So the Nats have upped the minimum wage by 25 cents. An increase of 1.9% that doesn’t even keep up with inflation of 4% and is thus a minimum wage cut. Just like last year. Way to close the wage gap with Australia John! Not.
Of course no one realistically expects anything different from a National government. Improving the lot of low income earners is not now and never will be their goal. We have the government that we voted for. Ain’t it grand?
What annoys me almost as much as the wage cut itself is the rent-a-quote nonsense that is used to try and justify such callous disregard for low income earners. TV3 piped up with a prime example here:
To bring some clarity 3 News spoke to ASB’s Chief Economist Nick Tuffley.
Clarity from an economist? Ummmm…
Mr Tuffley says at its core, setting a national minimum wage is an argument about where a society places most weight – “do we want more jobs or do we want a higher pay rate and better conditions”.
Both please. What makes you think they are mutually exclusive? What makes you think that raising the minimum wage costs jobs? And then we get to the bit that really annoys me:
Productivity is the key to raising wages without harming business according to Mr Tuffley. “If we have high productivity, wages will reflect that,” he says. “The reason Australia has higher wages is that Aussie workers are more productive on average.”
High productivity levels are achieved by injecting capital into the economy. Mr Tuffley uses an analogy of a man digging a six foot hole. If he has a spoon it might take him a week. If he is equipped with a digger he could dig the hole in five minutes and move on to digging more holes. The more that worker is able to do – the higher the value they represent to the company, and his wage level should rise as a result.
… “For higher wages to be sustainable, they need to happen after increased productivity.
Ahh, the great “productivity” lie! Where to begin? The main problem with the great productivity lie is that over decades productivity has increased significantly, and wages have not followed. In this piece from 2008 the CTU made the case:
For this analysis, the most appropriate statistics available to use are the average ordinary time wage and the salary and ordinary time wage rates part of the Labour Cost Index (LCI). The LCI is the most relevant but only goes back to 1992.
First – real wages. The real average ordinary time wage has increased, but only just, since 1980: by 18 percent or a rate of about 0.6 percent per year. Looking in terms of governments of the period, it fell by 6 percent between 1980 and 1984 (1.6 percent per year), rose by only 4 percent over the remaining six years of that decade to 1990 (0.7 percent per year), and then by just 8 percent from 1990-1999 (an average of 0.8 percent per year, though falling between 1990 and 1996). From 1999 to 2008 it rose 10 percent, by a small margin the fastest growth of the three decades at 1.1 percent. …
But what about recognition for productivity gains? Despite national gnashing of teeth over our productivity record compared to Australia and other high income nations, productivity did grow. Between 1980 and 2008 (the latest data available) labour productivity grew by no less than 82 percent – while the average ordinary time real wage grew by just 18 percent. Between 1980 and 1984 productivity growth was 9 percent compared to a 6 percent fall in wages. From 1984 to 1990, productivity rose 17 percent while wages rose only 4 percent. From 1990 to 1999, productivity gained 22 percent, but wages only 8 percent. And from 1999 to 2008, productivity rose 17 percent and wages only 10 percent.
So if we look at the average ordinary time wage (the story would be even more compelling using the LCI), if wages had reflected the increase in productivity we would be looking at an average ordinary time wage of around $38.60 in 2008 if it had received its share of the productivity gains since 1980, and $31.60 if it was only since 1989. Instead it was $24.47. See the accompanying graph.
If wage increases followed productivity increases then wages in this country would be much higher. But they aren’t, because the increased profits are swallowed up by the employers, while wages stagnate. And yet they still have the bare faced cheek to argue that future wage gains depend on yet more productivity! It’s a blatant lie. It’s economic mumbo-jumbo designed to placate us while they keep wages artificially low. Like the carrot on the stick it’s an eternally moving target — no productivity increase will ever be enough — more will always be demanded. How long do we want to keep on running faster to stay in the same spot?
(The CTU report contains many more interesting details – a good read.)