Keith Ng on minimum wage
February 3rd, 2009 at 9:48 am by David FarrarKeith Ng at Public Address takes a different position on the minimum wage to most of the other left bloggers:
Businesses are taking the brunt of declining exports, consumption and investment. They try to cut costs by cutting overtime hours, not hiring new staff, and trimming back the hours for temporary employees.
It’s that last group who are now on the plank, and if the minimum wage increases, they will be the ones who are most expendable and relatively expensive. Increasing the cost of hiring people will just force these businesses to cut back on hours, or push them into lay-off territory.
Nor will the supposed benefits be worth squat. If you raise the minimum wage by 10% ($1.20) and cause, say, 1 in 20 of those minimum wage workers to lose their jobs, the other 19 are not going to spend their additional earnings. Rather, they’re going to freak out about people getting fired, and get even tighter with their spending.
Increasing the minimum wage is not inherently a bad thing, but to do it now, when so many businesses and their employees are tethering on the edge is a seriously bad idea. The social harm done by the job losses would far outweigh the $20 or $30 it might mean for those other families.
I suspect the Government may keep it constant in real terms, which will be a 50c or so increase in nominal terms. What will be interesting is how many job losses DOL predicts will occur with even a 50c increase?
Tags: Keith Ng, minimum wage
February 3rd, 2009 at 10:05 am
There’s only one real point that matters in respect of the “minimum wage”, and that is the belief that what an employee can earn can be specified by politicians clamouring for votes rather than business people trying to create trade. As long as a majority of lemmings believe the former, the more direct is the route to the precipice.
Only one thing leads to high wages, at all levels, and that is prosperity. The more people subscribe to the delusional mantras of leftism, and believe that universal wealth is just a matter of more government and more regulation, the less likelihood there is, in reality, of the minimum wage growing in value. No leftist, possessed by their ideology, will ever accept this truism.
Vote:February 3rd, 2009 at 10:13 am
Farrar:
The minimum wage has not kept pace with inflation over the last 20 years, which has meant declining living standards for minimum wage workers (they’re worse of in real terms now than they were in 1990!).
So while i agree that real wage restraint is needed during a recession in order to keep employment levels up (notice i don’t use unemployment because that’s a meaningless statistic because it only measures people looking for work, not people in employment – i.e. unemployment can go up when the minimum wage increases simply because people are attracted into the labour market by the higher wages), you will struggle to convince me that the minimum wage shouldn’t be increased so that it at least matches what it was in real terms 20 years ago (which would mean increasing it to $15 an hour). There’s no evidence that this would hurt employment levels at all. In fact all the economic literature indicates that a modest increase in the minimum wage has no affect at all on employment levels – some of the increased labour costs eat in to profits, while most are passed on to the consumer in higher goods and service prices (meaning a little inflation, but overall a significant increase in buying power for those on the minimum wage).
So the minimum wage is a means by which wealth is redistributed. Rather than funneling money through the government, it goes straight to the worker in the form of higher wages – you should favour this over things like working for families because it avoids, what you neoliberals call “government churn”. But of course you don’t want any redistribution at all. You just see the gap between rich and poor getting ever larger, leading to a class-fractured society, less social mobility, more class warfare, crime and general social dysfunction. Such is the sadistic mind of the neoliberal.
Vote:February 3rd, 2009 at 10:15 am
..and if Keith really wanted to see people not lose their jobs, he would be calling for massive tax cuts on wages, minimum or whatever. Taking 30% plus plus plus or more of what people earn to pay for the overpriced and unnecessary luxury of all powerful government is what is killing this country and making it hard for working families and every other real wage earner to get ahead.
There is only one answer to the recession, and any other concerns, like minimum wages etc etc are just smokescreening.
The solution is to cut PAYE to 10% and GSt to 1% (or less)
..and leave it there.
Vote:February 3rd, 2009 at 10:23 am
But off course socialists politicians and their socialist media lapdogs will not even allow this idea, (cut GST and taxes on wages) the only one that will really work, to become a talking point, because it strikes at the heart of the big government social model they so religiously believe in.
Vote:February 3rd, 2009 at 10:27 am
Here’s a link to a post i did on the minimum wage not long ago. It includes links to the economic literature which prove the neoliberal theory – that employment levels drop with minimum wages increases – isn’t born out in reality.
http://www.kiwipolitico.com/2009/01/589/
Vote:February 3rd, 2009 at 10:30 am
I’m with RB on this. There is two ways for the govt to get more money into the pockets of the poor. One is for the govt to force others to give it to them either by stealing it from others (taxes) and handing it to them (benefits/WFF) or legislating that private business pay higher wages. The other is for the govt to stop taking so much money from them in the first place. Unfortunately the govt seems to insist on the option of taking from Peter to bribe Paul for his vote.
Vote:February 3rd, 2009 at 10:33 am
what about a business whos turnover is the same as 10 years ago… but costs have skyrocketed.. so they are making less money in real terms as well.
can they get a handout or something?
its just not fair
Vote:February 3rd, 2009 at 10:35 am
The only answer to the recession is to STOP bloody buying votes via bailouts, minimum wage increases and other financial carrots.
Politicians arent stupid, they know that the last time the world behaved this way was 1929. And the sure as shit know all about post 1929.
They are fucking with the core of capitialisim and thus messing with the natural recovery that will take place. For what? Power.
Vote:February 3rd, 2009 at 10:36 am
The minimum wage is tricky, my read is it should keep track with inflation, but there are times increases should be put on hold & now is one of those.
Vote:I’d increase take home pay by decreasing taxes in the current crisis.
February 3rd, 2009 at 10:48 am
Minimum wage should be re-visited.
The market should decide.
Running interference from Socialists. Employers are not that cynical.
Employees are not that daft.
You might even find that the overall wage rate increases once we are through this maelstrom.
Vote:February 3rd, 2009 at 11:01 am
I was talking with a pal of mine this morning who is doing it tough at the moment, all of his staff are unskilled and most are on the minimum wage, so far he has been determined to keep them all employed through these bad times as he has a social conscience.
However he told me this morning that if the Nat’s raise the minimum wage he will start laying people off.
Vote:February 3rd, 2009 at 11:03 am
Nome
“So the minimum wage is a means by which wealth is redistributed.”
Translated as “the minimum wage is one way that lazy bastards can steal money from those who have worked hard at improving themselves”
Vote:February 3rd, 2009 at 11:22 am
roger nome:
Make the first $30,000 of income tax free. No need for the minimum wage then. (With other tax adjustments to come)
Vote:February 3rd, 2009 at 11:28 am
Further to the suggestions above re Taxes, I would add as I have said often before, that to make it easier for the people at the bottom of the heap, they should pay NO income tax at all. NZ is way out of step with most of the rest of the OECD on this, especially Australia. I don’t think 30 grand is too high a figure for the income tax rate to be nil.
I don’t like to disgree with Redbaiter, but GST I reckon is about the most honest, fairest, and least economically destructive way of raising government revenue. I would cut company taxes to nil on principle, as they are a tax on economic growth pure and simple; and I would cut income taxes (above the level at which the “nil” rate applies) progressively as rapidly as possible as the government shrinks; I would retain GST and eliminate all income taxes rather than the other way around.
Vote:February 3rd, 2009 at 11:33 am
May 9, 2007
“The temperamental minimum wage”
By Walter Williams
“The first fundamental law of demand postulates that the lower the price of something, the more will be demanded, and the higher the price, the less will be demanded. To my knowledge, there are no known exceptions to the law of demand. That was until last fall when 650 economists, including several Nobel Laureates, signed a letter calling for an increase in the minimum wage.
They said, “We believe that a modest increase in the minimum wage would improve the well-being of low-wage workers and would not have the adverse effects that critics have claimed.” I’m not sure if these 650 economists meant increases in the minimum wage will have no effect on the employment of low-wage workers or if they meant its magnitude won’t be large. If their argument is the former, I’m embarrassed for them.
Maybe these economists, like House Speaker Nancy Pelosi, see the law of demand as being somewhat temperamental — sometimes having an effect and sometimes not. This would be like a physicist suggesting that the velocity of light, in a vacuum, is temperamental — sometimes a constant and sometimes not. But they and Speaker Pelosi might have a point.
On Jan. 10, the House of Representatives voted to raise the minimum wage from $5.15 to $7.25 per hour. Their bill, for the first time, extended the federal minimum wage to the U.S. territory of the Northern Mariana Islands, but it exempted American Samoa, another U.S. Pacific Ocean territory. American Samoa would have been the only U.S. territory not subject to the federal minimum wage. If increases in the minimum wage, like my 650 fellow economists claim, are so helpful to low-wage workers, why deprive Samoan workers from the benefits? Are Speaker Pelosi and my fellow economists anti-Samoan?
StarKist Tuna, whose parent company is Del Monte, and Chicken of the Sea employ nearly 50 percent of the Samoan workforce. Samoan cannery workers earn about $3.50 an hour. I’ll give you one guess what would happen if the minimum wage were raised to $7.25 an hour. Here’s a hint: The average cannery wage in Thailand is 67 cents an hour, and in the Philippines, it’s 66 cents. If you guessed that StarKist and Chicken of the Sea might move their operations to Thailand or the Philippines, go to the head of the class. Perhaps Speaker Pelosi agrees that mandating a higher wage would have an unemployment effect, but just in Samoa.
There’s a better explanation for Speaker Pelosi’s position that has nothing to do with the possible fickleness of the law of demand. StarKist, which owns one of the two Samoan packing plants, has been a big opponent of increases in the U.S. minimum wage. Del Monte, its parent company, is headquartered in Speaker Pelosi’s San Francisco district. Chicken of the Sea is based in Southern California. It’s not unreasonable to guess that Speaker Pelosi’s position has to do with the interests of her well-heeled constituents. In any case, Samoans are off the hook for now because the proposed legislation enacting a higher minimum wage didn’t pass Congress.
Many minimum wage supporters, like the Speaker, are hypocrites, but most supporters are decent people with an honest concern for the well-being of their fellow man. True compassion for our fellow man requires that we examine not the intentions behind public policy but the effects of that policy. There’s no question that Congress can mandate the minimum wage at which a person is hired, but Congress hasn’t found a way to mandate that a person have a level of productivity commensurate with the wage. Moreover, Congress hasn’t chosen to mandate that an employer hire a person whose productivity is less than the minimum wage. This means higher minimum wages cause unemployment for the least-skilled workers.”
Vote:February 3rd, 2009 at 11:35 am
Pascal; great minds think alike, eh? You just beat me to it at 11.22 AM; I hadn’t read that when I posted mine of 11.28…..
Vote:February 3rd, 2009 at 11:39 am
From Muriel Newman’s latest column:
“……When Labour became the government in 1999, the minimum wage was $7 an hour. This was just under 40 percent of the average hourly wage. Now, at $12 an hour, the minimum wage has risen to 49 percent of the average hourly wage. This compares with the situation in Britain where the minimum wage in 2007 was at 41 percent of the average hourly wage and in the US where it was at 33 percent. To match the situation in Britain, New Zealand’s minimum wage would have to be set at $10 and to match the situation in the US at $8.
In a free market economy, wages rise in line with increases in productivity: the more productive the worker, the higher their pay as the more goods and services they help to create for consumers. But over the term of the Labour Government it has been taxpayer funded public sector wages, rather than increases in productivity that have been the driving force, with government wage growth outpacing wage rises in the private sector. This has pushed the minimum wage to an artificially high level that no longer reflects productive output. In fact, since 1999, the minimum wage has risen by 71 percent while general wages have increased by only 40 percent.
In their 2007 minimum wage review briefing papers the Department of Labour recommended increasing the minimum wage to $12 from $11.25 in spite of concerns that doing so may constrain employment growth, increase inflation, cause the cost of goods and services to rise, and impose additional compliance costs on business which may force them to cut back on hours worked or even close their doors. Treasury also noted that “economic impacts are likely to be more significant if current buoyant economic and labour market conditions soften”. In other words, what seemed like a good idea last year can now be seen to be disadvantaging the very people it was purported to help.
But it isn’t just the adult minimum wage that is a problem. This week’s NZCPR Guest Commentator is Phil O’Reilly, Chief Executive of Business NZ, who explains:
“Another recent change is the virtual disappearance of the youth rate, its application limited to those in training and to roughly the first 3 months of a 16 or 17-year old new entrant’s employment. Getting rid of (most) youth rates – while retaining the minimum wage overall – makes it comparatively harder for young people to get their first job. This is borne out by OECD research that indicates a 10% increase in the minimum wage leads to a 3% increase in youth unemployment. This should be a concern for us, as youth unemployment in New Zealand is around four times higher than overall unemployment. And removing youth rates for most, while retaining them for trainees, is a disincentive for young people to undergo training.
“People don’t stay on youth rates for long. The evidence is that as they pick up skills, they move quickly into normal pay bands. Youth rates are therefore similar to a probationary period at the beginning of employment – they are useful in allowing an employer and employee to try each other out with not too much risk to either party, potentially providing a basis for a strong future employment relationship”….”
http://www.nzcpr.com/weekly165.htm
Vote:February 3rd, 2009 at 11:43 am
Note those statistics: NZ’s “average wage” has been inflated by public sector wages going up faster than private sector wages. This is a completely unsustainable situation; it is the taxes paid by the private sector that pay those public sector wages in the first place. It is not a question of the public sector being a “more socially responsible employer”; it is a question of power and privelege.
Those private sector employees are paying excessive taxes so that public sector employees can be overpaid.
Vote:February 3rd, 2009 at 12:05 pm
“Those private sector employees are paying excessive taxes so that public sector employees can be overpaid.”
I would be relaxed if that was the ONLY problem.
The Slam Dunk is the unfunded pension rights.
If you try and buy an annuity right now, you are in for a shock.
Where do Life companies get the best rates of return at the moment?
We have a two speed post-work economy, and it is both unfair, unsupportable, and ultimately fatal if left unattended.
ACC is unique, but its parlous state financially give us a ‘Canary in the Cage’ warning.
When Public Sector wages were behind Private sector earnings this was less of an issue.
Now we have 100% more Servants than required, on better than average wages, on spectacular pension plans, which are fully indexed, and because there was no real stress, the bastards are living so much longer.
Then the widow/widower cover kicks in.
FFS They earn more post work, than ever in work.
Vote:February 3rd, 2009 at 12:59 pm
“So the minimum wage is a means by which wealth is redistributed. Rather than funneling money through the government, it goes straight to the worker in the form of higher wages – you should favour this over things like working for families because it avoids, what you neoliberals call “government churn”.”
Except that the costs of this redistribution is directly from employers to employees, instead of from tax payers to beneficiaries. If the employers cannot pass on the costs of the increase then they have to wear most of it. But of course, that is exactly what Nome wants. He wants to take as much as possible from employers because in his sad little world they are the enemy.
Look at his language, “straight to the worker”. Not once does he say “straight from the employer”, nor does he give any indication that this entered his mind at all. He just assumes away the inconvenient truth that most employers cannot pass the increase in labour costs on to consumers. He just doesnt care.
He wants to feel good by increasing the pay for the lowest paid workers, and he doesnt care where it comes from. And thats being generous, as I genuinely believe that he LIKES the idea of his social and economic meddling will cost the employer class.
If you employ someone and make more money than they do, Nome despises you. He doesnt care about your well-being because he assumes you are selfishly taking care of yourself. There is no way for him to feel worthwhile, needed, or just plain warm and fuzzy inside by considering your well being at all. If he cant feel superior to you, and patronise you, if he cant picture himself as your saviour he doesnt care if you live or die.
This is typical of the soft-headed, “caring” liberal. Underneath it all, they are just plain self absorbed and selfish.
Nome whines and whines about the difference in income causing class stratification, but he complains too much i reckon. The truth is he loves the idea of class warfare, you only have to look at his language to see that. Would someone who was really worried about class stratification be so quick to seperate the goals and desires of employers from employees?
“It includes links to the economic literature which prove the neoliberal theory – that employment levels drop with minimum wages increases – isn’t born out in reality.”
And this proves that for all his intellectual posturing Nome still cant think like an economist. He sees what has happened and assumes that that is all that matters. So employment didnt FALL when the minimum wage was increased. What is lost is the INCREASE in employment. But that wasnt SEEN so Nome doesnt think it was a lost opportunity.
Nome knows how to boil a frog. That is why he always phrases the increase in the minimum wage as single, small, incremental increases. Tiny changes in the minimum wage doesnt have a significant impact on employment, he screeches. Of course they dont. A single cent increase in the cost of petrol doesnt materially change the use of fuel, but a sustained permanent increase in the relative cost of fuel would and did.
But Nome and his brigade of socialist emos want to keep you focussed on each small increase. Afterall, “It’s only WAFER thin!”.
Vote:February 3rd, 2009 at 1:11 pm
“The minimum wage has not kept pace with inflation over the last 20 years, which has meant declining living standards for minimum wage workers (they’re worse of in real terms now than they were in 1990!).”
This is the other annoying tactic that is typical of Nome and his ilk. He thinks the way things were was always better. Nostalgia is not what it used to be. There is a parallel between this sort of thinking and the absurd notion of the noble savage, the idea that humans shouldnt eat meat, and the ultimate green fantasy, we should all be working on farms. It is a significant feature of the socialist style mindset and fits well with their instinct to misremember history. Remember kiddies, revision, reversion, revision, reversion, division…
So what if the minimum wage has not kept pace with inflation over the last 20 years! That would only matter if you thought it was at the correct level to start with! And I have yet to see a single argument from Nome that this was the case. Nor have I seen any consideration given to how CPI is actually measured, how this has change, nor any of its failings.
All his arguments focus on the change from the past rather than what is the right state of affairs, and that is why his angst and vitriol filled rantings are worthless.
Vote:February 3rd, 2009 at 1:20 pm
kimble – good insights. thanks.
Vote:February 3rd, 2009 at 2:35 pm
While I would support a much higher minimum wage if we had in place extensive employment-generating policy, I think under National with its more hands-off approach to the economy, Keith is right that real increases to the minimum wage would be lose-lose and result in sackings and loss of employee confidence. I think, however, the recommended increase by the MoJ is pretty sensible and conservative enough to please most everyone to some degree. Perhaps not Kimble though, it seems
Vote:February 3rd, 2009 at 2:51 pm
Yeah, well said, Kimble.
And Glutaemus, thanks for THIS; you said it:
Glutaemus Maximus (1200) Vote: 1 0 Says:
February 3rd, 2009 at 12:05 pm
“Those private sector employees are paying excessive taxes so that public sector employees can be overpaid.”
“I would be relaxed if that was the ONLY problem.
The Slam Dunk is the unfunded pension rights.
If you try and buy an annuity right now, you are in for a shock.
Where do Life companies get the best rates of return at the moment?
We have a two speed post-work economy, and it is both unfair, unsupportable, and ultimately fatal if left unattended.
ACC is unique, but its parlous state financially give us a ‘Canary in the Cage’ warning.
When Public Sector wages were behind Private sector earnings this was less of an issue.
Now we have 100% more Servants than required, on better than average wages, on spectacular pension plans, which are fully indexed, and because there was no real stress, the bastards are living so much longer.
Then the widow/widower cover kicks in.
FFS They earn more post work, than ever in work.”
Vote:February 3rd, 2009 at 4:10 pm
Kimble,Philbest et el have already handed Nomey his arse in a devestating economics lesson so I will chip in with the moral aspect……being, just what business is it of the State what an employer pays an employee in a free market? Where does the State get this ‘right”…?… and the omnipotent knowledge to set wage levels without refererence to the market condictions at the time?
An employment relationship is a trade….in the ideal true free market the boss trades wages for the workers efforts.Both parties agree on the wages and conditions without coercion being used and thats that….but as we don’t have a true free market operating we get parasite unions and pollies threatening to use the hairy of the State to scew the playing field and violate the rights of the employer…..and yes it has also been used the other way around too in the past….both cases are wrong and reinforce why the State has no role to play in the economy…period….it can’t act without disadvantaging someone and that is in conflict with its only legit role…the objective protection of individual rights of ALL of the citizens.
Ayn Rand is famous for stating …”the moral is also the practicle…” meaning that as we live in an objective universe with set laws of identity and no contradictions possible then if an act is morally valid against the standard of mans life and his natural rights then it must also be practicle…..nature forbids the alternative.
Vote:February 3rd, 2009 at 4:12 pm
This old lefty will go with PhilBest and the dropping of all income tax on incomes of under $30,000.
Now this may result in fat so called public servants in Wellington getting a slimmed down pay packet but if they can not take a joke they should not
have joined the so called public service.
Move all tax to GST, good god do you want to see hungry accountants
Vote:and tax lawyers rattling a tin ?
February 3rd, 2009 at 4:55 pm
Journalism pays that much?
Vote:February 3rd, 2009 at 7:38 pm
It’s taken me a while (busy day) but finally got to make a response.
Keith doesn’t normally trot out a right wing line, so I would be interested to see his response to my suggestion here.
Seems to me that having the taxpayer subsidise all low wages Iincluding thos paid by the big players such as Progressive Enterprises and Foodstuffs, who have only each other as competition anyway) through Working for Families and Work & Income assistance is a much poorer option than raising the minimum wage significantly and directly subsidising through targeted assistance, as a transitional measure, those small businesses whose viability would be genuinely threatened by such an increase and who may have to lay off workers or close down as a consequence.
Vote:February 3rd, 2009 at 7:58 pm
toad- you called me out yesterday but you still haven’t backed up your claim
“For a start, most of these little morons come from reasonably well-to-do middle class two parent families”
I’ll ask you again -Can you back that up – or are you just just full of shit and making that up?
Vote:February 4th, 2009 at 11:19 am
Nice. Toads solution is to turn New Zealand businesses into welfare beneficiaries.
Shouldnt be a surprise, though; the Left is obsessed with the state controlling the means of production. The first step in that would be to make businesses rely on the state for their survival.
Why is it that the Left cannot think of a single solution to any problem that does not involve a necessary increase inthe reach and power of government?
It is almost as if they want to be authoritarians.
Vote: