Minimum Wage

The Government has announced the minimum wage is increasing 7.9% from $9.50 to $10.25. And lets remember how Dr Cullen said voting National would lead to high interest rates, because this will of course be somewhat inflationary.

They plan to go to $12 an hour in 2008, as promised to the Greens and NZ First.

Unless one believes in Santa Claus, you would accept that at some level, an increase in the minimum wage will lead to job losses. As an extreme if the minimum wage was $50 an hour we’d have massive unemployment as many businesses would go bankrupt or be unable to trade competitively.

Whether this particular increase will lead to job losses is debatable. But there certainly is a limit to how far one can push up the minimum wage and not have job losses. Time will tell.