NZ minimum wage higher than UK

March 20th, 2012 at 11:00 am by David Farrar

The Telegraph reports:

The adult rate of the is to rise by 11p to £6.19 an hour from October, Business Secretary Vince Cable announced today.

That is $11.90 in NZ dollars, which is 88% of the NZ minimum wage of $13.50 an hour. So the next time Labour or the unions insist our minimum wage is set at third world standards and keeps people in poverty, remember it is 13% higher than the UK one.

But the rates for younger workers will be frozen at £4.98 for 18 to 20-year-olds and £3.68 for 16 to 17-year-olds. 

Sensible when the focus is getting them into jobs.

The starting out minimum wage in NZ is $10.80 an hour, and doesn’t even apply to all under 21s like the UK one. It only applies to 16 and 17 year olds for their first six months with an employer or 18 and 19 year olds who have been on a benefit for at least six months.

The UK youth minimum wage is NZ$9.58 for 18 to 20 year olds, and NZ$7.08 for 16 and 17 year olds. That means those on the starting out minimum wage in NZ are getting 13% more and  53% more respectively.

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37 Responses to “NZ minimum wage higher than UK”

  1. wreck1080 (3,956 comments) says:

    It does help the UK minimum wage has halved comparitive to the NZD due to the NZ exchange rate.

    I don’t think its fair to judge this when the kiwi dollar is at record highs against the pound. You should look at average exchange rates as the kiwi will fall eventually.

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  2. Danyl Mclauchlan (1,070 comments) says:

    So the next time Labour or the unions insist our minimum wage is set at third world standards and keeps people in poverty, remember it is 13% higher than the UK one.

    With such little government intervention in the labour market they must be a paradise. How’s their unemployment rate and gdp growth been going?

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  3. Joel Rowan (99 comments) says:

    Not really relevant unless we’re talking purchasing power, unfortunately.

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  4. flipper (4,194 comments) says:

    And, USA. which at last look was about $US8.50.
    Exchange rates do NOT count unless there are also COL adjustments.
    NZ is fine.

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  5. ross69 (3,652 comments) says:

    Joel,

    That’s absolutely correct, and of course the figures are dependent on the prevailing exchange rate. I recall a time when you would need more than NZ$3 to buy a pound. But that wouldn’t suit DPF’s argument.

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  6. redqueen (582 comments) says:

    It’s also important to note that in the UK the employer will get stung with 13.8% in NIC on the employee (above the primary/secondary Class 1 threshold of £7,072), which discourages them from employing people (as even someone on minimum wage will have around £5,000 above the Class 1 threshold). It’s a major disadvantage compared with here, even with ACC levies.

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  7. ross69 (3,652 comments) says:

    Since we’re supposedly trying to close the wage gap with Australia, maybe DPF would like to tell his readers what the minimum wage is there?

    [DPF: Higher than the UK, but you can not close the wage gao by passing a law. Only simpletons think you can. You close it by increasing productivity – the very thing MUNZ is fighting tooth and nail against]

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  8. KevinH (1,236 comments) says:

    Despite receiving less than New Zealand teens, the lower rates have not incentivised employers in the UK to employ more teens. The unemployment situation in the UK is described as a crisis, a toxic crisis, with few solutions available.:

    http://www.guardian.co.uk/business/unemployment-and-employment-statistics.

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  9. Nick R (508 comments) says:

    @DPF – The UK minimum wage rates are not directly comparable with NZ rates because of differences in the tax system. As I understand (and it’s a long time since I worked over there, so happy to be corrected here), the UK has a personal income tax-free allowance of (from memory) about GBP7,500 p/a – similar to the policy Labour proposed at the last election. This obviously benefits the very low paid paid. The tax rate for income above the allowance is 20% increasing to 40% at about GBP37K and 50% above GBP150K.

    Of course, there are swings and roundabouts – their VAT is higher than our GST, but it doesn’t apply to absolutely everything.

    But anyway – the point is you need to be careful about comparing things that are not directly comparable – as you reminded David Clark just last week…

    [DPF: Excuse me. I am comparing a minimum wage to a minimum wage, adjusted for currency. David Clark used a change in taxation over three years and three different tax changes to reach a conclusion over the impact of just one year of changes. That is invalid for anyone beyond primacy school]

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  10. Scott Chris (6,176 comments) says:

    That is $11.90 in NZ dollars, which is 88% of the NZ minimum wage of $13.50 an hour.

    Try doing the calculations using the actual value of our respective currencies. You might find that gives you a more honest comparison.

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  11. eszett (2,426 comments) says:

    [DPF: Higher than the UK, but you can not close the wage gao by passing a law. Only simpletons think you can. You close it by increasing productivity – the very thing MUNZ is fighting tooth and nail against]

    But National chose Australia as the benchmark of GDP, why don’t you use it as a benchmark for the minimum wage.
    You could argue that Australian’s economy is closer to ours than the British.

    Now I am not saying that our minimum wage is too low. I am just saying that your argument is on shaky ground.

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  12. MT_Tinman (3,249 comments) says:

    So the next time Labour or the unions insist our minimum wage is set at third world standards and keeps people in poverty, remember it is 13% higher than the UK one.

    There are, of course, many who will suggest that the UK, currently, is of third world standard.

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  13. ross69 (3,652 comments) says:

    [you can not close the wage gap by passing a law. Only simpletons think you can. You close it by increasing productivity – the very thing MUNZ is fighting tooth and nail against]

    Strange that you would bring the wharfies into the dispute when last year their productivity was at record levels. By your logic, they should be getting paid more, not less. Yet POAL want to cut their pay by 20%.

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  14. ross69 (3,652 comments) says:

    Since DPF has avoided the question, the Australian minimum wage is A$15.51 per hour which equates to NZ$20.16. That’s 49% above our minimum wage. We’ve certainly got a lot of catching up to do. And if you think productivity increases are the answer, you need to do Economics 101.

    [DPF: I have done Economics 101, and 201. Anyone else who has done them will say the same – you need productivity gains]

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  15. YesWeDid (1,049 comments) says:

    DPF, what’s the youth unemployment rate in the UK, given they have a youth rate and how does that compare to NZ?

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  16. nzclassicalliberal (34 comments) says:

    We’ve certainly got a lot of catching up to do. And if you think legislation is the answer, you need to do Economics 101.

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  17. Weihana (4,583 comments) says:

    DPF – “…but you can not close the wage gao by passing a law. Only simpletons think you can.”

    nzclassicalliberal – “We’ve certainly got a lot of catching up to do. And if you think legislation is the answer, you need to do Economics 101.”

    Interesting how the political right views the issue of minimum wages. It seems to mirror the attitude of the left towards climate science. It seems when it comes to the issue of minimum wages that we have a consensus and people who question that consensus must be called names or need to go back to school to learn the basics because they are obviously morons.

    Yet it appears that this is in fact a debatable issue.

    “The efficacy of the minimum wage continues to divide economists. As Table 3 shows, almost half (46.8%) have concluded that the federal minimum wage should be eliminated, while a slightly smaller number (37.7%) favor increasing it”

    http://ew-econ.typepad.fr/articleAEAsurvey.pdf

    But apparently the 37.7% of PhD economists are simpletons who don’t understand economics 101. It sounds a bit like questioning whether someone understands Physics 101 simply because they question the validity of F = ma in certain circumstances.

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  18. Weihana (4,583 comments) says:

    DPF,


    …you need productivity gains

    I find unskilled workers tend to be more productive when rewarded more than the bare minimum. You pay the minimum and they put in the minimum amount of effort. Pay a little extra and they may actually take pride in their contribution.

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  19. dime (10,094 comments) says:

    weihana – you make it sound like half the population is on the minimum wage!

    some of you people do my head in.

    does the cost of capital ever come into the equation? you know there is a tipping point where a business will finally go – fuck it, im out. im cash up and invest in overseas stocks or whatever.

    as for Danyl LMAO

    “With such little government intervention in the labour market they must be a paradise. How’s their unemployment rate and gdp growth been going?”

    well danyl, as you can imagine after 15 years of idiot leftists. the UK is fucked! its a longgggggggggggg road back for them.

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  20. nzclassicalliberal (34 comments) says:

    As Table 3 shows, almost half (46.8%) have concluded that the federal minimum wage should be eliminated, while a slightly smaller number (37.7%) favor increasing it.

    Four points. First, 37.7% is not slightly smaller than 46.8%. It’s significant, and slighltly more significant when you include the 1.3% who think it should be decreased.

    Secondly, minimum wage in the US is much lower as a proportion of the median wage than it is in New Zealand. I very much doubt that if the same group of economists were asked about New Zealand’s minimum wage you would still find 37.7% believing that it should be increased. The level of minimum wage as a proportion of the median wage has been demonstrated to be highly relevant to whether minimum wage increases have a negative effect on employment rates.

    Thirdly (related too the above), the minimum wage in the US at the time of this survey was a little over $5 per hour. Only 16.9% of the economists surveyed thought it should be increased by more than $1 per hour above that. This means that 83.1% thought that the minimum wage in the US should be $6 per hour or less.

    Finally, it is highly unlikely that many of those economists who did support an increase to the minimum wage did so on the basis that it would make Americans on the whole wealthier relative to other countries, which is the issue at hand in this discussion. Rather, economists who support higher minimum wages more likely see it as a way to reduce inequality within the US, which many do see as a legitimate concern.

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  21. emmess (1,432 comments) says:

    Since DPF has avoided the question, the Australian minimum wage is A$15.51 per hour which equates to NZ$20.16.

    As a percentage of the median wage, our minimum wage is significantly above theirs, and even higher than other English speaking countries.

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  22. Sam Buchanan (501 comments) says:

    Last I was working in London, locals were getting the hell out due to wages being too low to make living there realistic. Their place was being filled to some extent by illegal immigrants, but there were significant labour shortages in low-paid jobs. Even better paid workers – police, teachers and nurses, were being offered housing subsidies in an effort to fill the gaps.

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  23. andretti (130 comments) says:

    having a minimum wage for schoole leavers is simply stupid.Every day here at my business i get 3-4 schoole leavers pleading for a job,but the fact is they have no experience and the cost to emply is simply to great.Take for instance if i need a waitress who we pay $15=$16 per hour sure i can get a school leaver for $13 odd but I need to have them double up with a experienced person so the hourly rate climbs to $29 per hour and productivity is less.Easier and cheaper to just emply an experienced person.I recently had a mother pleading for me to emply her son at $9 per hour so he can get experience.she wanted to pay me $5 per hour to make it legal (in her mind).I oviously couldnt do that.

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  24. nzclassicalliberal (34 comments) says:

    It occurs to me, Weihana, that I should make it clear that I was responding to ross69, who said “We’ve certainly got a lot of catching up to do. And if you think productivity increases are the answer, you need to do Economics 101.”

    On reflection, that might not have been obvious in my original comment. Nevertheless, it is not just the political right who believe that those who don’t agree with them on minimum wage are morons who need to go back to school to learn the basics.

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  25. andretti (130 comments) says:

    Sorry.Im in a bit of a hurry,it should be school not schoole

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  26. F E Smith (3,307 comments) says:

    With such little government intervention in the labour market they must be a paradise.

    That is silly.  There is a huge amount of government intervention in the labour market in the UK.  And in every other area of business, both at local government and national governement levels.  Business compliance costs are high, and the red tape is endless.

    In the UK, even the Tories are left of centre…

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  27. Rightandleft (669 comments) says:

    As others have pointed out the NZ minimum wage is actually quite generous when compared to our median wage. I grew up working minimum wage jobs in the US and that has made me really appreciate how lucky unskilled NZ workers are. For most of my childhood and teen years the US federal minimum was frozen at US$5.15/hr, with no adjustments for inflation for years and years. Also that minimum wage only applied to non-tipping jobs. Waitresses and such had a lower minimum wage around US$2 and were expected to make up the difference in tips. And unlike the UK there was no tax-free income. I still lost 15-20% of my wages to federal payroll tax and state taxes.

    I later lived on the NZ minimum wage at less than 40 hours a week and managed to pay my rent, fill my car with petrol and eat just fine. That was while I was at uni and I wouldn’t particularly want to do it again, but I wasn’t completely impoverished. I don’t like youth wages because I haven’t seen evidence they actually work and it seems likely only to decrease youth unemployment at the cost of higher adult unemployment if it does anything at all. Overall though I think our minimum wage is just fine as long as it keeps pace with inflation.

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  28. Viking2 (11,550 comments) says:

    F E Smith (1,675) Says:
    March 20th, 2012 at 5:01 pm

    With such little government intervention in the labour market they must be a paradise.

    That is silly. There is a huge amount of government intervention in the labour market in the UK. And in every other area of business, both at local government and national governement levels. Business compliance costs are high, and the red tape is endless.

    In the UK, even the Tories are left of centre

    FES. Our tories are left of left of centre.

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  29. F E Smith (3,307 comments) says:

    Viking,

    Agreed! :D

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  30. Weihana (4,583 comments) says:

    nzclassicalliberal (22) Says:
    March 20th, 2012 at 4:43 pm

    It occurs to me, Weihana, that I should make it clear that I was responding to ross69

    Sorry, jumped the gun.

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  31. Weihana (4,583 comments) says:

    nzclassicalliberal,


    Four points. First, 37.7% is not slightly smaller than 46.8%. It’s significant, and slighltly more significant when you include the 1.3% who think it should be decreased.

    The language employed was from the survey, not mine, and the point was that the issue is debatable compared with other issues they surveyed on which showed considerable consensus (such as reducing foreign trade barriers).


    Secondly, minimum wage in the US is much lower as a proportion of the median wage than it is in New Zealand. I very much doubt that if the same group of economists were asked about New Zealand’s minimum wage you would still find 37.7% believing that it should be increased. The level of minimum wage as a proportion of the median wage has been demonstrated to be highly relevant to whether minimum wage increases have a negative effect on employment rates.

    True, but then we must also consider that in the United States a significant portion of wages in the service industries is from tips which would somewhat offset the lower minimum wage.


    Finally, it is highly unlikely that many of those economists who did support an increase to the minimum wage did so on the basis that it would make Americans on the whole wealthier relative to other countries, which is the issue at hand in this discussion. Rather, economists who support higher minimum wages more likely see it as a way to reduce inequality within the US, which many do see as a legitimate concern

    Surely inequality is not completely unrelated to long term productivity and prosperity.

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  32. nzclassicalliberal (34 comments) says:

    The language employed was from the survey, not mine…

    Sure. My point was that the wording of Whaples paper understates what is actually a significant difference between the two groups.

    True, but then we must also consider that in the United States a significant portion of wages in the service industries is from tips which would somewhat offset the lower minimum wage.

    Actually, there is a different minimum wage in the US for “tipped labour”, which is currently $2.13 per hour.

    Surely inequality is not completely unrelated to long term productivity and prosperity.

    With respect to the general point, that’s an area where I’d suspect to see less consensus. I haven’t seen any evidence that high income inequality negatively impacts growth. With regard to the more specific point I made, I would be comfortable predicting a very strong consensus that increasing minimum wage isn’t a good way to close an income gap with other countries.

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  33. Weihana (4,583 comments) says:

    nzclassicalliberal,


    Sure. My point was that the wording of Whaples paper understates what is actually a significant difference between the two groups.

    I disagree. In terms of determining whether or not a consensus exists on a particular issue the difference in that context is not significant. A consensus is more than taking a vote and seeing who gets the most votes. It’s about showing that an overwhelming majority of people hold a certain view. Givin the results of that poll I’d say the issue, as to the effects of the minimum wage, are debatable.


    Actually, there is a different minimum wage in the US for “tipped labour”, which is currently $2.13 per hour.

    I wasn’t aware, thanks.

    However, given that the US does have a tipping culture, and those tips must at least equal the normal minimum wage, the situation in the US for many low wage workers is that they receive at least the federal or state minimum wage AND they have the opportunity to receive more through tips. I think this makes a difference in terms of giving service workers the ability to own their productivity and as such a minimum wage would be more harmful in the US than elsewhere as it would have a negative impact on the incentive to be productive by reducing the margin between the legal minimum and the excess that a productive worker would earn through tips.


    With respect to the general point, that’s an area where I’d suspect to see less consensus. I haven’t seen any evidence that high income inequality negatively impacts growth. With regard to the more specific point I made, I would be comfortable predicting a very strong consensus that increasing minimum wage isn’t a good way to close an income gap with other countries.

    Comparing gini coefficient to GDP per capita would seem to suggest that more equal societies tend to be the more productive ones.

    http://visualizingeconomics.com/2006/01/04/gdp-per-capital-vs-gini-index/

    While proving a causal link would be difficult it seems common sense to me that the better off someone is, the more productive potential they have. If someone is very poor (i.e. third world) it often doesn’t matter how hard they try they will not go very far. On the other hand mediocre talents born into affluence can succeed with minimal effort (e.g. Paris Hilton). Therefore if you have distributive efficiency within a society then more people have the opportunity to increase their productivity compared with a society where resources are utilized by a select few.

    Linking all this with minimum wages is a stretch, and it’s certainly not my preferred method of reducing inequality, but if it does help to ease inequality then such benefits may be worth the risks assuming it is kept at a reasonable level that maintains normal incentives.

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  34. Falafulu Fisi (2,179 comments) says:

    Weihana said…
    Comparing gini coefficient to GDP per capita WOULD SEEM TO SUGGEST that more equal societies tend to be the more productive ones.

    As the hymn says, you have always stated the Beautiful words and Wonderful Words of Life

    Are you having a hunch here? What makes you think that your hunch has any validity? Are you aware of the shortcoming of the Gini Coefficient.

    Look if you can’t be confident about anything or something then why make an indirect inference in the first place as you do here in your comment above? Why express any significance of confidence as your wonderful words (would seem to suggest) knowing that it is only some form of approximation (or idealization)? Seems odd for someone who doesn’t think that idealzed model can’t be applied to the real world and at the same time, using the very approximating concept/s to state with some confident that the probability of some event [ P(A=more_productive_society) ] taking place is significant or appreciable.

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  35. Weihana (4,583 comments) says:

    Falafulu,

    Hello again. :)


    Seems odd for someone who doesn’t think that [an idealized] model [can] be applied to the real world

    I have said the opposite of that.

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  36. nzclassicalliberal (34 comments) says:

    Weihana, while perhaps not at cross purposes, I don’t think we’re on quite the same page.

    Consensus

    My point is that an overwhelming majority of the economists surveyed opposed lifting the US minimum wage above $6.15 per hour. I think that Whaples has avoided that conclusion because he doesn’t like it, and that evidence of his not liking it can be seen in the fact that he descibes a 24% difference as “slight”. He could have easily reported this result as demonstrating that there was a strong consensus that too high a minimum wage was bad for business and reduced employment. Instead he chose to emphasise the area of disagreement, ie whether the minimum wage should exist or not.

    Tipping

    Your original point on tipping was that it made up for the low US minimum wage. It doesn’t, because there is an even lower minimum wage for “tipped labour”. As such, my point that 83% of economists support a minimum wage that, as a proportion of the median wage, is much lower than New Zealand’s holds.

    Inequality

    My first post, to which you responded, asserted that increasing the minimum wage was not a sustainable approach to closing the wage gap with Australia. Even if we accept that higher minimum wages reduce inequality AND that in general low inequality correlates with high levels of GDP per capita, the negative effects of minimum wages would more than offset any gain due to reduced inequality. And there is economic consensus on the disemployment effects of minimum wage.

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  37. ross69 (3,652 comments) says:

    [DPF: I have done Economics 101, and 201. Anyone else who has done them will say the same – you need productivity gains]

    You’re missing the point. Productivity gains don’t necessarily equate to wage increases. Wharfies had their most productive year last year at POAL. But their bosses want to cut their pay. What a textbook says and what the reality is can be quite different.

    [DPF: Of course productivity gains do not always equate to wage increases. They are the only way to close the wage gap with another country though]

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