CTU demands on minimum wage ridiculous

The CTU have said:

“What is needed is a change in the calculation of the minimum wage. The minimum wage needs to be two-thirds of the average wage, this would make it much fairer (two-thirds of the average wage would be $19.88 per hour).

The idea of linking the minimum wage to the mean or median wage is not bad in itself. I’d welcome it, as would save the arbitrary decision making process every year. It would also shift the focus to increasing the median wage so everyone benefits.

But a level of two thirds of the average wage would be by far the highest in the world. The current minimum to mean ratios are:

  1. New Zealand 0.52
  2. France 0.50
  3. Slovenia 0.49
  4. Chile 0.46
  5. Australia 0.44
  6. Germany 0.43
  7. Israel 0.43
  8. UK 0.41
  9. Canada 0.40
  10. Ireland 0.37
  11. US 0.25

The media never ever report our minimum wage is already the highest in the developed world.

At certain levels increases have only a small impact on employment. But the larger the ratio to the average wage is, the more jobs that would disappear. If this was not the case the minimum wage would be $50 an hour.

If you compare minimum wages to median wages, the CTU proposal would have the minimum wage at 85% of the median wage. This again would be the highest in the developed world. Other minimum to median ratios are:

  • France 62%
  • Israel 58%
  • Australia 53%
  • UK 49%
  • Canada 44%
  • Ireland 44%
  • US 36%

What I would do is fix the minimum wage at its current level of 67% of the median wage. It would still be the highest in the developed world, but would mean that the focus would go on lifting wages across the board – and you do that via productivity gains not decrees.

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