Pay rises for everyone!

The Herald reported:

Almost half of all women and a third of men earn less than $18.40 an hour – a rate which two Labour Party leadership contenders have promised to implement as a “living wage” in the state sector if they win power.

I’m still bemused that Labour now believes the effective minimum wage should be determined by Rev Charles Waldegrave of Lower Hutt! What will they do if next year he declares it should be $27 an hour!

Would-be Labour leaders Grant Robertson and David Cunliffe promised this week to raise minimum wages for government employees and contractors to $18.40, which unions and church groups say is the minimum required to meet the basic needs of two adults and two children where one parent works fulltime and one half-time.

This is why it is insanity to use the living wage as a de facto minimum wage. The living wage calculation is based on a very specific family situation that does not represent the vast majority of workers. Why would we say a 16 year old should have the same income as a 40 year old parent with two children?

Institute of Economic Research director Jean-Pierre de Raad said the figures confirmed that a living wage would be “harmful to the employment prospects of young people”.

Yep. Who is going to hire a 16 year old on a $38,000 a year starting salary?

“The data also confirm questions about the logic of the living wage,” he said. “The $18.40 figure is based on the expenses faced by a notional median nuclear family … earning the median household income.

My point. It is voodoo economics to start insisting this should be a minimum wage across the board for all employees.

“But a large proportion of those on low wages are the young … who will improve their incomes over time as they get work experience.”

I heard a great quote on a podcast today. The best way to eventually get a higher paying job, is to get a lower paying job. Saying that every adult in the public sector (or contractors to it, which is most of NZ) must start on at least $38,000 a year is nuts.

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