Keith Ng on minimum wage

Keith Ng at Public Address takes a different position on the to most of the other bloggers:

Businesses are taking the brunt of declining exports, consumption and investment. They try to cut costs by cutting overtime hours, not hiring new staff, and trimming back the hours for temporary employees.

It's that last group are now on the plank, and if the minimum wage increases, they will be the ones who are most expendable and relatively expensive. Increasing the cost of hiring people will just force these businesses to cut back on hours, or push them into lay-off territory.

Nor will the supposed benefits be worth squat. If you raise the minimum wage by 10% ($1.20) and cause, say, 1 in 20 of those minimum wage workers to lose their jobs, the other 19 are not going to spend their additional earnings. Rather, they're going to freak out about people getting fired, and get even tighter with their spending.

Increasing the minimum wage is not inherently a bad thing, but to do it now, when so many businesses and their employees are tethering on the edge is a seriously bad idea. The harm done by the job losses would far outweigh the $20 or $30 it might mean for those other families.

I suspect the Government may keep it constant in real terms, which will be a 50c or so increase in nominal terms. What will be interesting is how many job losses DOL predicts will occur with even a 50c increase?

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