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Maori could be affected by minimum wage rise

23 May 2006

Maori would be most adversely affected by a rise in the minimum wage, says an AUT senior economics lecturer.

Gail Pacheco studied rates of employment and inactivity among people who find the minimum wage binding in her thesis: Minimum wages in New Zealand: An empirical inquiry.

"There are high numbers of Maori and Pacific Island people on minimum wage," she says. "Together they account for more than a fifth of minimum and sub-minimum wage workers, therefore they'll attract more negative impact if the wage rise drives employers to reassess their options."

Pacheco says a rise in minimum wage means unskilled and young workers, especially between ages 16-19, could be displaced.

"Given the option employers might switch to hiring people with more skills and education or older people with more experience."

"My study found for Maori who find the minimum wage binding, a 10% rise in the real minimum wage would see a 15.8% point fall in employment propensity, a drop of 13.5 hours usually worked each week, a 5.7% point increase in unemployment propensity and a 10.9% point increase in inactivity, that is, not working or studying."

Pacheco says the minimum wage is a blunt instrument and there needs to be a more balanced debate around increasing it.

"I want policy makers to debate and consider the negative affects of a rise in minimum wage. There needs to be some reasoning to show the positive affects outweigh the negative affects."

ENDS

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