Greens will put tens of thousands out of work with their $18 minimum wage

"The $18 minimum wage championed by the Greens will throw tens of thousands of low skilled New Zealanders out of a job and condemn them to a life on the benefit. At no point do the Greens discuss the employment consequences of their massive minimum wage rise", said Dr Whyte.

"What is deeply suspicious is the Greens did not ask BERL or Infometrics to QA their policy. Dr Norman was officious to the point of prissiness about the use of independent consultants to QA his economic policy releases”, said Dr Whyte.

“Obviously, the Greens didn't like the inconvenient truths they were going to be told if they subjected their employment policy to an independent audit. Once they have opened that door, the Greens cannot pick and choose when they have their policies subject to independent audits", said Dr Whyte.

"The economic effects of minimum wage increases could not be plainer. Professor Gail Pacheco’s research repeatedly finds that the increases in the minimum wage over the last 10 to 15 years in New Zealand reduced employment, increased unemployment, and reduced enrolment in education and training among teenagers:

1. Maloney and Pacheco (2012) found that the real minimum wages increased by nearly 33% for adults and 123% for teenagers in New Zealand between 1999 and 2008. Where fewer than 2% of workers were being paid a minimum wage in 1999, more than 8% of adult workers and 60% of teenage workers are receiving hourly earnings close to the minimum wage. They estimated that a 10% increase in minimum wages, even without any offsetting reduction in earnings due to a loss in employment or hours of work, would lower the relative poverty rate by less than one-tenth of a percentage point!

2. Pacheco (2011) reviewed the impact of rising minimum wages on employment in New Zealand over 1986–2004 and found significant negative employment effects of a higher minimum wage.

3. Pacheco and Cruickshank (2007) found the youth minimum wage increases resulted in some age groups undergoing a 91% rise in their real minimum wage over the last 10 years. They found that for 16–19 year olds, minimum wage rises have a statistically significant negative effect on educational enrolment levels”, said Dr Whyte.

“Minimum wage advocates fail to take seriously that the low paid workers who lose their jobs because of minimum wage increases are real, living people. They suffer when their interests are traded off for the greater good of their fellow low-paid workers who are lucky enough to retain their jobs at a slightly higher pay, many of whom come from much wealthier households than them.” said Dr Whyte.

“The case for the minimum wage increase championed by the Greens gets no better if you think of it as offsetting alleged market power of employers to keep wages down. A small minimum wage increase, and the literature in this area only ever supported small minimum wage rises, must jump the following hurdles:

1. The minimum wage must be chosen correctly – the optimum minimum wage can be set only if the demand and supply of labour are known over a considerable range;

2. The optimum minimum wage varies with occupation (and, within an occupation, with the quality of worker);

3. The optimum minimum wage varies among firms (and plants); and

4. The optimum minimum wage varies, often rapidly, through time;

A uniform national minimum wage, infrequently changed, is wholly unsuited to these diverse local labour market and individual business conditions," said Dr Whyte.

“The notion that every employer in New Zealand will be willing to start an ordinary 16-year-old school leaver on $18 an hour defies belief. School and university students working part time in supermarkets and cafes can kiss their jobs good-bye" said Dr Whyte.

“If the minimum wage can be set at the click of a political finger in an election campaign, what's stopping the Greens from putting the minimum wage up even higher, to the average wage? When will the minimum wage be too high under a Greens dominated government? ” said Dr Whyte

“The Greens should listen to the impeccably left-wing New York Times from 1987, when it still remembered some basic economics:

‘Raising the minimum wage by a substantial amount would price working poor people out of the job market. A far better way to help them would be to subsidize their wages or – better yet – help them acquire the skills needed to earn more on their own…

Raise the legal minimum price of labour above the productivity of the least skilled workers and fewer will be hired. If a higher minimum means fewer jobs, why does it remain on the agenda of some liberals?

A higher minimum would undoubtedly raise the living standard of the majority of low-wage workers who could keep their jobs.

That gain, it is argued, would justify the sacrifice of the minority who became unemployable.

The argument isn’t convincing. Those at greatest risk from a higher minimum wage would be young, poor workers, who already face formidable barriers to getting and keeping jobs.’

The title of that editorial was The Right Minimum Wage: $0.00” said Dr Whyte.

“The only way to lift the rate of wages growth for the low paid is faster economic growth. Only ACT’s policies of a top tax rate of 24% and a company tax rate of 12.5% by 2020 will increase the economic growth rate by at least one-third” said Dr Whyte.

ends

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