Minimum Wage increase to $12.50

The Herald reports on yesterday’s decision to increase the minimum wage to $12.50. As John Key says, it was a balacnign act:

Mr Key said yesterday that they were “concerned that if the wage was to rise too much there would be unemployment”.

“Similarly, no raise at all in the minimum wage would have left the lowest-paid, most vulnerable workers with no increase to offset the costs that they are obviously bearing,” he said. “I think we have hit the right balance.”

Politically the balance is about right. A zero increase would have been a Godsend to Labour and the unions to portray National as heartless. More than 50c during a time when unemployment is rising anyway, could really impact jobs.

Frog Blog comments on the decision, and has a go at Labour for their hypocrisy in refusing to endorse a call for a move to $15 until after National had made their decision.

But there is a price to pay for increasing the wage. The debate has shifted from whether the minimum wage should be increased to “how much should it move to”, and we then face a rash of economic lunacy with Matt McCarten and UNITE seeking a CIR on having the minimum wage increase to two thirds of the average wage within three years.

This would see a minimum wage of $16.40 based on 2008 figures. By 2011 it would mean you are not allowed to employ anyone at all for under $35,000 a year. Nope not even that 15 year old dairy assistant (once they have worked for more than a month).

The communist states tried and failed with their policies that you have to pay everyone the same (or close to the same). The reality is that a 15 year old with no qualifications, no training and no job experience should not be getting anything near the average wage which reflects people with 20 years of experience, training etc.

I worked for a year after school in my fourth form for $1.99 an hour at Woolworths. It was shitty work – I joked the job was to clean up dirt, to get treated like dirt and to get paid dirt. But it was damn good for me as a 14 year old to have a sense of responsibility and having to start earning my own money. So I worked two hours after school every night, every Friday night and Saturday morning. Muldoon ruled then so it was illegal to work Sundays!

Anyway with the policies expoused by McCarten, there is no way I would have picked up that job today. In fact there is no way I would have picked up most of my holiday jobs. The paper run would have probably been illegal too unless as a 12 year old I set myself up as an independent contractor.

It is simplistic and destructive to say the minimum wage should be two thirds of the average wage. It is treating all jobs and all employees as just minor variations, with no regard for individuality.

It also could have profund inflationary impacts. If you have a minimum wage of $35,000 a year, then sure as hell university graduates are not going to accept $35,000 as a starting salary. Would you accept a job with a law firm that pays the minimum wage? Hell no. So starting salaries for graduates would increase to $50K or so. Which means all the salaries up the chain would increase. And this would all increase the average wage, which would result in a nice spiral of wages increasing with no productiviy gain. And boy watch us export jobs overseas quicker than you can imagine.