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National bows to minimum wage myths - ACT

National's move to increase the minimum wage by 50 cents this April is yet another example of the Government's lack of resolve when it comes to economic issues, says ACT Leader-elect Jamie Whyte.

Late yesterday, Prime Minister John Key confirmed the minimum wage will rise to to $14.25 an hour from April 1 this year. Labour says it will bump that to $15.00 if it gains power. The Greens favour a push to the "living wage" of $18.80.

Labour Minister Simon Bridges said the 50 cent rise balanced the needs of businesses and workers.

"Setting these wage rates represents a careful balance between protecting low paid workers and ensuring jobs are not lost."

Advice to cabinet was that a 50 cent rise could cause the loss of around 2300 jobs.

The Starting-Out and training minimum wages will increase from $11 an hour to $11.40 an hour (or 80% of the adult minimum wage) from April 1.

"The economists in the National Party aren't stupid, They know that this will have adverse effects for New Zealand workers and the economy. Yet they continue to intervene in wage rates, in an attempt to position themselves as moderates," says Dr Whyte.

"In doing this, National perpetuates the myth that minimum wages protect the poor.

"John Key has skimmed over the inevitable consequences of this intervention, saying job losses will be 'relatively negligible'. What Key doesn't acknowledge is the unseen effects of minimum wages -- those businesses which don't directly lay off workers will be discouraged from employing more, or replacing those who leave voluntarily in future.

“The best thing that low skilled workers can do is get work experience. It's hard to think of a more cruel policy than passing a law that bans the people most in need of work experience from getting any.

"Furthermore, many businesses will pass on their increasing employment costs to the consumer, contributing to the rising price of living which many New Zealanders have come to accept as normal.

"ACT doesn't think it's okay for the state to put up barriers to employment. Nor does ACT think it's okay for the state to intervene to drive up the cost of living.

"Only ACT can provide the economic spine so badly needed in any center-right government."

Earlier, economist Eric Crampton told NBR Mr Key's plan to raise the minimum wage could cost jobs - and has outlined an alternative.

“New Zealand’s minimum wage is among the world’s highest, when we consider it in relation to the median wage," the Canterbury University lecturer told NBR ONLINE.

"I get nervous about disemployment effects of the minimum wage when the minimum wage is more than half the median.

"If we want to support the working poor, targeting assistance through wage subsidies like Working For Families can do the job without forcing low-skilled workers out of the workforce."

Comments and questions
14

Minimum wage is pathetic, taxes are worse than ever, house prices are through the roof and John key is showing his true colors for our corrupt government

Basically the government is dictating which businesses will be viable in the NZ economy. I accept that there is an valid argument that if a business can't afford to pay the minimum wage then it shouldn't be in business but it also has to be accepted that there are employment implications for this policy. The higher the minimum wage the more negative this policy will be on unskilled workers.

Bravo Dr Whyte. Commentary like this and your remarks on the Greens Solar bribe is what this country sorely needs. Keep it up.

The biggest losers from a rise in the minimum wage are people with disabilities, and unemployed school-leavers.
My son,who has Down Syndrome, works for a few hours a week at two great businesses in New Plymouth. This gives him the dignity of work,and inclusion in society. Putting up the minimum wageis in effect penalising his employers for their generosity or spirit.

As a means of assisting the poor or low paid, minimum wages have always been of limited efficiency. Many poor households have no one in the work force and obtain no benefit; in fact, the minimum wage can price them out of the employment market. Many reasonably well off families have a second worker on low pay and they can benefit. The balancing act that the any government engages in when setting a minimum wage is fraught with the essential problem - what is high enough to help someone supporting a family yet low enough to give employers an incentive to employ single young adults with little or no qualifications and/or no work experience. I have empathy for both ACT's point and the political necessity for National to engage on the point.

Large companies like the supermarkets can easily afford to pay an extra $1 or $2 to its workers and still make hundreds of millions BUT minimum wage workers need to stop being so wasteful (how many grow their own vegetables, how many % wise still smoke etc)

Yet another clear example as to why New Zealand needs Act to ensure that the government does not keep swinging to the left.
paleo martin

Bah, so you think $13.75c per hour is acceptable? You're living in your own dream world. National have got something right by increasing it. More increases are needed but at the right speed.

There is no balance between raising the minimum wage and jobs lost. That is the same as saying that somewhere on the labour demand curve there is a flat point and all you have to do is find out where that is in order to changes prices/wages arbitrarily without changing demand. This is naievity at best, but more likely it is willful misrepresentation of the issue in order to buy votes. Trouble is, the other parties are worse. Raising the minimum wage increases unemployment - period!

Increase may not be the best option for economic growth or for social welfare, but it is sound politics.

You've hit the nail on the head there. If the average voter wasn't so damn average we could have political parties that put forward rational policies that aim for rational outcomes. However, that is not the world we live in.

We don't need minimum wage laws. Get government out of the workplace and remove restrictions to bring on a market that will enable free wage bargaining. End the pathetic Union monopoly on collective bargaining and allow genuine enterprise bargaining so we can have genuine wage competition again between businesses for staff. A return to the Employment Contracts Act with good faith bargaining requirements on both parties should do it. Ditch all the other prescriptive legislation and let the parties negotiate their own arrangements.

This man needs a tie. The slovenly look is passe...not at all attractive.

ACT Supporters are delusional. Scrap Minimum wage, scrap the RMA, move to private schools, remove regulation of business, let the market rule. Next you'll be saying survival of the fittest!

And if, God forbid, society ever descended to the anarchic position of survival of the fittest, I am sure ACT supporters in their airconditioned BMWs would be the very first to perish. Free market, yes, but only when it suits us.

No RMA? Fine until someone wants to build a high rise over your fence.

No Business regualtion. Fine until my supplier is the only supplier and I have to take it or leave it (Read here, Supermarket Oligopoly). Any Economics text you select talks about Monopolies and Oligopolies. Are you right wing AND stupid?

Split society into 'haves and have nots' and invite revolution. Isn't there enough examples of polarised Western democractially elected societies to demonstrate that the more egalitairan a society is, the more economically stable and wealthy it is.

And another thing, if people need $18 per hour to live, isn't then business the very bludgers you so abhor? You renege on your repsonsibliity to pay people a wage that they can survive on, who end up being supported by the Government to 'top-up' their poor wage with family support and other benefits necesary to keep them out of poverty.
Something I woule term 'fiscal drift'.

I know there is a balance, and it is complex, but serious right wing policies are the domain of extremists and social terrorists. I welcome the day I can start a business, compete against you by foul means (why be fair in the absence of regulation), employ slaves and conquer with force. I now I would beat all of you. Economic anarchy? Not a place you want to go, anytime, not against me. To quote a fellow right wing, gun slinger "Do yo feel lucky punk?".

Trust me, regulation suits us all.

And another thing, your Global economy? Just remember most buisiness people in Asia drive Tuktuks and live in a one bedroom home with their grandparents. Good luck with your BMW.