U.S. level in 1975 to 46 percent in 1996. An index of compensation in several newly industrializing Asian economies rose from 8 percent of the U.S. level in 1975 to 32 percent by 1996. In short, the experience to date is that wages always do move more or less in line with productivity. (Paul Krugman and Maurice Obstfeld, “International Economics: Theory and Policy”, Prentice Hall.)”

    and in a similar vein he says,

    “Economic history offers no example of a country that experienced long-term productivity growth without a roughly equal rise in real wages. In the 1950s, when European productivity was typically less than half of U.S. productivity, so were European wages; today average compensation measured in dollars is about the same. As Japan climbed the productivity ladder over the past 30 years, its wages also rose, from 10% to 110% of the U.S. level. South Korea’s wages have also risen dramatically over time. (“Does Third World growth hurt First World Prosperity?” Harvard Business Review 72 n4, July-August 1994: 113-21.)”

    So over time if you make people more productive, wages will increase. Can you cite a paper which show the argument of how increasing wages will increase productivity for an economy?

    • fraser 6.1

      going by the quotes above, one would expect that NZers wages would also have experienced a roughly equal rise in line with productivity – yes?

      have they? – i dont think so

      • Paul Walker 6.1.1

        I don’t know but note that New Zealand’s productivity growth over the last 30-40 has been great.

        • fraser 6.1.1.1

          yes. Thats kind of what i was getting at.

          productivity has increased out of step with wage increases.

          Just another example among many that illustrates that market solutions are great for some things and really crap for other things

          plus it kind of pokes a huge hole in your assertion above. Or at least renders it useless for a NZ perspective.

          • Paul Walker 6.1.1.1.1

            “I don’t know but note that New Zealand’s productivity growth over the last 30-40 has been great.”

            Actually what I wrote was wrong. What I should have written was

            “I don’t know but note that New Zealand’s productivity growth over the last 30-40 HASN’T been great.” Sorry about that.

            • Bright Red 6.1.1.1.1.1

              productivity is only a factor of GDP. It’s pretty pointless to look at it alone, ignoring other variables like employment and hours worked.

              • “productivity is only a factor of GDP”

                Actually, no its not. Roughly, economists use two measures of productivity: labour productivity, often GDP per worker, and total factor productivity which measures the joint effectiveness of of all inputs combined in producing output.

            • Descendant Of Smith 6.1.1.1.1.2

              Man we must have some pretty crap managers out there then.

              Isn’t the problem with the lack of productivity growth the fact that we have relied on low wages to be competitive rather than investing in research, training and system improvement.

    • roger nome 6.2

      that was written in 1994 – and is now outdated paul. See this study:

      http://news.bbc.co.uk/2/hi/business/5303590.stm

      You really know fuck all don’t you?

      • Paul Walker 6.2.1

        Clearly I know a lot more than you. The Krugman comments are not outdated. The first Krugman quote comes from 2003 I think. The study noted in your BBC article covers the period 2000 to 2005, the Krugman quotes are about time periods of around 30-50 years. That productivity and average wages do not match over a short period of 5 years will not surprise anyone much, I wouldn’t think.

        • roger nome 6.2.1.1

          paul – you’re going on about a period when profits were predicated on domestic demand, which was dependent on domestic wage levels. Now we have a much more globalised economy, where profitability isn’t so dependent on wage levels. as a result, profit margins have expanded, and wage growth has not kept pace with productivity growth in the countries that have deregulated labour markets (ours and the US). The Economic Policy Institute study illustrates this.

          • Paul Walker 6.2.1.1.1

            This has nothing to do with my point. My point was that the Krugman quotes are correct since they are referring to longer term, 30-50 years, time periods. The Economic Policy Institute study covers 5 years, and thus its results tell us nothing about the point Krugman was making.

            • roger nome 6.2.1.1.1.1

              oh, i see – your debating technique is just to deny that anything which contridicts your point is relevant.

              The world has changed Paul. The relation between productivity and wages has changed as a result. get it? nah, doubt it.

  7. tc 7

    An intelligent and rational post which I’m sure will be challenged by the folk in nice houses, expensive cars, beach houses and other property/trust holdings as simply unaffordable to the country as it may give them less coinage to holiday in fiji.

  8. Lanthanide 8

    “Unless you support slavery, you must agree the amount is greater than zero.”

    Slavery is not the same as working for $0/hr. Many people volunteer to organisations and get paid $0/hr, but they are not slaves. Slavery is when you are owned by someone else and do not have the right to do as you choose; you are controlled by your master. That is not the same as being paid $0/hr, as you are trying to construe it. I understand what you’re trying to say, but you’ve conflated it with slavery to try and strengthen your argument, when it really it’s a completely separate issue.

    “Every time the minimum wage has gone up in the past we have failed to see the rise in unemployment routinely predicted by representatives of the Right like the Business Roundtable.”

    That might be true, but you’ve made the converse point in other postings: we can’t tell what the unemployment rate would have been had the minimum wage not been raised. It’s quite possible that if the minimum wage wasn’t raised at a point in time, 2 years later the unemployment rate could be 5%, but because it was raised at that point in time, 2 years later the rate is instead 5.8%. Of course there’s no way to measure this, only speculate on it, but to not acknowledge this outcome is negligent.

  9. Pascal's bookie 9

    So if the argument against raising the min wage isn’t that unemployment will increase*, but rather that there will be some (unknown) small number of people that would not get jobs that might have been available if not for the increase, then it seems there are better ways of dealing with that problem. Like education for the unemployed or something.

    It doesn’t seem like a knockout argument chaps.

    *someone needs to let Key know that he’s talking shit, and saying stuff that no one says…

    “The Government has always tried to be fair. We recognise there are about 100,000 people who earn the minimum wage, I think it’s important they are able to make ends meet as best possible, but also there’s got to be a recognition that where there are increases in wages that they have to be paid for – we don’t want to be threatening people’s jobs so there’s a balancing act here and that’s what the Cabinet will consider,”

    Oh, I get it, he’s talking about counterfactual jobs from the future being threatened, or Australia, or something.

    • “So if the argument against raising the min wage isn’t that unemployment will increase*, but rather that there will be some (unknown) small number of people that would not get jobs that might have been available if not for the increase,”

      The group is not unknown. It is the group whose wages are at or close to the minimum wage. The claim made is that there will be a reduction in employment opportunities for the low-skilled and directly affected workers, that is, those at or around the minimum wage.

      • Pascal's bookie 9.1.1

        “some (unknown) small number”

        It’s the number that’s unknown Paul.

        Or do you have a number for me, of people that will not get jobs, for the proposed increase to $15/hr?

        • Paul Walker 9.1.1.1

          Sorry, misunderstood your point. No. As far as I know no one has looked at the New Zealand situation in enough detail to make any estimates of the actual number of job loses.

          • Pascal's bookie 9.1.1.1.1

            It’s irrelevant anyway.

            Fact is, it’s probably a small number, not enough to effect the unemployment rate. The effect you are so worried about, could be mitigated by other polices to assist the unemployed into employment.

  10. vto 10

    Quite clearly the fairest thing for the politicians to do is to put minimum wage up by the same amount that politicians have put their own wages up.

    ha ha ha ha ha ha ha… exposes politicians for what they most of the time are…

  11. Herodotus 11

    “The poverty level is generally recognised as 66% of the average income. It seems unjust that any person working full-time should be below the poverty line”
    Just a wee point I have with this so 2 full time earners within a household if they each earned 60%, total income 20% above poverty line. Should not the poverty line be based on household income, and instead of gross be based on after tax as we have a progressive tax system, so (60% income) I would imagine increase by some (not much) of a percentage and approach 66%.
    Also as a caring community do we not then use Soc Welfare, housing allowances etc to compensate for the low wage. I.e. Govt subsidise the employer ?

  12. todd 12

    Rogernome If your argument that raising the wage to $15 will not effect jobs ect why not introduce a $30 minimum wage,or at what point does your argument cease to exist that making a higher minimum wage will effect jobs.

    • Descendant Of Smith 12.1

      The definition used in 1907 in Australia seems a good start.

      It established a ‘living wage’ for a man, his wife and two children to “live in frugal comfort”.

      I wonder how much this would equate to today?

    • roger nome 12.2

      Good question todd. I think the minimum wage should be set at such a level as enables a full time worker to buy a modest house, and participate fully in society. In other words, it should offer financial security.

      Now, i don’t think you need to be on $30 and hour for that, but i’d say it would be at least $15 an hour.

      in 1987 the minimum wage was set at about 65% of the average wage, and it did cause economic catastrophe. We’re currently sitting at about 50%, so i think there’s room to bump it up substantially.

      Sure it’s difficult to know just where it should be set however, and that’s an area where there needs to be a good amount of work done to find the right balance.

      What are your thoughts?

  13. todd 13

    Or as my bank covenants are being broken now,by making me pay all my cleaners $15 or more,tell me how much more you will pay for my services that I will have to increase.Now dont get me wrong it would be great to pay them more,they do deserve it.But I would HAVE to increase prices and hopefully all my compettion will too.
    Which means it might work,but if not there is going to be alot of people hurting.

    • roger nome 13.1

      todd -all your competitors would have to increase their prices, and you would just have to charge more for the service you offer. it’s that simple.

      so there would be a bit of inflation, but not nearly enough to off-set the gains made by increasing the minimum wage. it’s just a mechanism for democratic wealth transfer. nothing more, nothing less. it’s my opinion that rewarding people for hard work is the best means of wealth transfer.

  14. tsmithfield 14

    Jumping in here late in the piece, I would simply note that we are losing a helluva a lot of industry to the likes of China, Mexico etc. I don’t think anyone would dispute that. Look at recent cases of Firestone etc. There would be lots of jobs in these types of industries that would probably attract the minimum wage. Now they are being shipped overseas to countries that have even lower effective minimum wages.

  15. rogergenome 15

    [deleted]

    [lprent: You’re still banned. Adding another month for having to clean up the pending. Next time I’ll drop you into auto-spam. ]

  16. quenchino 16

    I would simply note that we are losing a helluva a lot of industry to the likes of China, Mexico etc.

    Which is of course another sort of issue. I guess if China goes on adding 10m new workers to their industrial base, every year for the next 80 yrs without running out of rural peasants to recruit at slave wage pay rates.. and at the same time put every job in the developed world out of existence… what will be the result?

    I realise this seems so absurd it looks and feels like a strawman argument; but I’m not sure where else the logic takes us.

  17. tsmithfield 17

    Marty, there will still be a lot of cheap labour in China for a long time yet. And when that runs out, there’s India with nearly the same population size, and so it goes on.

    The trend of industry leaving NZ is something that worries me, because my business services the industrial sector, so I acutely notice the amount of businesses leaving our shores. As this trend, and the trend towards automation continues there are going to be less and less industrial type jobs available for those on the minimum wage. It is a bit of a worry, as I fear there are going to be more and more people for whom jobs simply aren’t available.

    The problem is, that whatever efforts are made to fix a minimum wage here, it doesn’t have any effect on wage standards overseas that are attractive to industry. And before you blame the greedy companies, just remember it is consumers such as ourselves who demand cheaper and cheaper products.

  18. Matthew 18

    One area where there has been a significant jump in minimum wage is the youth wage, which was abolished. This jump is from $8.20 in 2006 to $12.50 now, or a jump of some 52% in the last 3-4 years. This jump has been so significant that its effects will not easily be drowned out by the many other factors that effect unemployment.

    If you look at the youth unemployment rate (I am talking about 15-19 year olds to be as consistent as possible with the youth wage change), it has for the last 20 years always been significantly higher than the general unemployment rate. However the % difference between these two rates has held reasonably constant over the last 20 years (stats NZ data. The difference was briefly at 14% (youth umemployment rate minus general unemployment rate) around 1994, but apart from that has been in a reasonably range of approximately 8%-12%. That is until the last couple of years (post minimum wage jump), where the gap has blown out to be almost 19%.

    There may be other reasons for this, but it will be interesting to see where the number goes in the next few years. Of course not so much interesting as disheartening for those 16 year olds who would probably happily work for $9 an hour rather than be unemployed.
    [This is Farrar’s line and we’ve already shown it’s bullocks. http://www.thestandard.org.nz/farrar-vs-the-facts/%5D

  19. Matthew 19

    Nice try Ed, but I went back to 1990 too.

    But youth unemployment relative to general unemployment is now unprecedented.

    “Check out what happened during the recession induced by the neoliberal revolution in the early 90s”

    Yes youth unemployment was nearly as high back in the early nineties as it is now (although currently it is the highest at any point in the last 20 years). But back then general unemployment was way higher than it is now.

    When youth unemployment got close to 25% in the early nineties the general unemployment rate was over 10%, as opposed to 6.3% currently. Thats a very big difference.

    In other words 15-19 year olds are taking a much bigger hit this time around relative to the general population.

    So why is that bullocks?

    • lprent 19.1

      Employers are increasingly after skills and less into training themselves.

      15-19 year olds usually don’t have many skills and typically don’t have a work history either.

      Employers are cost sensitive, but of all their costs.

      Wages are less expensive than the costs of training someone how to work.

      Given a choice between someone applying for a job with a decent work history and someone with none, employers will take the work history.

      Given a choice between someone with minimum training and one with more training outside of school, employers will take the one with more training.

      15-19 year olds really need to carry on schooling.

      Pretty simple really.

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Recent Posts

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