What will be the impact on Super of an effective minimum wage of $18.40?

September 9th, 2013 at 2:00 pm by David Farrar

A reader posted this question to me. NZ is set at 66% of the average wage (for a couple).

Now if you jerk up the effective minimum wage from $13.75 to $18.40 per hour, that will increase the average wage significantly.

That will then mean the rate of NZ Superannuation will increase significantly, making it more unaffordable.

Any economists out there want to take a stab at what the extra cost of NZ Super would be if the minimum wage was $18.40?

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104 Responses to “What will be the impact on Super of an effective minimum wage of $18.40?”

  1. burt (8,034 comments) says:

    These costs … no problem – just put taxes up for the rich – it worked so well from 1999-2008 !!!!!!!

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  2. BeaB (2,083 comments) says:

    But what else can we expect from members of a caucus described by their own former leader as venal which has no other meaning apart from corrupt or open to bribes.

    No-one else has picked this up. Even the interviewer Corin Dann let it pass, probably because he isn’t educated enough to understand what the word means.

    But this is what Shearer said:

    “The thing I found most difficult really was the pettiness of politics and being in opposition. A lot of it was petty, a lot of it was venal.”

    So, if his colleagues are corrupt, why shouldn’t they promise the sun, moon and stars?

    They don’t care what these guys promise and what it will cost and Shearer has told us why.

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  3. Alan (1,082 comments) says:

    The link with wages is a nonsense and should be scrapped anyway. It should be tied to prices.

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  4. PaulL (5,983 comments) says:

    So, first part of the math. $18.40 per hour is $736 for a 40 hour week, or $38,272 per annum. 66% of that would be $25,259. I’m pretty sure National Super is $13,000 per annum at the moment, double that for a couple.

    So, if the minimum wage and the average wage were the same (possible once we work through part time work etc, but probably a very conservative/low assumption) this would be a substantial increase in National Super.

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  5. RightNow (6,843 comments) says:

    So it would also increase the threshold for relative poverty?

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  6. Jinky (181 comments) says:

    What would be the effect on the tax take/ WFF if the minimum wage was raised to $18.40. Wouldn’t there be a reduction in eleigibility for WFF? Wouldn’t the amount of income tax collected go up?

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  7. cha (3,856 comments) says:

    Wouldn’t there be a reduction in eleigibility for WFF?

    And stop subsidising employers, sacrilege!.
    /

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  8. Sector 7g (237 comments) says:

    Who cares what happens next, it’s free money for all…….said the average kiwi voter.

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  9. ross69 (3,652 comments) says:

    When the minimum wage increases, this has no effect on the average wage. So I’d imagine there will be no impact on superannuation. Of course, you’ve ignored the fact that superannuation will be more affordable under Labour as the age of eligibility will be increased over time.

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  10. alwyn (402 comments) says:

    PaulL @ 2.08pm.
    I’m afraid your calculation is incorrect.
    The rate for a couple is set at 66% of the average weekly wage.
    If the average weekly wage was, as you suggest equal to the “living wage” then the rate for a couple would be the $25,259 you mention. The actual rate for a couple at the moment is $32.360 gross per year so if you assumption on what the average would become there would be a major DROP in the national super.
    I am very loathe to give my own view on what might happen if the “living wage” became the average wage. The Reserve Bank, or Treasury might be able to give estimates but I wouldn’t trust any else to give sensible opinions.

    Ross69. You are dreaming. Even if the only wages to go up were those below the “living wage” the average would increase

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  11. MT_Tinman (3,052 comments) says:

    Once everyone is paid a “living wage” of $18.40ph won’t the “poverty level” used by the comedians who made up worked out the living wage based on the median income level go up, thereby automatically increasing the “living wage” which will again increase the median income level increasing the “living wage increasing the median income ……………………… ?

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  12. georgebolwing (686 comments) says:

    The Family Centre Social Policy Research Unit’s paper that presents the calculations of the $18.40 gross figure does include the effect of working for families and the income tax system.

    This again is an example of the stupidity of saying that everyone in New Zealand, regardless of circumstances, should be paid $18.40 per hour. If you accept the Centre’s assumptions (which I don’t), $18.40 is the amount that they consider should be paid to both adults (one working full-time, one part-time) in a two adult, two dependent child family renting accommodation.

    To move this to a universal minimum wage, as the Labour leadership aspirants are doing, is an abuse of the idea.

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  13. MikeG (416 comments) says:

    ” that will increase the average wage significantly.”

    Only if there are a significant number of workers on the minimum wage. Farrar is trying to draw conclusions before the analysis has been done.

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  14. georgebolwing (686 comments) says:

    People are confusing average (used for NZ super) and median (used for “poverty”).

    In June 2012 (latest available figures) the average weekly income of all people aged 15 and over from all sources was $721. This is total income divided by number of people. The median weekly income was $560. The median is the amount that divides the population in two: half of all people over 15 earn more than this, half less.

    For people in paid employment, the average was $1,002, while the median was $845.

    As the “living wage” is $736 for a 40 hour week, paying it to all people earning less than this would definitely increase the average wage. It would probably not increase the median income for people in paid employment, since the living wage is below the median. The impact on the median for all person is harder to predict, since it depends on the distribution of full-time, part-time, retired and not in the labour-force people.

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  15. homepaddock (434 comments) says:

    Pensioners have done better under National because the calculation for superannuation is based on the after-tax average wage.

    When taxes have gone down the after after-tax wage has increased and so has superannuation.

    If Labour increased taxes without doing anything else they would be cutting superannuation.

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  16. ex-golfer (156 comments) says:

    @alwyn
    Not sure where you get your figures from but here are the annual gross NZ Super rates:
    Single person living alone: $21, 336
    Single person sharing accom: $19, 606
    Married person whose partner is not yet 65: $16, 137
    Married person whose partner also gets super: $16, 137
    Therefore couple both getting is gross $32, 275 combined

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  17. mikemikemikemike (319 comments) says:

    I don’t know what anyone has against a living wage and why it is automatically assumed that means everyone has to get a pay rise. Why can’t it be a way to make life cheaper to live?

    I for one would love for people who put in a solid 40-50 hour working week to be able to afford to take their family on a holiday or afford sky or whatever it is they might like to do. I would so much rather that than drive through Otara or Glen Eden and see a sea of sky dishes that my taxes are paying for, for people who are doing nothing.

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  18. RightNow (6,843 comments) says:

    “Why can’t it be a way to make life cheaper to live?”

    Because it will drive up inflation…

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  19. nickb (3,675 comments) says:

    I for one would love for people who put in a solid 40-50 hour working week to be able to afford to take their family on a holiday or afford sky or whatever it is they might like to do. I would so much rather that than drive through Otara or Glen Eden and see a sea of sky dishes that my taxes are paying for, for people who are doing nothing.

    A living wage will do nothing except make tens of thousands of people in the former group end up in the latter group. But hey, if it is ideologically pure, go for it.

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  20. Ryan Sproull (7,060 comments) says:

    If raising the minimum wage will make tens of thousands of people unemployed, why not lower the maximum salary and create those jobs back again?

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  21. Sector 7g (237 comments) says:

    Mike.

    Tell me why stop at 18.40?
    Wouldn’t life be way cheaper for everyone if minimum wage was $50 an hour? Or do you think it’s possible you are missing something here?

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  22. Ryan Sproull (7,060 comments) says:

    Tell me why stop at 18.40?
    Wouldn’t life be way cheaper for everyone if minimum wage was $50 an hour? Or do you think it’s possible you are missing something here?

    Why stop at requiring people wear seat belts? Wouldn’t life be way safer for everyone if people had to drive in helmets too?

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  23. jaba (2,096 comments) says:

    easy answer .. they are going to increase the age from 65t to 67-68 and they will have to kick that off real soon. I’m just 7 years off so hope they wait a little longer

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  24. Sector 7g (237 comments) says:

    Ryan.

    Why doesn’t Labour just change their name to the Socialists? At least then they wouldn’t need to hide behind slogans such as “living wage”.

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  25. Sector 7g (237 comments) says:

    Ryan.

    I’m sure that is next on your list. Actually, fining people for not wearing helmets could help pay for the increase to welfare.

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  26. Redbaiter (8,032 comments) says:

    “If raising the minimum wage will make tens of thousands of people unemployed, why not lower the maximum salary and create those jobs back again?”

    Start a company Ryan and show us how it is done.

    Otherwise you risk being viewed as a pontificating academic know nothing right?

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  27. mikemikemikemike (319 comments) says:

    so you guys are against people who are working a full week being able to afford a life at the end of it?

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  28. scrubone (3,082 comments) says:

    so you guys are against people who are working a full week being able to afford a life at the end of it?

    What makes you think that people who can’t manage on their wages now will be able to do so when they’re paid $18.40 per hour?

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  29. Ryan Sproull (7,060 comments) says:

    Start a company Ryan and show us how it is done.

    Redbaiter, are you under the impression that people can just start companies and be paid the kinds of $200K+ salaries that would be affected by a maximum salary?

    It doesn’t work like that, bud. Starting a business is tough work, and it’s really only much larger businesses in general that can afford to pay that kind of money.

    Lots of businesses fail in their first year, Redbaiter. It’s not as easy as you think.

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  30. Ryan Sproull (7,060 comments) says:

    Why doesn’t Labour just change their name to the Socialists? At least then they wouldn’t need to hide behind slogans such as “living wage”.

    They were explicitly socialists to begin with, weren’t they?

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  31. RightNow (6,843 comments) says:

    “Starting a business is tough work, and it’s really only much larger businesses in general that can afford to pay that kind of money.”

    +1 for your concise destruction of the living wage.

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  32. nickb (3,675 comments) says:

    so you guys are against people who are working a full week being able to afford a life at the end of it?

    No mike. I am against regulation which will have the opposite effect to its intended effect.

    I mean, that so-called educated people could honestly believe that legislating a minimum wage $5 higher than currently will work, and will not reduce employment, especially with a soft economy, blows me away.

    Has anyone in the Labour or Green parties ever operated a business? I highly doubt it. Even that is no excuse though. It is giving people completely false hope and is really just a cynical and disgusting attempt at class warfare, built on a fallacy.

    And don’t get me started on how this minimum wage will somehow lift the earnings of self employed people…. WTF??? Are we going to start subsidising taxi drivers? Some people might call that communism…

    And Ryan, I don’t have any particular interest in answering your multiple questions in response to my statement. Why don’t you just say what you think instead of imitating Pete George all the time?

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  33. Ryan Sproull (7,060 comments) says:

    “Starting a business is tough work, and it’s really only much larger businesses in general that can afford to pay that kind of money.”

    +1 for your concise destruction of the living wage.

    Starting businesses can afford to pay the minimum wage, not $200K+ salaries (the equivalent of five or more jobs on the minimum wage if it was raised to $18.40).

    Though you make a good point, RightNow. Only the companies who can afford to pay the kind of salary that would be affected by a maximum wage should be forced to pay a minimum wage.

    And why would I want to start a business that could not afford to pay its workers enough for them to live a decent life?

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  34. Ryan Sproull (7,060 comments) says:

    And Ryan, I don’t have any particular interest in answering your multiple questions in response to my statement. Why don’t you just say what you think instead of imitating Pete George all the time?

    Hi, Nick! It was just one question, not multiple questions. Maybe you’re getting my posts confused with someone else’s. Or you could mark which of your comments are for people to engage with and which aren’t. I’ll put one at the bottom of this comment as an example for you to use.

    Also, I wasn’t particularly interested in your answer to the question, which I figure is fairly predictable. It was for anyone who wanted to play.

    I AM HAPPY FOR PEOPLE TO ENGAGE WITH THIS COMMENT

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  35. Sector 7g (237 comments) says:

    “And why would I want to start a business when It’s much easier to force others through legislation to do as I say, rather than what I do, while I carry on living my life”

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  36. gump (1,553 comments) says:

    @RightNow

    “Why can’t it be a way to make life cheaper to live?”

    Because it will drive up inflation…

    ————————–

    No. This is not correct.

    Lowering the cost of living would cause a deflationary effect on the economy (we see this happen when improvements in production efficiency lower the cost of manufactured goods).

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  37. nickb (3,675 comments) says:

    No need to be upset. It’s just that KB can get somewhat surreal with the volume of your non sequiturs and questions, when coupled with the lack of any obvious political beliefs. The same goes for PG.

    Have you thought of just joining a chatroom if you like your own voice that much?

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  38. Ryan Sproull (7,060 comments) says:

    “And why would I want to start a business when It’s much easier to force others through legislation to do as I say, rather than what I do, while I carry on living my life”

    Maybe I’m not explaining clearly enough, Sector.

    Try this. List all of the reasons a business might not be able to afford to pay someone what’s being called a “living wage” for the work they do.

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  39. Ryan Sproull (7,060 comments) says:

    Have you thought of just joining a chatroom if you like your own voice that much?

    Jesus, dude, take a pill. You said something in a place where people converse online, I asked a single question, and you got all pissy about not answering multiple questions and something about Pete George. Take a breath.

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  40. Sector 7g (237 comments) says:

    Ryan.

    Nothing needed to be explained. I was purely putting your internal dialogue into text form.

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  41. Ryan Sproull (7,060 comments) says:

    Nothing needed to be explained. I was purely putting your internal dialogue into text form.

    But that’s not what I think, so obviously I have not explained myself clearly to you.

    Are you opposed to the minimum wage, whatever it’s set at, on principle? Or are you opposed to the minimum wage being raised to Cunliffe’s claimed goal?

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  42. scrubone (3,082 comments) says:

    Remember that business do not hire out of charity. They hire in the expectation that the both parties will benefit from the exchange, i.e. that the person will provide more value via their labour and skills than the business pays. I don’t get paid the minimum wage, but I’ve at times saved tens of thousands for my employer. I don’t expect someone who’s going for a minimum wage to be able to claim that.

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  43. Redbaiter (8,032 comments) says:

    “What makes you think that people who can’t manage on their wages now will be able to do so when they’re paid $18.40 per hour?”

    Simply that they are screw loose leftists beyond rational debate and unable to cope with simple mathematics.

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  44. Harriet (4,616 comments) says:

    “…..If raising the minimum wage will make tens of thousands of people unemployed, why not lower the maximum salary and create those jobs back again?…..”

    Be serious Ryan. Where are you prepared to stop with that?

    Full employment? Full employment after Labour/Greens have increased immigration? After ALL women are satisfied with hours of work? After all semi retired people work and no longer draw a pension?

    Commie! :cool:

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  45. Ryan Sproull (7,060 comments) says:

    Remember that business do not hire out of charity. They hire in the expectation that the both parties will benefit from the exchange, i.e. that the person will provide more value via their labour and skills than the business pays. I don’t get paid the minimum wage, but I’ve at times saved tens of thousands for my employer. I don’t expect someone who’s going for a minimum wage to be able to claim that.

    True, but you’re not paid over minimum wage because you’re more valuable than someone on minimum wage – you’re paid over minimum wage because you’d leave to a different employer if they offered you more, so your current employer has to pay you more than minimum wage to keep you.

    In other words, not only do businesses not hire out of charity, but they also do not set pay based on how much your efforts profit them.

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  46. flipper (3,847 comments) says:

    A few issues here, some crap comments, and some sensible data based observations.
    ***

    Alan (518) Says:
    September 9th, 2013 at 2:07 pm
    The link with wages is a nonsense and should be scrapped anyway. It should be tied to prices.

    ***
    This goes in the crap tin.
    I suppose the number of peanuts in a bar of Whittakers could be used.

    On the other hand, nickb says…

    **** “….Has anyone in the Labour or Green parties ever operated a business? I highly doubt it. Even that is no excuse though. It is giving people completely false hope and is really just a cynical and disgusting attempt at class warfare, built on a fallacy.

    And don’t get me started on how this minimum wage will somehow lift the earnings of self employed people…. WTF??? Are we going to start subsidising taxi drivers? Some people might call that communism… ****

    This is in the SENSIBLE can.

    As for Ryan S……
    Childish garbage, and beyond belief that it could come from any a sane person, who has ever worked in the private sector , (where taxes do NOT pay salaries), let alone run their own business. In both cases, so much time is spent working for the state or local government on a non paid basis, that the cost is a substantial invisible tax.

    But there is another important point.

    Assume $18.50 per hour is the start point.

    Then add ACC at about 3%,
    Holiday pay @ 8%,
    Sick pay @ about 2%,
    and Kiwisaver a 4% (or is it now 5%?)

    The actual CASH cost of the $18.50 to the employer is more than $21.65 per hour – all to be paid from a reduced income stream.

    Only private sector employers will feel that pressure. Taxes and Rates will go up to meet the 36 -40 share of the economy that is the State and local government..

    So Rossie69, Ryan and all the other idiots, take your living wage and stick where the monkey pouts its nuts-

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  47. Ryan Sproull (7,060 comments) says:

    Be serious Ryan. Where are you prepared to stop with that?

    Full employment? Full employment after Labour/Greens have increased immigration? After ALL women are satisfied with hours of work? After all semi retired people work and no longer draw a pension?

    Harriet, I’m just surprised no one has suggested yet that capping salaries won’t create jobs because a business whose money is freed up by paying those at the top less are not necessarily going to spend that money on employing more people at the bottom and middle.

    Or that capping salaries would send all of the best executive talent offshore and businesses would suffer so much from this that there would be less money available to pay the living wage at the bottom.

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  48. RightNow (6,843 comments) says:

    gump (810) Says:
    September 9th, 2013 at 4:22 pm
    @RightNow

    “Why can’t it be a way to make life cheaper to live?”

    Because it will drive up inflation…

    ————————–

    No. This is not correct.

    Lowering the cost of living would cause a deflationary effect on the economy (we see this happen when improvements in production efficiency lower the cost of manufactured goods).

    How would introducing a “Living Wage” lower the cost of living?

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  49. Ryan Sproull (7,060 comments) says:

    The actual CASH cost of the $18.50 to the employer is more than $21.65 per hour – all to be paid from a reduced income stream.

    Only private sector employers will feel that pressure. Taxes and Rates will go up to meet the 36 -40 share of the economy that is the State and local government..

    Yes, flipper, that is true. And the opposite would occur if the minimum wage was dropped, wouldn’t it?

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  50. scrubone (3,082 comments) says:

    In other words, not only do businesses not hire out of charity, but they also do not set pay based on how much your efforts profit them.

    Not entirely. There’s a lot of things in the mix.

    But at some level people do have to provide a value. And while not many people would get directly let go because of minimum wage increases, over time and across the population such things do have an effect – usually because people don’t’ get hired in the first place.

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  51. Ryan Sproull (7,060 comments) says:

    Not entirely. There’s a lot of things in the mix.

    But at some level people do have to provide a value. And while not many people would get directly let go because of minimum wage increases, over time and across the population such things do have an effect – usually because people don’t’ get hired in the first place.

    Yes. Also, increasing the minimum wage would increase the capital investment required to get a new business running to the point of profitability, which would discourage the creation of new businesses and the new jobs that come with them.

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  52. Sector 7g (237 comments) says:

    Ryan.

    That is what you think. You sit around dreaming up ways to force others to pay for the things you believe in while never getting up and doing it yourself.

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  53. Ryan Sproull (7,060 comments) says:

    That is what you think. You sit around dreaming up ways to force others to pay for the things you believe in while never getting up and doing it yourself.

    Gosh, tell me more.

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  54. gump (1,553 comments) says:

    @Gump

    “How would introducing a “Living Wage” lower the cost of living?”

    ———————

    It would not lower the cost of living, and I haven’t suggested it would.

    I was responding to your comment that reducing the cost of living would increase inflation (because your comment was not correct).

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  55. Sector 7g (237 comments) says:

    Gosh, tell me more. Ok.

    You know it is true.

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  56. Elaycee (4,332 comments) says:

    ross69 (2.46pm):

    When the minimum wage increases, this has no effect on the average wage

    Whaaaaaaat??

    Someone is on $15. Someone else on $35. And a third on $100. The average is $150/3 = $50.00
    But you move the bottom figure to $20 and the rest stay the same, it becomes $155/3 and the average = $51.66.

    If the bottom figure increases, the average must also increase. Logic 101.

    FIFY

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  57. flipper (3,847 comments) says:

    Ryan Sproull (5,853) Says:
    September 9th, 2013 at 4:55 pm

    The actual CASH cost of the $18.50 to the employer is more than $21.65 per hour – all to be paid from a reduced income stream.

    Only private sector employers will feel that pressure. Taxes and Rates will go up to meet the 36 -40 share of the economy that is the State and local government..

    Yes, flipper, that is true. And the opposite would occur if the minimum wage was dropped, wouldn’t it?
    ******

    You have already demonstrated that you are thick, Ryan. Do not celebrate that fact by further trumpeting it to the world.

    If an employer has LESS cash flow to run their business because of a State mandated , unaffordable, wage rate thresh hold, care to guess what the result will be?
    Even dummies like you folks should be able to understand that redundancies, and a frozen work force number, will follow. Not MAY follow. But WILL follow. When the economy is growing, why apply the brakes?

    So, take your half baked Kelly/Cunliffe/ Jones/Rainbow/ socialist ideas back to the 1920s, from whence they came.

    Oh, by the way, care to guess at the Minimum Wage in the US right now? We are generous by their standards.

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  58. Ryan Sproull (7,060 comments) says:

    Gosh, tell me more. Ok.

    You know it is true.

    Sector, just to be clear, you’re saying that I have to literally go out and start a new business before you will consider me worthy of having thoughts or opinions on the question of minimum wage?

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  59. burt (8,034 comments) says:

    Elaycee

    ross69 is a Labour supporter – he’s just repeating the words printed on the party talking points list – these points aren’t designed to be debated – rather shouted at people loudly with a megaphone when logic and reason make the party look stupid.

    He’s just a foot soldier – spare him the humiliation that his dear leaders have lumped onto him by asking him to repeat their lies so they can get elected.

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  60. PaulL (5,983 comments) says:

    In other words, not only do businesses not hire out of charity, but they also do not set pay based on how much your efforts profit them.

    Two separate concepts.
    1. Someone’s salary is set based on what you have to pay so as to hire them. It’s a market, supply and demand. There are market imperfections (such as lack of willingness to get a new job) that impact this, but it will do as a broad assumption.

    2. Whether a job exists or not is based on whether the market rate for the person is low enough that someone can make a profit off the work of that person. So if I have to pay you $100K because someone down the road would pay that, but I make only $80K from your work, then I won’t hire you. Presumably what you’re doing for the person down the road is more valuable for them, and they’re making at least $100K

    Going further, in a market that works well, over time the returns will accrue to the scarce resource. So if people willing to run a company is a scarce resource, then the returns will accrue to them over time. If there’s a shortage of people with a specific skill or just with a willingness to work, then over time the market will bid up their pay and bid down the returns to an employer.

    In this way the overall market self corrects – if running a business is really profitable then more people will do it, and that will create more opportunities for employees, who will then get paid more, which will reduce profitability, and eventually we reach equilibrium.

    Interestingly, the govt intervenes in this market in a few ways. They create lots of red tape and pain for employers, which artificially reduces the returns to being a business owner, and therefore reduces employment opportunities for the people who would have worked in those companies. They set a minimum wage which means that some jobs simply don’t exist – the value of that job isn’t high enough to pay minimum wage (I reckon many of these jobs disappear into the grey economy and are done by either retirees as “cash jobs” or by illegal immigrants, or people on benefits as “cash jobs”). They introduce a wedge between what a company pays you and what you get (taxation) which reduces your inclination to work. They subsidise education, which hopefully means that more people have higher skills, and should push them into the position of having the upper hand in bargaining (dubious whether it actually achieves that, but in theory it could).

    As always, it’s complex. And, given how complex and self correcting it is, you need to be very careful when you intervene in this market – you can get some very weird side effects. Things like raising the youth minimum wage come to mind.

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  61. Ryan Sproull (7,060 comments) says:

    You have already demonstrated that you are thick, Ryan. Do not celebrate that fact by further trumpeting it to the world.

    If an employer has LESS cash flow to run their business because of a State mandated , unaffordable, wage rate thresh hold, care to guess what the result will be?
    Even dummies like you folks should be able to understand that redundancies, and a frozen work force number, will follow.

    So, take your half baked Kelly/Cunliffe/ Jones/Rainbow/ socialist ideas back to the 1920s, from whence they came.

    Oh, by the way, care to guess at the Minimum Wage in the US right now? We are generous by their standards.

    Flipper, are you saying that I demonstrated that I was thick when I agreed with you?

    Or are you saying that I demonstrated that I was thick when I said that lowering the minimum wage would reduce pressure on private-sector employers?

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  62. Ryan Sproull (7,060 comments) says:

    Two separate concepts.
    1. Someone’s salary is set based on what you have to pay so as to hire them. It’s a market, supply and demand. There are market imperfections (such as lack of willingness to get a new job) that impact this, but it will do as a broad assumption.

    2. Whether a job exists or not is based on whether the market rate for the person is low enough that someone can make a profit off the work of that person. So if I have to pay you $100K because someone down the road would pay that, but I make only $80K from your work, then I won’t hire you. Presumably what you’re doing for the person down the road is more valuable for them, and they’re making at least $100K

    Paul, yes, I was going to say that, but didn’t want to detract from the point that it’s not value to the business that causes someone to be paid above minimum wage. If an employer could pay someone minimum wage to do my job or scrubone’s job, they would, regardless of how much value we bring to our respective businesses.

    The value of skilled labour sets a maximum on how much a business will sanely pay for it, but it’s only the threat of leaving for another employer that sets a minimum.

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  63. PaulL (5,983 comments) says:

    @Ryan: correct. But go the next step – in even a relatively efficient market, that threat leads to competition and over time bids a job up to it’s true value. That true value basically equates to the point where it’s worth starting a company and employing that person given the returns you get from having them as an employee. Make running a company harder, you reduce wages. Not many on the left have worked that out yet.

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  64. Ryan Sproull (7,060 comments) says:

    @Ryan: correct. But go the next step – in even a relatively efficient market, that threat leads to competition and over time bids a job up to it’s true value. That true value basically equates to the point where it’s worth starting a company and employing that person given the returns you get from having them as an employee. Make running a company harder, you reduce wages. Not many on the left have worked that out yet.

    Yep, so a more detailed statement than my one above would be…

    Employers pay the least possible in order to keep the employee from leaving, which is pushed up by how much other employers are willing to pay, unless there is someone else capable of and willing to do the same job for less pay, up to a limit of the value created by that employee’s labour, at which point the role in the business (and perhaps the business itself) becomes financially unfeasible.

    And I didn’t even include the costs incurred by recruitment and training requirements.

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  65. Ryan Sproull (7,060 comments) says:

    So the clincher is that raising the minimum wage will increase some people’s pay up higher than the value of their labour to the business, either making the role unfeasible (redundancy and the business keeps going) or the business unfeasible (business dies).

    Can anyone see anything wrong or incomplete about that statement?

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  66. flipper (3,847 comments) says:

    Ryan…..

    In case you have NOT noticed, no one, no political party, not The Treasury, not the Reserve Bank, not Business NZ, not Fed Farmers, …no one, is proposing a reduction in the minimum wage.

    Yes, lower wages would increase employment opportunities, but only for a small number at the bottom end, including those on NZ Super with other income. But that is NOT up for discussion. Ever heard of incentives? Bonuses?
    Having been an employer, and knowing many employers, I do not know of one that wants an under-paid, disgruntled work force.

    Paull summed it all up well when he said:

    ***” As always, it’s complex. And, given how complex and self correcting it is, you need to be very careful when you intervene in this market – you can get some very weird side effects. Things like raising the youth minimum wage come to mind. ” ***

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  67. Ryan Sproull (7,060 comments) says:

    In case you have NOT noticed, no one, no political party, not The Treasury, not the Reserve Bank, not Business NZ, not Fed Farmers, …no one, is proposing a reduction in the minimum wage.

    Well, maybe they should!

    Yes, lower wages would increase employment opportunities, but only for a small number at the bottom end, including those on NZ Super with other income. But that is NOT up for discussion. Ever heard of incentives? Bonuses?

    Wouldn’t there be knock-on effects from a reduced minimum wage? Lower wages increase employment opportunities, but also reduce the cost of starting new businesses, increase the returns on investment in businesses, encouraging foreign investment in New Zealand’s economy.

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  68. Harriet (4,616 comments) says:

    Ryan, I’ve been at the bottom. Here’s how it works:

    Employers don’t pay those who do more work any more than they pay those who do less. They will pay people who have ‘qualifications’ more – but not much more.

    I used to be a chef in NZ in the early to mid ’90′s. I got paid around $14-16hr and those who also ‘worked’ in the kitchen who were unqualified were paid about $12 hr[kitchenhands less] yet they did about 30-40% of what I did – and that was after I trained them what to do. I thought a minimum of $24 was fair given that I was training staff and doing more than twice as much work. I was told I was being ridiculous. I left NZ.

    You don’t get paid more at the bottom for doing more work than others – even though the employment contracts were bought in on that theory. That’s the REAL problem for most people who work. Instead, most work places have pay ‘levels’ to meet the ‘budget’. You go from one pay level to the next – but they’re mostly based on vacancies – not performance! Do not talk about bonuses – the biggest joke in NZ – travel vouchers to Fiji!

    You will hear every excuse under the sun by employers as to why you are not being payed in COMPARISON to those who do EXACTLY the same work or LESSOR work. They don’t want that arguement as it means that most staff will be put on the minimum wage, and a handful on double that +. Those on mimimum wage will then later leave for the sake of $1hr and the employer then has to replace them. NZ employers want loyal obediant servants – 24/7. The dumber the better.

    If you ask for a pay rise and your employer sees that you are not happy with what you get, they presume you are then going to leave so as to better yourself. They then go behind your back and look for others to replace you, then cut your hours ect till you leave as employers don’t like to be left in the lurch. When asking for a pay rise – employers get what they want from staff before staff even now that they want it. It’s just a game to them.

    Management have ‘pay levels’ and unions have ‘pay rates’. They’re both the same – dishonest- and they really only benefit the lazy!!

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  69. Redbaiter (8,032 comments) says:

    “Sector, just to be clear, you’re saying that I have to literally go out and start a new business before you will consider me worthy of having thoughts or opinions on the question of minimum wage?”

    More or less. How can we grant you any authenticity when you’re always running around telling us how businesses should be run but you’ve never run one yourself?

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  70. Ryan Sproull (7,060 comments) says:

    Pretty grim reading, Harriet.

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  71. Ryan Sproull (7,060 comments) says:

    More or less. How can we grant you any authenticity when you’re always running around telling us how businesses should be run but you’ve never run one yourself?

    Well, you could always evaluate what I’m saying rather than who’s saying it.

    I’ve never managed any business units or departments in the public sector – how long would I have to do so in order to have authenticity in having thoughts or opinions on how they are run?

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  72. Harriet (4,616 comments) says:

    “….Pretty grim reading, Harriet….”

    It’s how it goes for those at the bottom. You work harder than those around you and your employer doesn’t respect that. It’s demoralising. I was told by a couple of employers that I would be better off if I left the industry. That sums up well what they are then looking for in employees that they prefer to employ – stupidity.

    BTW – it was 20yrs ago. I trade for a living now – while talking to you. Sometimes that costs me a lot. :cool:

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  73. Ryan Sproull (7,060 comments) says:

    It’s how it goes for those at the bottom. You work harder than those around you and your employer doesn’t respect that. It’s demoralising. I was told by a couple of employers that I would be better off if I left the industry. That sums up well what they are then looking for in employees that they prefer to employ – stupidity.

    BTW – it was 20yrs ago. I trade for a living now – between talking to you. Sometimes you cost a lot.

    Hah, you too. After our last bout, I had to spend half a Saturday working from home to top up my billable hours.

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  74. Redbaiter (8,032 comments) says:

    Public sector doesn’t count either. Its not your money and its completely risk averse. Anything you think you learn about business in that situation will actually be useless to you because its not based upon reality. Its perverse, and your thinking will become likewise perverse.

    Mortgage your house and put the money into a business venture. Or raise money on the share market or through private investment to fund an idea. Then you will learn about business. It might even take two or three failures, but eventually you will be able to talk with authenticity.

    Shiney arsed left wingers cosseted within government bureaucracies are delusional if they think they can talk about business with any real credibility.

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  75. PaulL (5,983 comments) says:

    @Ryan, there is an option where increasing the minimum wage means the person gets paid more, and the employer earns less. The problem is that in aggregate, that means that _some_ jobs go away, and _some_ companies go out of business. Not every employee, not every business. It’s classic union economics – when a union pushes up the award rate their members get a pay rise at the expense of people who might have one day become members (those in the club stay in the club, it’s harder to join the club). Maybe some of their members get the sack, but then they’re not members any more, so no need to worry about them.

    When you push up the minimum wage some people become unemployed, but we don’t have to worry about them because they’re now guaranteed Labour voters – they’re on a benefit. Many people get a small improvement, a few people get a very poor outcome. The many outweigh the few.

    @Harriet: true but not true. A company that can’t tell who of it’s staff are good and who aren’t will eventually succumb to competition. Unless every other company is equally incompetent. A cafe I sometimes frequent has worked it out – I reckon the guy is probably paying about 10% more than the next guy, but his staff are twice as good. They work all day, when there aren’t customers they’re cleaning, when there are customers they’re serving them efficiently. It helps that the owner’s there on the floor working too. I reckon his cafe would be twice as profitable as the next one, because he’s worked out that it’s profitable to pay staff more. Plenty of people haven’t. Overall the hospitality trade sucks, and it sounds like you had a particularly bad run of it. And, without knowing you, I’ve had plenty of staff worked for me that thought they did twice as much work as the next person……but actually didn’t. There’s a possibility you’re one of them, hard for me to say from the outside. :-)

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  76. Ryan Sproull (7,060 comments) says:

    Public sector doesn’t count either. Its not your money and its completely risk averse. Anything you think you learn about business in that situation will actually be useless to you because its not based upon reality. Its perverse, and your thinking will become likewise perverse.

    You missed my point, Red. By your logic, I shouldn’t be able to have an opinion on how the public sector operates, because I have no experience of working in it.

    Mortgage your house and put the money into a business venture. Or raise money on the share market or through private investment to fund an idea. Then you will learn about business. It might even take two or three failures, but eventually you will be able to talk with authenticity.

    I agree that someone with personal experience of starting a business will have a lot of insight from doing so.

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  77. Redbaiter (8,032 comments) says:

    Man.. WE KNOW HOW THE FUCKING PUBLIC SECTOR WORKS FOR EVERY FUCKING DAY WE ARE HARRIED AND HARASSED AND HAVE TO DEAL WITH THE FUCKING LOONY DETACHED FROM REALITY CLIPBOARD WIELDING SNIFFING SNEERING SIMPERING FUCKWITS WHO ARE IN IT.

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  78. Ryan Sproull (7,060 comments) says:

    Red, go work in the public sector for 10 years and then maybe you’ll be able to yell with authenticity.

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  79. burt (8,034 comments) says:

    People should never start a business – they should simply vote Labour and go on a benefit …. Real men don’t take responsibility for their own family – other people’s money is taken from them so real men can stay at home !!!!!!

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  80. Harriet (4,616 comments) says:

    “…There’s a possibility you’re one of them, hard for me to say from the outside…”

    No I wasn’t. I only ever took about 5 days of sick in about 10 years working in NZ…..so I did tell my last employer in NZ what I thought! :cool:

    However I will give some employers the benefit of the doubt, because as you have reminded me, it was in the early to mid 90′s just after the employment contracts were bought in, and the industry then had a ‘race to the bottom’ with regards to wages. Some employers paid less, then charged the customer less, then the competition had to pay less in wages. The contracts act also opened the doors for others to open businesses who new they could survive by not paying penalty rates which thyen made the matter worse.

    Nowdays however most businesses in hospitality have to provide a quality product to survive, which then means they have to treat good staff better – as you suggest.

    It was probably a case of ‘wrong industry at the wrong time’ when I think about it, and the better employers were probably only trying to survive under worsening conditions. Cheers.

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  81. Redbaiter (8,032 comments) says:

    “Red, go work in the public sector for 10 years and then maybe you’ll be able to yell with authenticity.”

    I’d rather off myself.

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  82. Griff (6,996 comments) says:

    We live in hope red.

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  83. Ryan Sproull (7,060 comments) says:

    @Ryan, there is an option where increasing the minimum wage means the person gets paid more, and the employer earns less. The problem is that in aggregate, that means that _some_ jobs go away, and _some_ companies go out of business. Not every employee, not every business. It’s classic union economics – when a union pushes up the award rate their members get a pay rise at the expense of people who might have one day become members (those in the club stay in the club, it’s harder to join the club). Maybe some of their members get the sack, but then they’re not members any more, so no need to worry about them.

    When you push up the minimum wage some people become unemployed, but we don’t have to worry about them because they’re now guaranteed Labour voters – they’re on a benefit. Many people get a small improvement, a few people get a very poor outcome. The many outweigh the few.

    I’m less concerned with political motivations behind party policies and more concerned with understanding the fundamentals of the problem in order to come up with a solution.

    Because, to me, it is a problem that there are people working 40 hours a week and being paid less than they would need to live what I consider a minimum good life. And, to me, it is also a problem that there are people who are unable to find work. And, to me, it is also a problem that unemployment combined with unemployment benefits ensure a certain portion of the population is addicted to the State.

    And because of the way my head works, I refuse to believe there is not a solution that addresses them all. But they seem on the surface a bit like the old iron triangle I’ve worked with a lot. (You can have it done cheap, quickly and low quality; cheap, high quality and slowly; quickly, high quality and expensive; but you can’t have it done quickly, high quality and cheap.)

    So I want to think it through from all angles. It’s not a problem for someone who either doesn’t care how little people are paid (most right-wingers), or doesn’t care how many people are unemployed (most employed people), or doesn’t care how reliant people are on the State (most left-wingers). But all three of those things bother me, and I’m sure we can come up with a solution.

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  84. Harriet (4,616 comments) says:

    “….I’d rather off myself….”

    The fuckers in this place are now going to give you job offers…….left, right and centre.

    [edit: see what I mean.]

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  85. PaulL (5,983 comments) says:

    @Ryan: So, if that’s our problem, let’s get to the bottom of what it takes for someone to generate enough value for their employer that their employer can and will pay them enough to live what you consider to be a minimum good life.

    Firstly, the definition of minimum good life changes with age. Let’s accept that it’s important across someone’s life that they get to a good income, but perhaps their first job doesn’t have to provide that. So for many people the key is to get that first job and learn skills, and have enough money over at the end of the week to get out on the piss with their mates (we’re talking 18-25 year olds here). So, take them out of your concerns – they’re looked after (there’s a second order issue to make sure they’re getting enough for this lower aspiration, but if we take care of the others they’ll be taken care of too).

    So now we have people with reasonable life experience and working in a job where they don’t generate enough to live “a good life (Ryan’s definition)”. And given our earlier discussions, our problem is that these people don’t create enough value to be desirable to other employers, or to create enough value for their employer to pay them more.

    Thoughts on things that might impact that:
    1. Drugs and substance abuse
    2. Mental health issues
    3. Lack of motivation
    4. Inability to be the sort of employee people value – someone who goes the extra mile
    5. Lack of skills
    6. Lack of capacity to apply skills they have

    How many of those are addressed by fiddling with the minimum wage?

    For my money, attitude is about 90% of it. Someone with the right attitude can overcome most of the above. The old NZ number 8 fencing wire attitude, get the job done, have some common sense. People with that aptitude are still worth gold – maybe it’ll take some finding the right job for them, but most of them will end up living the good life.

    The whingers, whiners, the “why don’t I earn more” sorts, they’ll end up doing their same dead end job badly for the rest of their lives, and never understand why nothing changed. So I think the culture change that NZ is currently undergoing is making this worse – the cosseting, the division of jobs into mutually exclusive specialties, the lack of interest in end outcome, the entitlement mentality, the “every kid wins a balloon” life that we’re encouraged to believe we can live. In short, to sound a bit like Red, the crazy lefties are destroying our country.

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  86. Ryan Sproull (7,060 comments) says:

    So now we have people with reasonable life experience and working in a job where they don’t generate enough to live “a good life (Ryan’s definition)”. And given our earlier discussions, our problem is that these people don’t create enough value to be desirable to other employers, or to create enough value for their employer to pay them more.

    (Or our problem is the current system of determining remuneration.)

    So now we have people with reasonable life experience and working in a job where they don’t generate enough to live “a good life (Ryan’s definition)”. And given our earlier discussions, our problem is that these people don’t create enough value to be desirable to other employers, or to create enough value for their employer to pay them more.

    Thoughts on things that might impact that:
    1. Drugs and substance abuse
    2. Mental health issues
    3. Lack of motivation
    4. Inability to be the sort of employee people value – someone who goes the extra mile
    5. Lack of skills
    6. Lack of capacity to apply skills they have

    How many of those are addressed by fiddling with the minimum wage?

    For my money, attitude is about 90% of it. Someone with the right attitude can overcome most of the above. The old NZ number 8 fencing wire attitude, get the job done, have some common sense. People with that aptitude are still worth gold – maybe it’ll take some finding the right job for them, but most of them will end up living the good life.

    The whingers, whiners, the “why don’t I earn more” sorts, they’ll end up doing their same dead end job badly for the rest of their lives, and never understand why nothing changed. So I think the culture change that NZ is currently undergoing is making this worse – the cosseting, the division of jobs into mutually exclusive specialties, the lack of interest in end outcome, the entitlement mentality, the “every kid wins a balloon” life that we’re encouraged to believe we can live. In short, to sound a bit like Red, the crazy lefties are destroying our country.

    What changes would you make to the culture to cause people to have the kind of attitude you believe will cause their labour to be more valuable? And how would you make those changes?

    Thanks for taking the time to explain your perspective very clearly, by the way, Paul.

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  87. RightNow (6,843 comments) says:

    gump: “I was responding to your comment that reducing the cost of living would increase inflation (because your comment was not correct).”

    Except I was responding to the previous poster and didn’t say that. So I think we’re actually in agreement.

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  88. Harriet (4,616 comments) says:

    Ryan#

    “…..But all three of those things bother me, and I’m sure we can come up with a solution…..”

    Good analogy, but it’s four….and even better…five things…..and better still six things.

    [4]What you do with your income.

    [5]What you do with a joint income.

    [6]What you do with a further part time income.

    Most people who are ‘rich pricks’ arn’t soley rich because they had 1 very high income.

    I think the arguement is not how much you earn, or poverty, or housing affordability – but what you actually want to do with your life….and what you do with your income so as to do that.

    As has been said before by economists “divide all the wealth up evenly, and within about 18 months you will find that the wealth has been re-distributed back to about where it was.” [they are talking percentage groups, not indivduals themselves]

    Most people need financial education. After I left NZ I didn’t bother to try to get more money off 1 employer as I knew there would always be a limit as a chef. So I worked at one full time job during the day and one at nights & weekends. It is then easier to ask 2 employers for $100 dollars extra a week than it is to ask one for $200. The result for me was the same. But it was also easier for the employer.

    And as Bob Jones once said in the mid 90′s “accountancy is really just a set of rules, it should instead be taught in the polytecs than in the universities.”
    So I went and bought 2nd hand finance and accounting books from the 2nd hand bookshops in Newtown Sydney – right opposite the university!

    Bob was right, and I didn’t have a student loan! [I didn't become an accountant, but I ran a couple of businesses for myself and now trade.]

    Earn and learn is really all it takes I think. Cheers.

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  89. Ryan Sproull (7,060 comments) says:

    So I went and bought 2nd hand finance and accounting books from the 2nd hand bookshops in Newtown Sydney – right opposite the university!

    Hah, weird, I’m off to Newtown in about 20 minutes. Fight Club is playing at the cinema!

    As has been said before by economists “divide all the wealth up evenly, and within about 18 months you will find that the wealth has been re-distributed back to about where it was.” [they are talking percentage groups, not indivduals themselves]

    Yes, but I think it doesn’t go far enough to say, “This is because some people treat money differently from others, treat work differently from others, have different ambitions, etc.”

    Why do some people have these advantages and others don’t?

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  90. Harriet (4,616 comments) says:

    I wouldn’t call them advantages, but rather, having a good work and savings ethic becomes an advantage. Actually, it’s probaly not so much an advantage – but a requirement of life.

    Some women hate microwaves and dishwashers – but remind them about pot bellies, boiling pots of water and milking cows, and they soon change their attitude! :cool:

    Have a good night.Cheers.

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  91. PaulL (5,983 comments) says:

    @Ryan: I think the problem with our culture is that people no longer expect that they need to make their own way in life. At school they don’t fail, in sports they don’t fail.

    I’m all in favour of participation – some things you do participate in, and the value comes from participating. I run because I like the exercise, not because I delude myself I could win any races, I used to play basketball in a team that never won anything, but I still enjoyed it.

    But if you never tell people they’re bad at some things, they’ll never try to do them better, and they’ll never go and find something else that they might be good at.

    Intergenerational welfare dependency is a big part of the problem. If you’ve never seen someone go to work every day you have no concept of how it is that people who go to work have more money than you.

    Accountability for your actions is important. Understanding that you get out what you put in. Sports can be a great way to learn this, but so can charity work, school science fairs, any of a range of things.

    It’s not easy, if it were someone would have sorted it out by now. There’s no magic wand that will fix it all, but certainly it’s possible to inch in the right direction through a series of small changes.

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  92. PaulL (5,983 comments) says:

    @Ryan: also be careful about making all people the same. Money isn’t everything. Some people choose to live “the good life” by going off grid, growing their own food, having a solar panel on their roof. Part of a market economy is that different people can have different measures of success – maybe I spend half my life searching for a particular stamp to complete my stamp collection, and I chuck lots of sickies whilst I go through bags of stamps. And maybe having that right stamp is worth more to me than having a better paid job that allows me to meet Ryan’s definition of a good life.

    I reckon once you deal with those who have substance abuse issues, intergenerational welfare, and mental health issues, plus those who are consciously opting out (I might include those who get a degree in philosophy in that group) and those who are young or deliberately part time……you actually don’t have a hell of a lot of people left who aren’t living a good life.

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  93. burt (8,034 comments) says:

    OK, just doing my fact checking. If we bang the minimum wage to $18.40 and make sure no family of 4 gets less than 60 hours a week of that – that won’t fuel inflation ?

    It won’t effect superannuation ?

    People currently on about $20/hour are not going to want a pay rise to keep the hard fought ground they had made up from the minimum wage causing general significant ( way over CPI ) pay increases further fuelling inflation?

    Companies are not going to be laying people off in large numbers and will keep hiring just like today because the companies are all rich pricks and just choose to pay less than $18.40/hour to minimum wage workers ?

    Hell – Why didn’t we just make this change years ago. If there is no downside why did it take so long to simply realise we can legislate away poverty if we vote Labour.

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  94. SPC (5,473 comments) says:

    First the economist would determine that super is 66% of the net average wage not the average wage.

    Any wage increase for any worker AND any tax cut for any worker increases the cost of super.

    Thus the cut in top tax rate from 39 to 38 to 33 to 30% means a rising cost of super, just as much as an increase to the MW.

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  95. burt (8,034 comments) says:

    SPC

    Sure, so what’s the cost ? If it’s going to be Labour policy to implement this within 100 days (if elected next year) then Labour must surely know the likely impacts on the current account ?

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  96. Simon (716 comments) says:

    So called living wage tacit admission that the state functionaries have been lying about inflation.

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  97. SPC (5,473 comments) says:

    burt, it is Labour policy to increase the MW to $15 within 100 days.

    The MW is increased each year – and is currently $13.75.

    It will increase to $14.00 or $14.25 in early 2014 and if National win later in 2014, it would rise to $14.25-14.75 in early 2015.

    Labour’s promise to increase the MW to $15 in 2011 was significant now it is of marginal value and cost.

    The living wage concept applies only to the public service.

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  98. OneTrack (2,818 comments) says:

    SPF – “The living wage concept applies only to the public service.”

    So Labour’s plan is take take more money from the productive sector and give that money to the unproductive public service sector. That is such a masterful plan. Why didn’t I think of that? A bunch of troughers taking more money from the people who actually keep NZ going and they give it to their mates who basically shuffle paper from one desk to another. High five.

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  99. SPC (5,473 comments) says:

    One Track, it is actually a misunderstanding of the living wage concept which is that in higher cost areas – here such as Auckland, Christchurch and Wellington then the MW needs to be at a higher rate a so called living wage for these areas. It was not intended to be rolled out nationwide or to public service workers ahead of other workers etc.

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  100. burt (8,034 comments) says:

    SPC

    Right so if the living wage is higher in the cities, the benefit is higher in the provinces ?

    We could relocate unemployed people into the provinces, pay “workers” more to live in the city and say it’s not social engineering. I mean it would be if National did it – but under Labour it would be visionary social policy.

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  101. SPC (5,473 comments) says:

    burt, a higher MW in areas where the living costs were higher – higher rents etc. The idea originated in London. It has support from Tories such as Boris Johnson.

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  102. lolitasbrother (588 comments) says:

    PaulL (5,393) Says: September 9th, 2013 at 2:08 pm
    So, first part of the math. $18.40 per hour is $736 for a 40 hour week, or $38,272 per annum. 66% of that would be $25,259. I’m pretty sure National Super is $13,000 per annum at the moment, double that for a couple.
    So, if the minimum wage and the average wage were the same (possible once we work through part time work etc, but probably a very conservative/low assumption) this would be a substantial increase in National Super

    PaulL WRONG the rate does not double for a couple

    http://www.workandincome.govt.nz/manuals-and-procedures/deskfile/nz_superannuation_and_veterans_pension_tables/new_zealand_superannuation_tables.htm

    alwyn (205) Says: WRONG ALWYN READ BELOW ALWYN‘
    September 9th, 2013 at 2:49 pm
    PaulL @ 2.08pm.
    I’m afraid your calculation is incorrect.
    The rate for a couple is set at 66% of the average weekly wage.
    If the average weekly wage was, as you suggest equal to the “living wage” then the rate for a couple would be the $25,259 you mention. The actual rate for a couple at the moment is $32.360 gross per year so if you assumption on what the average would become there would be a major DROP in the national super.
    I am very loathe to give my own view on what might happen if the “living wage” became the average wage. The Reserve Bank, or Treasury might be able to give estimates but I wouldn’t trust any else to give sensible opinions.
    see rates here

    http://www.workandincome.govt.nz/manuals-and-procedures/deskfile/nz_superannuation_and_veterans_pension_tables/new_zealand_superannuation_tables.htm

    In fact the rates are variable depending on circumstances ,both PaulL and Alwyn give wrong figures .
    it does pay as Alwyn suggest to be married or a couple

    http://www.workandincome.govt.nz/manuals-and-procedures/deskfile/nz_superannuation_and_veterans_pension_tables/new_zealand_superannuation_tables.htm

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  103. Ryan Sproull (7,060 comments) says:

    I reckon once you deal with those who have substance abuse issues, intergenerational welfare, and mental health issues, plus those who are consciously opting out (I might include those who get a degree in philosophy in that group) and those who are young or deliberately part time……you actually don’t have a hell of a lot of people left who aren’t living a good life.

    Hah, I partly attribute the very good job/career I have to my philosophy degree.

    So you wouldn’t characterise many people in New Zealand as “working poor”?

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  104. Jafa (37 comments) says:

    Aren’t we forgetting recent history with WFF in all this? Initially WFF only went to the very poor but the people who weren’t quite poor enough got disillussioned with all the free lolly that the others got and they missed out on. So kind Aunty Helen extended the whole thing so folks earning $120,000 a year now got it. Kind of ironic when you are deemed to be a rich prick if you earn $60,000 a year but thats for another thread. Back to the living wage debate. If you are currently earning $18.45/ hr (or $20/hr or any other number), how will you feel that a cleaner is getting paid nearly as much as you? If you think those people are going to be ‘happy’ about it, think again. There will be attempts by the people who miss out on this ‘living wage’ lolly to get their ‘fair share’ of the action. In other words this will trigger a massive amount of wage inflation worse than you can imagine. The average wage will balloon as the knock on effects work their way through the system not to mention the effects on super which will bankrupt the country. If Cunliffe et al think they have any economic credibility, they are similarly deluded when proposing this sort of finacial armageddon. I cannot believe the idiotic policies that these buffoons dream up simply to get in to power. But then Aunty Helen has taught her disciples well hasn’t she?

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