NationStates Jolt Archive

New Zealand [has] raised the minimum wage by 6.7 percent to NZ$12 ($9) an hour to encourage more people to seek jobs, Labor Minister Trevor Mallard said.

The wage will rise from NZ$11.25 an hour on April 1, Mallard said in a statement released in Wellington today. About 102,000 adult workers and 38,000 youths in New Zealand's population of 4.2 million are affected.

[...] ``This increase will ensure that lower-paid workers share the benefits of economic growth,'' Mallard said. ``It will encourage people to join the workforce and provide protection for some of New Zealand's most vulnerable workers.''

The government planned to raise the minimum wage to NZ$12 an hour by 2008, as part of an agreement with the New Zealand First party after the 2005 election. Strong economic growth has enabled the government to deliver on its promise ahead of time, Mallard said.


(link (http://www.bloomberg.com/apps/news?pid=20601081&sid=ahA3TNwEL6RE&refer=australia))

Of course, requiring employers to pay a higher level of minimum wage might lead to some of them reducing the number of jobs that are actually on offer...

This will hurt the companies more than help the poor, obviously.

Of course, requiring employers to pay a higher level of minimum wage might lead to some of them reducing the number of jobs that are actually on offer...

what an original argument, and so simple too. surely our politicians are not that stupid.

Wait, they are not. NZ has been increasing the minimum wage for a number of years, and unemployment rates keep falling - down to only 3.5%. And at $12 an hour, working 40 hours a week for 52 weeks = $24,960 which is approximately NZ$20,000 after tax (roughly $18,000AUD, $14,000USD, 10000euro or 7000 pounds). It is damn hard trying to live on that kind of money - trust me I know, and I do not have any kids to think about either.

The greatest concern for employers is a strong and vibrant economy - not how much they have to pay lower end workers. Plus, the 3% reduction in company income tax soon to come into effect might be a boost for business

what an original argument, and so simple too. surely our politicians are not that stupid.
Why not? Various other countries' politicians are, after all... Have you ever heard anything about a British politician named John Prescott (http://en.wikipedia.org/wiki/John_Prescott), who was actually 'Deputy Prime Minister' of this country for several years under Bliar?

Wait, they are not. NZ has been increasing the minimum wage for a number of years, and unemployment rates keep falling - down to only 3.5%.
That's impressive, I admit. But can you prove that unemployment wouldn't have fallen even faster if there had been a lower minmum wage in place?

And at $12 an hour, working 40 hours a week for 52 weeks = $24,960 which is approximately NZ$20,000 after tax (roughly $18,000AUD, $14,000USD, 10000euro or 7000 pounds). It is damn hard trying to live on that kind of money - trust me I know, and I do not have any kids to think about either.
I'll have to trust you on this, unless & until some of your compatriots come along with proof otherwise, as I don't know how costs of living there & here compare. I agree that it doesn't seem much... But would that fact, in itself, have motivated a high proportion of employers to want to pay more than they actually had to?

The greatest concern for employers is a strong and vibrant economy - not how much they have to pay lower end workers.Not their own levels of profit?!?

Plus, the 3% reduction in company income tax soon to come into effect might be a boost for business
Fair enough, that probably would make them a bit happier about the situation. If your politicians are giving them that factor to balance the higher wages then they do seem a bit cleverer than ours, who apparently can only think of putting more burdens onto the productive side of the economy...

That's impressive, I admit. But can you prove that unemployment wouldn't have fallen even faster if there had been a lower minmum wage in place?
When you are proven wrong, you come up with a further absurd argument. Maybe the businesses in New Zealand arn't run by incompetent greedy morons like they are here and realize that if more people make more spending they might, oh I don't know, spend it and therefore make the businesses more money.

Of course, requiring employers to pay a higher level of minimum wage might lead to some of them reducing the number of jobs that are actually on offer...

Which from a business POV make no sense at all. Less staff= higher staff stress, more sickies, low staff moral, higher staff turnover, less productivity.

Minimum wage is an extremely good idea.

When you are proven wrong, you come up with a further absurd argument.
Proven wrong? Where? I didn't say that higher minimum wages would automatically increase unemployment, just that it might cause some employers to reduce the number of new jobs that they were offering.
Prove that my question is "absurd", or else you're just flaming.
Maybe the businesses in New Zealand arn't run by incompetent greedy morons like they are here
In other words, you know no more about their management than I do... and seem inherently biased against businesspeople.
and realize that if more people make more spending they might, oh I don't know, spend it and therefore make the businesses more money.
Money that came from those businesses in the first place? How does simply getting some of what they have to pay out in higher wages back (because some would probably be spent elsewhere, instead) increase their profits?!? And hadn't it occurred to you that if that money had been left to those businesses' owners -- whether they're just a few plutocrats or whole hordes of shareholders -- then those people would probably have been spending the money and thus putting it back into the overall economy anyway...

Which from a business POV make no sense at all. Less staff= higher staff stress, more sickies, low staff moral, higher staff turnover, less productivity.
Higher stress, yes. More sickies, probably yes, but that also depends to some extent on local laws (and how easy they make such matters) and mores. Lower staff moral, quite probably. Higher staff turnover, quite possibly, but that wouldn't necessarily be a serious problem for employers in the sorts of jobs that tend to be 'minimum wage' as long as there's still a large enough pool of other candidates available. Less productivity, maybe.
But you're assuming that the businesses will realise this, instead of thinking that their management systems can overcome the problems, and I'm cynical enough to suspect that at least some companies' managements won't do so.
And there have to be some upper limits on 'minimum wages' and staffing levels, after all, because there comes a point when companies simply can't afford the increases that some people might want them to make...

That's impressive, I admit. But can you prove that unemployment wouldn't have fallen even faster if there had been a lower minmum wage in place?
can you prove that it would have, if there had been no minimum wage?
no?
then try to construct an argument that can be, y'know, argued. And not just make up asinine points against that can't possibly be justified, nor dis/proven.

3.5% unemployment is below full employment levels (which is generally considered 4%). This means NZ is really suffering a labour shortage at present. Raising the minimum wage is one way of alleviating that shortage. Encourages people into jobs and migration to NZ. And not before time - only a few scant years ago, min wage for adults was $6.12, for 18-20; $3.something and for under 18, $0. That's before tax too, btw.
This now makes it possible for ppl to survive, even live, on the min.

I'll have to trust you on this, unless & until some of your compatriots come along with proof otherwise, as I don't know how costs of living there & here compare. I agree that it doesn't seem much... But would that fact, in itself, have motivated a high proportion of employers to want to pay more than they actually had to?
iirc, in a global survey taken this year compared house prices to average wages, giving one a basic idea of how relatively expensive a city was to live (by how many years of the average wage in that city it'd take to buy a house there), Auckland, NZ, came in the top 20 making it one of the most expensive cities to live worldwide.

As for the 2nd half - why would having an expensive CoL make employers want to pay their employers more? Specifically the employers at the bottom of the pile, the ones who would be making min wage?
Obviously those with desirable and much-sought-after skills are going to be offered more to cover CoL increases, but they're not the ppl min wage is aimed at, are they?

And there have to be some upper limits on 'minimum wages' and staffing levels, after all, because there comes a point when companies simply can't afford the increases that some people might want them to make...

Like Nire and Nire said, it's already damn hard to live on the current minimum wage in NZ, simply put, every couple of years the min wage needs to be increased because otherwise it will fall behind inflation rates.

Furthermore, if people on min wage are making less than they need to survive, they'll quickly become a burden on society. If only because they can't pay of their (inevitable) debts. Now, i know a few of you will respond by: "those people should go find a better paying job then", but fact of the matter is, there will always be people unable to get anything above min wage, no matter how hard they try. In a group there will always be someone at the top, and someone else at the bottm. Abolishing the whole min wage altogether will quickly lead us back to the times when families had to send their children of to work, simply to make ends meet.

Money that came from those businesses in the first place?
So they make more money by paying people money but earning none back because of unemployment and low wages?
And do you realize how far behind inflation the American minimum wage is? No, because you don't care and are greedy. The entire American model is a self-centric model of greed and that is how the businesses are run.

Higher stress, yes. More sickies, probably yes, but that also depends to some extent on local laws (and how easy they make such matters) and mores. Lower staff moral, quite probably. Higher staff turnover, quite possibly, but that wouldn't necessarily be a serious problem for employers in the sorts of jobs that tend to be 'minimum wage' as long as there's still a large enough pool of other candidates available.

You have a point but a company with a high staff turn over will find it increasingly harder to find workers, and get a 'bad name' in their sector, and have more training expenses.

Less productivity, maybe.
But you're assuming that the businesses will realise this, instead of thinking that their management systems can overcome the problems, and I'm cynical enough to suspect that at least some companies' managements won't do so.

Heh yes you are correct there many, bad and badly run companies out there.



And there have to be some upper limits on 'minimum wages' and staffing levels, after all, because there comes a point when companies simply can't afford the increases that some people might want them to make...

Yes I agree. But still, minimum wage is a very good idea.

Furthermore, if people on min wage are making less than they need to survive, they'll quickly become a burden on society. If only because they can't pay of their (inevitable) debts.
Another point is that making min wage much more than unemployment benefit gives ppl more reason to look for work.
Back in th 1990's, when min wage was $6 /hr for ppl over 20, a f/t position equated to ~$190 after tax. You could get $160 on the dole.

40 hours work + at least 5 hours traveling a week (assume at least 30 minutes each way) with all the expenses therein = $30 more than the dole = equivalent of 1/2 day's work(since you could earn $30 a week before they hit your dole) + dole (and 6.5 days free to bum around, surf, play comp games, whathaveyou).
Which would you do?

Now, it (f/t at min wage) is $400 after tax vs $180 on the dole.
Certainly makes working a damn site more attractive.

Money that came from those businesses in the first place? How does simply getting some of what they have to pay out in higher wages back (because some would probably be spent elsewhere, instead) increase their profits?!?
you're showing a decided lack of understanding about the nature of the economy, especially min wage effects on it.
ppl on the min wage are more likely to spend any - and all - their wage increases than anyone else, resulting in a bigger boost to the economy than giving that money to any other sector of society. We're talking about a $24NZ a week pay rise after tax ~$19US. To anyone other than someone at the bottom, this isn't a heck of a lot. To someone on min wage, that $20 is spent, which is then put back into circulation and spent again and respent and respent etc etc. thus stimulating the economy further and helping business.

So they make more money by paying people money but earning none back because of unemployment and low wages?
Most companies make most of their money by selling to people (and businesses) who aren't members of their own workforces: That's how they can afford to buy-in the necessary raw materials & services from other people & businesses.
In fact, some companies actually make things (such as sports cars, ocean liners, skyscrapers, or fur coats) that very few of their own employees would be able to afford even if their wages were increased tenfold.


*Tries to explain in simple language*

1/ If a company makes 'X' money after all expenses, including wages, then that company's owners have 'X' money to spend. Total money spent = some part of 'X', although some is probably saved instead.

2/ If wages are increased by 'Y', without any automatic increase in productivity, then the workers involved would (almost certainly) spend only a part of 'Y' at their employers' businesses: Therefore those companies' owners would now have 'X' - ('Y'-'Z') to spend. Total money spent = some part of 'X', although some might be saved instead.

3/ 'X'-('Y'-'Z') < 'X', therefore paying higher wages means that the company's owners are financially worse off.
The individual workers involved are better-off with higher wages, unless these are set at levels that drive the businesses where they work into bankruptcy.
The total amount of money in the system remains the same.

4/ The basic effects of a higher minimum wage on the overall economy therefore depend on how this redistribution affects the spending:savings ratio, and the balance of spending on 'domestic' products versus imported ones, which are very complex matters to predict accurately.
(This calculation is also complicated by the effects that differing levels of unemployment & relative poverty will have on the local government's policies, and how those policies affect taxation of businesses, which will differ widely from society to society and thus make predicting the results in general terms -- rather than just in 'local' ones -- even harder.)

5/ Therefore higher wages are not automatically good for the economy... and do not automatically lead to more jobs being created.

And do you realize how far behind inflation the American minimum wage is? No, because you don't care and are greedy. The entire American model is a self-centric model of greed and that is how the businesses are run.
Do you do a lot of leaping to conclusions? Where have I ever claimed to be American or, for that matter, an employer rather than an employee? Both of those assumptions are, in fact, wrong.
Do you do a lot of flaming? I won't bother reporting you this time, considering how mild this is in comparison to some of the other things that I've seen said around here, but you really might want to consider the possibility that people can disagree with your ideas about economics on purely theoretical grounds without being "greedy" businessmen...

can you prove that it would have, if there had been no minimum wage?
no?
then try to construct an argument that can be, y'know, argued. And not just make up asinine points against that can't possibly be justified, nor dis/proven.
Either both sides of the argument about how higher minimum wages have affected the rates of falling unemployment should be provable or neither of them are... No?

3.5% unemployment is below full employment levels (which is generally considered 4%). This means NZ is really suffering a labour shortage at present. Raising the minimum wage is one way of alleviating that shortage. Encourages people into jobs and migration to NZ.
Is NZ accepting large numbers of immigrants now? When I looked into the possibility a couple of decades ago it seemed almost impossible to get in without having a specific job already promised...

And not before time - only a few scant years ago, min wage for adults was $6.12, for 18-20; $3.something and for under 18, $0. That's before tax too, btw.
This now makes it possible for ppl to survive, even live, on the min.
As I've already said, I don't know how the cost of living compares to the currency in NZ so I can't comment on the details here... but I'll agree that people surviving is generally good.

iirc, in a global survey taken this year compared house prices to average wages, giving one a basic idea of how relatively expensive a city was to live (by how many years of the average wage in that city it'd take to buy a house there), Auckland, NZ, came in the top 20 making it one of the most expensive cities to live worldwide.Ouch! I don't know what the average wage is in the town where I currently live, but I was looking at house prices recently and buying a one-bedroom flat here would cost about eight years'-worth of my salary which means that (unless & until I'm able to find a much better-paid job,which seems unlikely, or to move to somewhere a LOT cheaper which family circumstances currently rule out) I'm probably going to be pretty much stuck on renting a bedsit or a room in a shared flat for the forseeable future...

As for the 2nd half - why would having an expensive CoL make employers want to pay their employers more? Specifically the employers at the bottom of the pile, the ones who would be making min wage?IS that how you read my post? Oops! I was simply saying that as I didn't know how the local CoL compared to the figures quoted for wages I wouldn't comment on that aspect of the matter.

Obviously those with desirable and much-sought-after skills are going to be offered more to cover CoL increases, but they're not the ppl min wage is aimed at, are they?No argument there.

Another point is that making min wage much more than unemployment benefit gives ppl more reason to look for work.
Back in th 1990's, when min wage was $6 /hr for ppl over 20, a f/t position equated to ~$190 after tax. You could get $160 on the dole.

40 hours work + at least 5 hours traveling a week (assume at least 30 minutes each way) with all the expenses therein = $30 more than the dole = equivalent of 1/2 day's work(since you could earn $30 a week before they hit your dole) + dole (and 6.5 days free to bum around, surf, play comp games, whathaveyou).
Which would you do?

Now, it (f/t at min wage) is $400 after tax vs $180 on the dole.
Certainly makes working a damn site more attractive.
Fair comment. Again, though, we're back to the benefits of this policy for the society as a whole rather than for the businesses that have to pay those wages in particular... and to the question of whether some employers would respond to the higher wages-bill by cutting the numbers of jobs on offer. And, again therefore, to the fact that NZ's government has (very commendably) promised those businesses a tax-cut to balance the matter, which is something that I can't imagine the UK's current government ever doing...

you're showing a decided lack of understanding about the nature of the economy, especially min wage effects on it.
ppl on the min wage are more likely to spend any - and all - their wage increases than anyone else, resulting in a bigger boost to the economy than giving that money to any other sector of society. We're talking about a $24NZ a week pay rise after tax ~$19US. To anyone other than someone at the bottom, this isn't a heck of a lot. To someone on min wage, that $20 is spent, which is then put back into circulation and spent again and respent and respent etc etc. thus stimulating the economy further and helping business.Oh, I'll concede the effects on the general economy, at least in the short term (because the money that the businesses' owners might not have spent if they hadn't had to pay it out in higher wages might sooner-or-later have been invested in expanding/improving those businesses, and thus also have boosted the overall economy eventually): Will you concede the point that this won't (as another poster suggested) necessarily be a direct help to their employers' profits in particular, ?

you're showing a decided lack of understanding about the nature of the economy, especially min wage effects on it.
ppl on the min wage are more likely to spend any - and all - their wage increases than anyone else, resulting in a bigger boost to the economy than giving that money to any other sector of society. We're talking about a $24NZ a week pay rise after tax ~$19US. To anyone other than someone at the bottom, this isn't a heck of a lot. To someone on min wage, that $20 is spent, which is then put back into circulation and spent again and respent and respent etc etc. thus stimulating the economy further and helping business.

Of course... you'd only want to do this if you want less investment, and more spending which could lead to inflation. I would imagine arbitrarily raising someone's wages without increasing productivity would in effect lower everyone else's wages. Of course many argue that productivity rises if you give a pay raise. HOWEVER, if these businesses are so smart to realize that a pay raise will help their profits, why don't they just give one now on their own without government compulsion? Either the business is stupid or its really the best outcome for them to have lower wages.

Of course, requiring employers to pay a higher level of minimum wage might lead to some of them reducing the number of jobs that are actually on offer...

I keep hearing this argument, and not once has anyone ever been able to offer the slightest shred of evidence that it actually happens.

Sure they always trot out the "if hiring people costs more then companies will hire less people" argument, but that's bullshit. Companies hire as many people as they need to do the job and if they think that they can get the same job done with less people they will start laying people off. It doesn't matter how little they can pay those people.

Of course... you'd only want to do this if you want less investment, and more spending which could lead to inflation. I would imagine arbitrarily raising someone's wages without increasing productivity would in effect lower everyone else's wages. Of course many argue that productivity rises if you give a pay raise. HOWEVER, if these businesses are so smart to realize that a pay raise will help their profits, why don't they just give one now on their own without government compulsion? Either the business is stupid or its really the best outcome for them to have lower wages.

For the same reason that restaurants in Manhattan don't voluntarily give buckets of money to the Metropolitan Museum of Art. If the museum does well and attracts a lot of visitors with a new exhibit then people will show up, take a walk through Central Park have dinner at a local Restaurant and probably take a cab home or back to their hotel.

But there is nothing telling any particular restaurant that supporting the museum will put museum patrons in their restaurant. It could be any restaurant, and so no one restaurant is willing to make the offer. So instead the government uses tax money to support the restaurant so that no one business feels the sting any more than any other and they all get the benefit of increased customer traffic (and the city gets the benefit of an increased tax base).

It isn't stupid of any one restaurant to want to withhold support for the museum, because if all the others are still supporting it then that one restaurant will get the same benefit of all the others.

The same is true of minimum wage. Increased minimum wage increases the disposable income of those at the bottom of the economic pyramid. This increases demand for goods and increases the money that businesses eventually earn, despite the expense of increased worker wages. But if all the other businesses in the area start paying their employees more and you don't you still get the employees of all the other businesses buying your stuff, but without the expense of paying your employees more. So the government has to step in and make sure that everyone pulls their weight.

One of the few good things Britain's Labour government did was introduce a minimum wage soon after they came to power. The Conservatives were shrieking about how it would cause massive job losses, but that didn't seem to happen. Obviously introducing a minimum wage will harm business to a degree, but I doubt it's as bad as the doomdayers say. So I think the benefits for the population offset the negatives.

Surely this is obveous? In enforcing a higher price of labour, any whose labour is worth less become unemployed. Any whose labour is worth more that the min. wage aren't affected at all. Minimum wages never raise prices, only push some out of work. Outlawing volentary transactions is never a good idea.

If there was no minimum wage, anyone could have a job if they wished, simply by offering to work for less money. I'd employ anyone if they'd work for a penny and hour!

Companies hire as many people as they need to do the job and if they think that they can get the same job done with less people they will start laying people off. It doesn't matter how little they can pay those people.

You make it sound as if there is a fixed amount of work a company must do! Companies don't decide 'ok, this year we'll make 500 houses, and to hell with the consequenses. They sell what there is demand for. Whether they'll employ you depends on how much benefit you'll bring them. If the minimum wage is at $7 and I can only get you $6 an hour, you won't employ me: I'll make you a loss. But if we have the opportunity to sell labour for $4 an hour, then I have a job and you have an employee.

The only reason they would make specific targets is if they have bulk orders./But these are only true of the short term, and in a multi-agent economy, the short term isn't important: becuase there are other firms. These can take me on, and expand.

If NZ needed to raise minimum wage to encourage people to enter the workforce, clearly the benefits received by the unemployed were too good.

You could have created the same incentive by reducing unemployment benefits, and it wouldn't have cost anything.

Generally it's not a good sign if you have to raise the minimum wage in order to encourage people to work. Perhaps they should seriously scale back their unemployment program to make it far less attractive to remain on the dole.

In reply to a few posts:

NZ is currently experiencing an influx of foreign labour. There is a huge demand for labour in this country, made more acute because of the thousands upon thousands of kiwis moving to Australia for, you guessed it, higher wages. We live in a low wage economy and any attempt to increase wages, especially for those at the bottom, should be applauded. As a result immigration is high, although those trying to come here need to have skills considered to be in high demand.

Contrary to some other countries, the businesses in NZ are not soul-sucking, greedy corporate whores out to screw the world. We are a small country where, literally, everyone knowns everyone else. You cannot get away with that kind of behaviour without the whole country turning on you. In fact, some businesses are enlightened enough to act in the social good before the Government. Just this year several fast food chains decided to abolish youth rates months before the government did in a sign of goodwill towards its workers. Very few businesses in this country are against the planned increase to the minimum wage. A major union is also pushing for it to be lifted again to $15 and while a change of government next year might delay this happening, it will happen within a few years.

As for costs of living, it certainly is no greater than Sydney or London for example but in Auckland and, to a lesser extent, Wellington, it is quite tough. Interests rates are well over 8%, median house prices are somewhere in the vicinity of $300,000-$400,000 in Auckland (average wage about $30,000-$35,000). Being amongst the top 20 most expensive cities to live in, considering that NZ is a low-wage economy, makes life extremely difficult for those earning minimum wage or thereabouts. The picture is further complicated by the make-up of NZ society. A large proportion of those in the lower socio-economic groups are Maori and Pacific Islanders (combined these groups make up about 25% of NZ population), typically large families it is not unusual for 1-2 people to be supporting households of 5-10.

It is not all about money people. We are a pretty laid back bunch down here, the majority of people have a social conscience and are determined to ensure that people are not left behind. The notion of an egalitarian society is still at the forefront of peoples minds and I think it is fair to say that both sides of politics in this country are concerned with reducing inequalities. When you get to wake up every morning in one of the greatest and most picturesque countries in the world, minimum wage increases do not seem overly detrimental.

as for scaling back our unemployment 'benefits', what kind of cold heartless bastards to you take us for? every society needs a safety net for those who cannot find work - that is the mark of a caring society. We try not to leave people behind in NZ, I know that might be a foreign concept to many in the rest of the western world

as for scaling back our unemployment 'benefits', what kind of cold heartless bastards to you take us for? every society needs a safety net for those who cannot find work - that is the mark of a caring society. We try not to leave people behind in NZ, I know that might be a foreign concept to many in the rest of the western world

If your benefits are so substantial that people are willing to remain on them rather than work, there's something wrong with your system and it needs to be reformed. A safety net does not equal a dole; unemployment benefits are designed solely to help you stay afloat until you find a new job, not sustain you in lieu of a job. Otherwise, you're rewarding people for remaining unemployed by giving them more than they would earn in gainful employment, and by extension penalizing the people who are working in order to support those who are not.

Why not? Various other countries' politicians are, after all... Have you ever heard anything about a British politician named John Prescott (http://en.wikipedia.org/wiki/John_Prescott), who was actually 'Deputy Prime Minister' of this country for several years under Bliar?


...

Prescott earned about 100k a year doing fuck all! The man is obviously some kind of genius!

unemployment benefit = $150-$250/week depending on circumstances. see here link (http://www.workandincome.govt.nz/get-assistance/rates-info.html)
Minimum wage (after tax) = $380/week

That incentive enough for you?

I am somewhat opposed to a minimum wage - not because it is a bad thing, just that there are better ways to achieve the same purpose - negative income tax - which can be paid for by the government through taxes rather than making businesses fork out more. This also avoids the problem of unscrupulous employers who can use their power over employees to avoid having to pay minimum wage - like most employment regulations its not easily enforced. My other gripe with minimum wage is that not everyone earning minimum wage is poor - a large proportion are youngsters living with parents and partners earning a second income.

We are a pretty laid back bunch down here, the majority of people have a social conscience and are determined to ensure that people are not left behind.
Which also ensures that no one gets ahead.

unemployment benefit = $150-$250/week depending on circumstances. see here link (http://www.workandincome.govt.nz/get-assistance/rates-info.html)
Minimum wage (after tax) = $380/week

That incentive enough for you?
Not nearly. I can earn half as much doing zero work? If that's the unemployment train, I want a ticket.

Working carries a huge opportunity cost. The difference there isn't nearly large enough to offset it.

Not nearly. I can earn half as much doing zero work? If that's the unemployment train, I want a ticket.

Working carries a huge opportunity cost. The difference there isn't nearly large enough to offset it.

try living on $200/week. Rent alone is costing me $150/week and this is for a small room in the city add utilities of $30 and that leaves $20 for food ... hmm, thank goodness I am working and earning more than that

Which also ensures that no one gets ahead.

NZers do pretty well for themselves thank you very much

Hmmm, what a strange way of looking at an issue.

The issue: people not bothering to seek jobs because they don't earn enough compared to the alternative.

So there are basically three options. You can raise wages, you can reduce the alternative income (welfare etc) or you can cut taxes (having the same effect as raising wages).

Increasing the minimum wage is likely to result in a reduction in positions on offer, the other two are not.

So unless Ariddia has misrepresented the policy, and the wage hike is just one part of an integrated strategy involving the other two options as well, I can't say I would support this move on merit.

Simple laws of economics show that raising the minimum wage has the opposite effect that the lawmakers intend.

There is also the problem that increased wages lead to more inflation. To counter this, contractionary economic policy must be used to control inflation. This policy increases unemployment. (See Volcker's policy in the early 80s leading to 10% unemployment)

Hmmm, what a strange way of looking at an issue.

The issue: people not bothering to seek jobs because they don't earn enough compared to the alternative.

So there are basically three options. You can raise wages, you can reduce the alternative income (welfare etc) or you can cut taxes (having the same effect as raising wages).

Increasing the minimum wage is likely to result in a reduction in positions on offer, the other two are not.

So unless Ariddia has misrepresented the policy, and the wage hike is just one part of an integrated strategy involving the other two options as well, I can't say I would support this move on merit.

we have a left-leaning government so to accuse them of having an integrated strategy would be unfair but yes minimum wages are being increased, tax cuts are on the horizon - in what form is a matter for much debate next year, and as for welfare - NZ is the original 'Cradle to the Grave' state. This is ingrained into NZ culture, we genuinely believe that there should be support for everyone in society. There will always be high levels of welfare in NZ, there has been for well over 70 years now.

As for increased inflation, the argument only works it is shifts money from savings to spending. If a business was saving its profits and was forced to pay higher wages then, yes, it would be inflationary. But, if the owners were given the profits in the form of dividends then they would be spending the money - wage increases would not be inflationary as you would simply be shifting the spending power from the owners to the employees

I keep hearing this argument, and not once has anyone ever been able to offer the slightest shred of evidence that it actually happens.

Sure they always trot out the "if hiring people costs more then companies will hire less people" argument, but that's bullshit. Companies hire as many people as they need to do the job and if they think that they can get the same job done with less people they will start laying people off. It doesn't matter how little they can pay those people.
Companies base hiring on maximum profit. Salaries are a marginal cost. If salaries are increased to the point that a company's profits are higher with lower production (as often happens) then people will undoubtedly be laid off.

Go back and look at simple Micro-Economics.

Companies base hiring on maximum profit. Salaries are a marginal cost. If salaries are increased to the point that a company's profits are higher with lower production (as often happens) then people will undoubtedly be laid off.

Go back and look at simple Micro-Economics.

Lol, more bourgeois economics to prove bourgeois points, how sad.

There will always be high levels of welfare in NZ, there has been for well over 70 years now.
As long as you can afford it, and people are free to leave with their money if they want, I don't mind.

The question is whether a generous welfare state is counter-acting the stated goal: to make work more attractive for low-income people. It's not so much a question of principle as it is a question of practical policy.

But, if the owners were given the profits in the form of dividends then they would be spending the money - wage increases would not be inflationary as you would simply be shifting the spending power from the owners to the employees.
The assumption being that the recipients of dividends spend on roughly the same thing as low-income earners.

Not that consumer spending is really driving inflation at the moment, or that NZ has a problem with inflation (IIRC). Your central bank is a very good organisation.

Lol, more bourgeois economics to prove bourgeois points, how sad.

Say something relevant or shut up. I'm bringing up facts. All you do is yell Bourgeois in each post. It's like you're a little kid who just learned a new word and want the world to know.

Please grow up and try to discuss economics instead of your shallow and bankrupt indeology.

Well what do you know? The polititians over there are just as stupid as the ones we have!

Say something relevant or shut up. I'm bringing up facts. All you do is yell Bourgeois in each post. It's like you're a little kid who just learned a new word and want the world to know.

Please grow up and try to discuss economics instead of your shallow and bankrupt indeology.

No, the point is relevant, and this can be extended to the Cuba thread also, trying to judge social goals based on capitalist economic theory is bound to fail because capitalist theory judges success based on mass excess production beyond need in order to concentrate wealth and property, thus exploiting organized labor. Capitalist economics completely ignores all social, environment and otherwise costs. You're 'macroeconomics' makes about as much sense as the IMF telling Cuba they are doing things wrong, it's irrelevant.

Also, I don't follow any 'indeology', but if you mean 'ideology' I don't follow any, neoliberalism and conservatism themselves are fantasy-based ideals, why Marxism-Leninism is a full-fledged analytical social science.

No, the point is relevant, and this can be extended to the Cuba thread also, trying to judge social goals based on capitalist economic theory is bound to fail...
Ahem, no one is judging "social goals". New Zealand is a capitalist country, ergo microeconomics applies even according to your twisted view of things. If we're judging anything, it's the value of the specific policy, which we can't do with marxism.

The only goal that was stated is that of the NZ government, which no one here judged, but simply acknowledged.

Lol, more bourgeois economics to prove bourgeois points, how sad.

That sounds oddly reminiscent of creationists deriding scientific evidence for the theory of evolution. Actually, come to think of it, change a few words around and Kent Hovind could be an admirable Marxist demagogue.

Well, first of all, I wouldn't really listen to what Trevor Mallard has to say; he has a tendency to think up big dreams (Waterfront Stadium); beat up Maoris (Tau Henare). In fact, the minimum wage increase has something more to do with agreements made between Labour and New Zealand Last than a desire to lower unemployment. With that said, here is my take on the situation.

I wouldn't interpret his comments as a desire to increase the minimum wage to lower unemployment; as it has been commented on here already, we have a very low unemployment rate of 3.5%, and at last count, only 12,000 people had been officially unemployed for six months or more. What it would mean instead is encouraging more people that choose not to work (housewives, et cetera) to enter the workforce. These are the people that would be more likely to get low skilled, low paying jobs. Bear in mind that our government has been attempting to increase the labour force participation rate (it presently sits at about 68%).

What I would be looking at though to get more productivity is the present state of the labour force in New Zealand. Of those who are employed, a quarter are not in full time employment, and instead work part time. Granted, many of these people are school/university students, however, there are a large number of adults that work part time.

Finally, wage increases have contributed little to inflation in the last few years. Much of New Zealand's inflation has been caused by the wealth effect, brought upon by a massive surge in house and stock prices. If house and stock prices started tumbling with wage increases remaining, then you would still see a decreased rate of inflation.

Oh, and by the way, don't forget mods, if you spend more than NZ$12,000 on this forum, you will need to register under the Electoral Finance Act. After then, you can only spend up to NZ$120,000. Isn't life under Labour great!

No, the point is relevant, and this can be extended to the Cuba thread also, trying to judge social goals based on capitalist economic theory is bound to fail because capitalist theory judges success based on mass excess production beyond need in order to concentrate wealth and property, thus exploiting organized labor. Capitalist economics completely ignores all social, environment and otherwise costs. You're 'macroeconomics' makes about as much sense as the IMF telling Cuba they are doing things wrong, it's irrelevant.

Also, I don't follow any 'indeology', but if you mean 'ideology' I don't follow any, neoliberalism and conservatism themselves are fantasy-based ideals, why Marxism-Leninism is a full-fledged analytical social science.
Now you are really sounding dumb. This thread is NOT about Cuba. You got chased out of that thread when everyone dogpiled on your idealist filth so you chased me here to completely change the topic.

We are discussing wages, unemployment, and the changes in monetary policy and inflation which result. Even socialist nations like your pathetic Cuba require things like a currency.

You are really foolish. I think a fair judge of a country is how much its citizens want to stay there. If Cuba has to have guards to imprison their citizens when they travel to the Olympics and baseball tournaments, it tells you the quality of life there sucks.

Cuba performing those actions is a matter of fact and is a tell tale sign that living in the country is hell. Why did the Elian Gonzalez incident occur? Because his mother had to risk her life to flee on a dangerous boat because the risk of death was deemed to be better than living under the dictatorial rule of Cuba.

Now please stick to the topic and stop posting your poor ramblings full of words you picked out of a thesaurus to make your diatribes sound intelligent when they aren't.

Simple laws of economics show that raising the minimum wage has the opposite effect that the lawmakers intend.

No. A simplistic interpretation of the laws of economics show that it has the opposite effect. But the world is not that simple. The same way that a simple understanding of the laws of thermodynamics shows that things always become less ordered. But in reality many things become more ordered as a result of how those laws play out.

There is also the problem that increased wages lead to more inflation. To counter this, contractionary economic policy must be used to control inflation. This policy increases unemployment. (See Volcker's policy in the early 80s leading to 10% unemployment)

Volcker was dealing with an unusual situation. Not every car who slams on the breaks to avoid hitting a tree also gets rear-ended by a truck.

The inflation that results from a minimum wage hike is minimal, and more than compensated for by the increase in demand for consumer goods which sparks reinvigorated commerce. Only the very bottom sees a direct boost from the rise in minimum wage, and they have mostly been reduced to living on credit anyway, so they are already increasing inflation.

Companies base hiring on maximum profit. Salaries are a marginal cost. If salaries are increased to the point that a company's profits are higher with lower production (as often happens) then people will undoubtedly be laid off.

Go back and look at simple Micro-Economics.

Again, I'm not asking you to argue it from first principles. I'm familiar with the argument. I think it's bullshit, but I'm familiar with it.

What I'm asking for is examples that show that this theory is valid.

Phlogiston theory had more support for it than the idea that increasing minimum wages raises unemployment, and it turned out to be wrong.

You can spout theory all you want, but it means nothing if the predictions of those theories don't bear fruit.

I BEFRIEND CHESTNUTS;13305578']One of the few good things Britain's Labour government did was introduce a minimum wage soon after they came to power. The Conservatives were shrieking about how it would cause massive job losses, but that didn't seem to happen. Obviously introducing a minimum wage will harm business to a degree, but I doubt it's as bad as the doomdayers say. So I think the benefits for the population offset the negatives.

It doesn't harm. It inconveniences. Much the same way that taxes used to build roads inconvenience businesses (like everyone else) but those businesses prosper because those roads carry the customers who buy their goods and the wholesalers who deliver them.

It's the problem of the commons. If it doesn't belong to anyone then everyone thinks they can do as they please with it. Even if that means that there's nothing left for anyone else. If the community is wise it will recognize the harm that is being done by exploitation of the commons (whether it be lumber, pasture, or the labor pool) and will appoint administrators to adjudicate use of the commons so that it will continue to be available to everyone, just not as freely as it once was (whether it be limits on chopping, grazing, or lowering wages).

What I'm asking for is examples that show that this theory is valid.
You do have to keep in mind that the usually quoted unemployment statistics include parts of the labour force that aren't affected by minimum wage changes.

http://www.ncpa.org/ba/ba292.html

snip

The effect goes far beyond simple microeconomic margin changes. The biggest problem with a rapid rise in wages is the macro effect it has on inflation.

It is a very valid point. The short term effect of a rise in minimum wages is beneficial. The long term effect isn't so rosy.Inflation rises and central banks (The Fed in the US, not sure of New Zealand's equivilant) have to initiate contractionary money policy and drive up unemployment in the end.

http://www.heritage.org/Research/Labor/BG1162.cfm
http://www.mises.org/story/2377

Oh and the Volcker point is valid as there is always a trade-off with inflation and unemployment. Greenspan has been the best at balancing the see-saw, but even he could not do so in the early 90s and 2000 when his actions to cut inflation led to recessions.

The relationship between the two factors is best shown on a Phillips Curve or the more modern Gordon's Triangle.

The relationship between the two factors is best shown on a Phillips Curve.
You mean this one?

http://www.andrew.cmu.edu/course/88-301/phillips/phillips_curve.gif

http://neweconomist.blogs.com/photos/uncategorized/20060928_thephilipscurvethenandnow.gif

If there is one area I can't allow myself to take short-cuts in order to win an argument, it's this (since it's the area my career is moving towards). Figuring out how to run a central bank is extremely complex, and simple trade-offs aren't exactly the norm. Weird shit happens - and that's precisely why economists talk about "ceteris paribus" all the time, and why it is so hard to support economic theory empirically at times as well as why empirical results can't reliably be used to make general rules.

You mean this one?

http://www.andrew.cmu.edu/course/88-301/phillips/phillips_curve.gif

http://neweconomist.blogs.com/photos/uncategorized/20060928_thephilipscurvethenandnow.gif

If there is one area I can't allow myself to take short-cuts in order to win an argument, it's this (since it's the area my career is moving towards). Figuring out how to run a central bank is extremely complex, and simple trade-offs aren't exactly the norm. Weird shit happens - and that's precisely why economists talk about "ceteris paribus" all the time, and why it is so hard to support economic theory empirically at times as well as why empirical results can't reliably be used to make general rules.The Gordon's Triangle takes supply shocks and other aspects into effect and found a way to better show the relationship between the two.

The Gordon's Triangle takes supply shocks and other aspects into effect and found a way to better show the relationship between the two.
Which makes it a much more complex way of looking at it, and no longer an easy trade-off either way (especially since it includes expectations, which immediately take over from actual past inflation figures when determining unemployment). But then, I'm looking at this from a central banker's perspective rather than a purely analytical one.

By the way, New Zealand's central bank is very good at managing things. They were the first one to use inflation-band targeting, and have been doing a great job through at times difficult periods (like the massive increases in house prices and therefore household wealth): http://www.stats.govt.nz/products-and-services/hot-off-the-press/consumers-price-index/consumers-price-index-sep-07-qtr-hotp.htm

You do have to keep in mind that the usually quoted unemployment statistics include parts of the labour force that aren't affected by minimum wage changes.

http://www.ncpa.org/ba/ba292.html

This comes close, but no cigar.

By limiting the survey to "teenage unemployment," the data have little bearing on unemployment in the general population. It's quite likely that with increased minimum wage more adults are lured back into the legitimate workforce. Either by leaving "under the table" jobs or having given up looking for work that could not pay their bills, they see the new minimum wage as worth it.

This would force teenagers into competition with more mature and experienced workers who are likely to be more attractive to employers.

It doesn't show that real unemployment was affected at all.

The effect goes far beyond simple microeconomic margin changes. The biggest problem with a rapid rise in wages is the macro effect it has on inflation.

It is a very valid point. The short term effect of a rise in minimum wages is beneficial. The long term effect isn't so rosy.Inflation rises and central banks (The Fed in the US, not sure of New Zealand's equivilant) have to initiate contractionary money policy and drive up unemployment in the end.

http://www.heritage.org/Research/Labor/BG1162.cfm
http://www.mises.org/story/2377

Oh and the Volcker point is valid as there is always a trade-off with inflation and unemployment. Greenspan has been the best at balancing the see-saw, but even he could not do so in the early 90s and 2000 when his actions to cut inflation led to recessions.

The relationship between the two factors is best shown on a Phillips Curve or the more modern Gordon's Triangle.

The links you provide have the same flawed analysis as the previous post. The first of yours even admits that unemployment went down. To salvage its position it points out that "teenage unemployment" went up. And again, I don't see that, in itself, as a problem. Not if it means that the jobs they would have filled have become lucrative enough to start attracting adults who would otherwise be unemployed.

The links you provide have the same flawed analysis as the previous post. The first of yours even admits that unemployment went down. To salvage its position it points out that "teenage unemployment" went up. And again, I don't see that, in itself, as a problem. Not if it means that the jobs they would have filled have become lucrative enough to start attracting adults who would otherwise be unemployed.

Unemployment is governed by monetary policy more than any other single factor. Most of the articles claiming that raising minimum wage will lead to unemployment are going at the wrong angle. They are going at the simple marginal cost angle. While this is valid, it is the wrong angle to look at. The micro effect isn't what I'm looking into. I'm looking at the macro side.

My point is that increasing wages will of course have the multiplier effect in increasing the money supply leading to spiral inflation and thus devaluation of the currency. To combat this, a nation's central bank will practice contractionary monetary policy. No one has disputed this fact.

I will use the US as an example as I understand their system the best. If inflation increased in the US, then the Fed would respond by an open market sale of bonds, increasing the reserve ratio, or by increasing the discount rate. These would effectively lower inflation, but they would also constrict the money supply and lead to unemployment and a possible recession.

for those of you debating the economics of this, read this Link (http://www.neon.org.nz/newsarchive/nzlwe/) and give us your thoughts.

Also, it is worth noting that in 2000 the NZ minimum wage was $7 and the Official cash rate (Set by the Reserve Bank - our Fed) was 5.25% and unemployment was 7.5% according to the 2001 census. Today, the minimum wage is $12, the OCR is 8.25% and unemployment is 3.5% (Source: Statistics NZ www.statistics.govt.nz and Reserve Bank www.rbnz.govt.nz)

I can provide the facts, not so strong on the analysis

Might this be something of a condemnation of the state of the welfare state in New Zealand, in that people can get by better on the dole than by actually working?

Might this be something of a condemnation of the state of the welfare state in New Zealand, in that people can get by better on the dole than by actually working?

because it is so easy for a single person to get by on NZ$178/week (US$134/week). as noted above, unemployment is not an issue in NZ (at 3.5%), the policy is aimed at increasing the wages of those at the lower end of the socio-economic standards and to encourage more people into the labour force. perhaps you could expand on your argument with some facts ...

By limiting the survey to "teenage unemployment," the data have little bearing on unemployment in the general population.
Hence me saying that general unemployment figures also include people who have nothing to do with the minimum wage, and whose figures won't be affected in any meaningful way by a change.

Teenagers are generally likely to be working at or near the minimum wage, simply because they have few qualifications. So if minimum wages change and that has an effect on employment in these sectors, teenagers would be a target group you'd be looking at. There are few reasons I can think of why teenagers would show different patterns than the few adult minimum wage earners around, and it's a question of data availability.

It's not perfect, but it's hardly as bad as you make it look. As I said, finding empirical support for any given theoretical relationship isn't easy in situations like this, because you can't make experiments in which you isolate the variables. A lot of stuff happens, and that limits the usefulness of any given data set.

for those of you debating the economics of this, read this Link (http://www.neon.org.nz/newsarchive/nzlwe/) and give us your thoughts.
This probably has little to do with the minimum wage, because it's a general average.

There are three reasons why incomes might be lower in NZ:

1. Prices in NZ are lower than in other countries, meaning that real incomes (ie what you can actually buy with it) isn't lower at all. But these are PPP-adjusted figures, so they should already include relative price levels.

2. Because NZ is a smaller country which is far away from everywhere, the factors of production might not be as effective there as in, say, the US. So a Kiwi worker doing the same work as an American would be producing relatively less actual value, which mean he'll get paid less.

3. There are just more low-skilled workers there, which drags down the average.

Methinks 2 might have the most to do with it.

There are three reasons why incomes might be lower in NZ:

1. Prices in NZ are lower than in other countries, meaning that real incomes (ie what you can actually buy with it) isn't lower at all. But these are PPP-adjusted figures, so they should already include relative price levels.

2. Because NZ is a smaller country which is far away from everywhere, the factors of production might not be as effective there as in, say, the US. So a Kiwi worker doing the same work as an American would be producing relatively less actual value, which mean he'll get paid less.

3. There are just more low-skilled workers there, which drags down the average.

Methinks 2 might have the most to do with it.

As a New Zealander, I will look through this post

1) Highly unlikely; our prices are comparable to that of Australia's, and Australia's average after-tax wage is a full 30% higher than ours.

2) Nope; while we produce goods and services of lower value, it is not because of our distance away from major markets

3) Part of the reason.

Here is the reason why New Zealand wages tend to be lower. I will start at the beginning and work through to today.

From 1894 through to 1991, we had the Industrial, Concilliation and Arbitration Act which was the foundation of our employment law. Wages across industries were set by negotiations between employers and unions conducted by the Arbitration board. As a result, our labour market was extremely inflexible. Add to this, the large number of job cuts made by State Owned Enterprises in the 1980s (NZR alone lost 20,000 employees) and the severe bust after the 1987 crash, and this was a recipe for high unemployment. Enter the Fourth National Government.

The Fourth National Government scrapped the IC&A Act and replaced it with the Employment Contracts Act in 1991. This meant that employees were now paid at market rates. Combined with the high unemployment and the end of compulsory unionism, this allowed employers to hire more staff instead of purchasing more capital goods.

Throughout the 1990s, and early 2000s, New Zealand industry followed the concept of "more hands at the pump" instead of getting a "more efficient pump." Of course with fewer capital goods, we couldn't produce as many goods and services per worker. As a result, our wages tended to be lower, also remembering that the labour market until 2002 was still highly competitive.

Of course, if you don't believe me, just look at Australia. They have 30% more productivity, and 30% higher wages. Economic theory would back me up as well. The only question is what causes that investment.

Might this be something of a condemnation of the state of the welfare state in New Zealand, in that people can get by better on the dole than by actually working?

The welfare state was nearly destroyed in the 1990s, and yet unemployment only decreased steadily (11% in 1991, 6% in 1997, 8% in 1999, 4% in 2002). As I said earlier, Mallards comments more than likely referred to the voluntarily unemployed than the involuntarily unemployed and would match the government's desire to see a higher labour-force participation rate.

Also, it is worth noting that in 2000 the NZ minimum wage was $7 and the Official cash rate (Set by the Reserve Bank - our Fed) was 5.25% and unemployment was 7.5% according to the 2001 census. Today, the minimum wage is $12, the OCR is 8.25% and unemployment is 3.5% (Source: Statistics NZ www.statistics.govt.nz and Reserve Bank www.rbnz.govt.nz)

Nire and Nire, the OCR hit 6.75% in 2000. Bear in mind that this was at a time of a global economic downturn, and we in New Zealand were still recovering from the 1997/98 Asian Crisis. The OCR increases since 2005 have been more to do with a housing market out of control than lower unemployment and/or higher wages. I would be willing to bet that had house prices increased at about 5% per annum (instead of 20%), then the OCR would be at least a percentage point lower.

-snip-
Hmm, makes sense. Fair enough, to be honest I know very little of the economic history of NZ, other than the way the reserve bank got inflation under control.

How was the quake, by the way? ;)

not having read most of the thread yet, as i got distracted by a couple of things, i thought i'd point something out [as i was just looking into this recently] i'll read it through properly and make better responces later.

that minimum wage?

in most cases between one fifth and as much as HALF [though that, admittedly, requires you to Not fill the relevant forms :P] of that is lost to income tax. we then pay 12.5% goods and services tax on everything we buy. then we pay petrol taxes, road user taxes, rates, and untold others.

[did i mention transaction fees for depositing or withdrawing money from the bank, as well as account fees for Having money in the bank... money which, i should note, is NOT actually in the bank, as they've lent it to someone else who, surprise surprise, they're charging for the privilege... ]

then there's the amount of debt kicking around...

all up i'd be surprised if the average kiwi [and i got no actual numbers to back This up] gets to actually Use more than half their theoretical income on, you know, actually doing/buying stuff.

that aside: yes, our politicians Can be that dumb. [Muldoon, anyone? he did some good in passing, but good Grief...] the amount of badly [VERY BADLY] thought out legislation that's been coming out of parliament lately, ranging from the outright idiotic to the simply unenforceable.. is astounding.

should also question what they count as 'unemployment' ... they've reclassified a lot of things along the way. not enough to completely cancel out that improvement, but it does make it look a little less awesome.

oh, also... 40 hour work week?

unless you work in a bank, somewhere like a hospital where lives are on the line depending on your ability to do the job, or are Very lucky, they've pretty much gone the way of the dinosaur. [edit: it should be noted that it's still PAYED based on the 40 hour week, it's just borderline impossible to avoid ending up working more than that]

raising the minimum wage in line with inflation does nothing about inflation [it's a holding pattern at best]. the big corporations simply soak it up and carry on.
the medium sized businesses reorganize.

wouldn't surprise me if a lot of that growth in employment was by way of self employment or contract work.

another edit: typically, the result of increased costs, at least initially, is to pass them on by raising the prices of the goods and services being sold. the increase in minimum wage is generally small enough to only have this effect. eventually, however, [especially with a government simultaneously pushing free trade with places like china etc] to remain competitive, jobs Will get outsourced, cut, etc.

economics is more complex than most people think.

of course, an awful lot of it is based on the fact that people believe the myth if it's presented as fact, and self fulfilling prophesy.


umm, sorry if it seems i jump around here. i had a similar conversation about just these subjects just last night.... and it's been days, at least, since i slept enough, well enough, at sane hours. regardless, i hope that's useful stuff.

If NZ needed to raise minimum wage to encourage people to enter the workforce, clearly the benefits received by the unemployed were too good.

You could have created the same incentive by reducing unemployment benefits, and it wouldn't have cost anything.

this has been through the mill here so many times it's just stupid.

the minimum wage is not raised to encourage people to work. it's raised because otherwise wages drop below inflation to the point where you get industrial action in order to correct the imbalance.

industrial action which, in NZ's history, has at least once risen to the level of actually crippling the entire country.

that aside, one of the things our government's done... less poorly than they could... is refocused the benifits so that those which Are based around simply not having a job, are less attractive, while those surrounding health issues, children, etc, are designed to be in Addition to whatever your main source of income [bet it work or some other benifit for a different reason] is.

Hence me saying that general unemployment figures also include people who have nothing to do with the minimum wage, and whose figures won't be affected in any meaningful way by a change.

Teenagers are generally likely to be working at or near the minimum wage, simply because they have few qualifications. So if minimum wages change and that has an effect on employment in these sectors, teenagers would be a target group you'd be looking at. There are few reasons I can think of why teenagers would show different patterns than the few adult minimum wage earners around, and it's a question of data availability.

It's not perfect, but it's hardly as bad as you make it look. As I said, finding empirical support for any given theoretical relationship isn't easy in situations like this, because you can't make experiments in which you isolate the variables. A lot of stuff happens, and that limits the usefulness of any given data set.

It's not that hard. You look at the rise in the minimum wage. You look at the employment figures afterwards. You see how long it takes for the unemployment figures to rise.

If every rise in the minimum wage is followed by a rise in unemployment then you've got compelling evidence.

If it's followed by a rise in unemployment adjusted for micro-trends then you've got fairly strong evidence.

If you find no correlation between rising minimum wage and unemployment then you've got no evidence.

The fact that no one can seem to do that shows me that there is no evidence for the claim, and those who argue one are arguing more from motivational belief than evidence.

And looking at teenage unemployment does nothing to show what's happening to unemployment, even as a sample of the overall employment picture. You're just shifting the demographics around.

If you fill a casino with video cameras you might not have much crime inside the casino. That doesn't mean that Atlantic City has a low crime rate.

How was the quake, by the way? ;)

I'll get into the other stuff later, however, you ask about the quake.

I went a shake, rattle and roll *starts singing Big Joe Turner's song

Actually, I have to admit that I didn't feel anything; then again, I didn't feel Auckland's quake in last year either.

And looking at teenage unemployment does nothing to show what's happening to unemployment, even as a sample of the overall employment picture. You're just shifting the demographics around.
No, I'm trying to isolate the issue I'm looking at. Say we raise the minimum wage and at the same time there's a boom in the car industry, because a local car manufacturer developed an emission-free car.

Employees of that car factory earn much more than the minimum wage. When setting their wages, neither side is concerned with what the minimum wage is, because the workers wouldn't accept something so low anyways.

Meanwhile teenagers as a group have a disproportionate number of individuals working in minimum wage jobs, for example at fast food chains. If the minimum wage changes, aggregate teenage wages change to a much higher degree than wages overall. The same, it makes sense, would go for any effects of this change to employment.

So the car industry boom lowers overall unemployment significantly. Say the rise in the minimum wage puts a lot of teenagers out of a job because fast food chains make do by other means that have become relatively cheaper.

So if we look at the aggregate figures for everyone, we see an increase in the minimum wage and a decrease in unemployment and conclude that we can use this relationship to make policy.

But we'd be wrong. In truth our results were disturbed by using the wrong sample. What we should have done is choose a sample where we expect the greatest effect due to the change in the minimum wage, in order to make the relationship as clear as possible and keep out as many other events in the economy as possible.

Not to mention that minimum wage policy targets a certain subsection of society, and it would make the most sense to examine its effects on that subsection specifically.

I recall studying economics in the mid 90s, when the UK government was refusing to bring in a minimum wage, saying it would lead to increased unemployment. Both of my teachers (one fairly right wing, the other fairly left wing) told us this was nonsense. Or, at least, was not supported by what had been observed in other countries. If anything, unemployment fell - giving so many people a little more disposable income seemed to benefit the economy quite a lot.

If anything, unemployment fell - giving so many people a little more disposable income seemed to benefit the economy quite a lot.
You've got to be more careful with statements like that. You need to go through some fairly advanced econometrics to establish whether or not there might be a causal relationship there (and the same is true for the reverse case), and you need a large sample.

And besides, the intuitive support for your idea isn't great either. It's not like there are many minimum wage earners, and that an extra dollar an hour will immediately turn into disposable income and be spent on consumption. If you have a 2 trillion dollar economy, and the minimum wage adds 100 million to aggregate spending, that's .005% or something. That's not the sort of change you'd expect to have a significant effect on unemployment figures.

You've got to be more careful with statements like that. You need to go through some fairly advanced econometrics to establish whether or not there might be a causal relationship there (and the same is true for the reverse case), and you need a large sample.


I didn't say there was a causal relationship, only that there was a correlation. One that appeared to exist in a number of countries, each with its own unique economic setup. Isn't that a large enough sample?


It's not like there are many minimum wage earners, and that an extra dollar an hour will immediately turn into disposable income and be spent on consumption.

Yes there are, and yes it will. When you are poor, you spend most of what you earn.

I didn't say there was a causal relationship, only that there was a correlation. One that appeared to exist in a number of countries, each with its own unique economic setup. Isn't that a large enough sample?
Well, let's see. Can you reproduce any of this stuff?

Yes there are, and yes it will. When you are poor, you spend most of what you earn.
Okay, you'll need to support all this.

No, I'm trying to isolate the issue I'm looking at. Say we raise the minimum wage and at the same time there's a boom in the car industry, because a local car manufacturer developed an emission-free car.

Employees of that car factory earn much more than the minimum wage. When setting their wages, neither side is concerned with what the minimum wage is, because the workers wouldn't accept something so low anyways.

Meanwhile teenagers as a group have a disproportionate number of individuals working in minimum wage jobs, for example at fast food chains. If the minimum wage changes, aggregate teenage wages change to a much higher degree than wages overall. The same, it makes sense, would go for any effects of this change to employment.

So the car industry boom lowers overall unemployment significantly. Say the rise in the minimum wage puts a lot of teenagers out of a job because fast food chains make do by other means that have become relatively cheaper.

So if we look at the aggregate figures for everyone, we see an increase in the minimum wage and a decrease in unemployment and conclude that we can use this relationship to make policy.

But we'd be wrong. In truth our results were disturbed by using the wrong sample. What we should have done is choose a sample where we expect the greatest effect due to the change in the minimum wage, in order to make the relationship as clear as possible and keep out as many other events in the economy as possible.

Not to mention that minimum wage policy targets a certain subsection of society, and it would make the most sense to examine its effects on that subsection specifically.

I understand what you're saying, I just don't accept it.

You are providing an interpretation for the data for which I see insuficient evidence.

And when most people talk about their concern that increasing the minimum wage will increase unemployment they aren't worried that teenagers will have to rely more on their parents for allowance. They're concerned that people whose actual livelihood depends on minimum wage jobs will have that livelihood threatened.

The data you've provided show me no evidence of that happening. It shows me that what is likely happening is that teenagers, who don't need to work, are facing stiffer competition over more lucrative jobs from those who do need to work. That's a good thing.

And when most people talk about their concern that increasing the minimum wage will increase unemployment they aren't worried that teenagers will have to rely more on their parents for allowance. They're concerned that people whose actual livelihood depends on minimum wage jobs will have that livelihood threatened.
What people do with their wages isn't material though to the question of whether or not increasing minimum wages reduce the number of positions available. Teenagers aren't picked because they're representative of minimum wage earners, but simply because they contain such a high proportion of them. If we can use the data on teenagers to show the relationship, then it becomes your job to explain why the same relationship would hold if a minimum wage earner is 16, but not if he is 26.

Well, let's see. Can you reproduce any of this stuff?

Re-read my first post on this topic.


Okay, you'll need to support all this.

No I won't. If you are poor, you have to spend what you are earning. That's what being poor means.

Capitalist economics completely ignores all social, environment and otherwise costs.
If you can measure a social cost, I'll start considering it.

It it matters, measure it.