Unite Union says job loss threat from minimum wage rise not supported by facts

Unite Union National Director Mike Treen says the claims that an increase in the minimum wage will lead to job losses is based on economic theories that have no basis in reality.

“The Labour Department report that estimated a 4-5000 job loss accepts that its estimates are based on models that don’t actually apply in the real world. To quote their report: ‘The estimates of impacts on job growth are based on a conventional model of firm decision-making, whereby firms operating in perfectly competitive markets adjust outputs and inputs, including labour, in response to relative prices. This modeling approach’ the report continues ‘does not adequately reflect the dynamic nature of employment responses to changes in minimum wages, and, in particular, any investments that employers may make to increase the productivity of low paid workers.’” http://www.dol.govt.nz/publications/general/ris-min-wage-review-2010/index.asp

“The number of job losses being quoted is equal to about 0.2% of the labour force – that is really margin of error stuff for a workforce of 2.2 million. In it is even small compared to the actual job losses of 150,000 over the past three years as a consequence of the economic crisis and failure of the government to implement policies designed to protect jobs.

“In the real world NZ economy over the last decade there have been major increases in employment associated with periods of rising minimum wages such as the early 2000s. There have also been major increases in unemployment associated with a freeze in the minimum wage as occurred in the early 1990s.

“The reality is that opponents of the minimum wage increase are usually protecting their own self interest as employers. Crocodile tears for the unemployed should be treated with skepticism.

“Employers have benefited greatly over the last 2 or 3 decades from rising productivity not being matched by rising wages. The economic benefit they have gained is reflected in a significant shift in the relative shares of the economy going to wages in salaries compared to corporate profits as recorded by the Department of Statistics. That is worth something like $20 billion dollars every year. The annual estimated cost to business of 500 million dollars is small change in comparison.”

ENDS

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