Of all the announcements by Labour over the weekend, the $15/hour minimum wage one was the riskiest politically.
Predictably, the policy announcement has been lashed by the business community and right wing commentators. It is taken as a given that raising the minimum wage will be bad for business and will result in job losses.
But is this true? Hundreds of studies have been done around the world over the years on the effects of minimum wage legislation, and although I'm no economist and don't intend to trawl through the literature, it seems obvious to this layperson blogger that the answer's not clear.
If we always let the business community dictate what was good for the country there would probably be no minimum wage legislation, and possibly little or no other legislation protecting worker rights. So clams by businesses that raising the minimum wage will hurt jobs need to be treated with caution.
And in the Chicken Little hysteria being generated by some commentators over the minimum wage announcement, it's easy to lose sight of the fact that for many workers struggling to survive on the current minimum the weekly wage boost will be substantial. Instead of accepting at face value the claims that the increase will hurt jobs, let's focus on the positives. Like the fact that people struggling to cope will have more money in their pockets and will be less likely to need state assistance.
Monday, May 23, 2011
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Given that we are promised 4% wage growth per annum the minimum wage would naturally rise to $15.00 in three years anyway. Unless John Key doesn't actually believe his own budget...
ReplyDeleteThat's an extremely good point Sanc. However, they are some pretty heroic looking forecasts. I guess the guys in Treasury know where their paycheck comes from.
ReplyDeleteIf the government was serious about stimulating the economy they would increase the minimum wage and offset the cost of doing this to business by decreasing company taxation.
ReplyDeleteThe government would have clawed back a lot of the lost revenue through the additional income tax and GST because people on low incomes spend a much higher percentage of their income.
This would have had a much greater boost to the economy than the previous reduction in taxes for higher income earners.