Monday, March 21, 2005

Raising the minimum

The minumum wage increases to $9.50 an hour today - but the CTU isn't happy. And they have a point. The value of the minimum wage has been eroded over the last 15 years, and while Labour has increased it by over $2 now, it is still worth less in real terms than it was in 1987. And at the present rate of increase, its unlikely to reach the 1987 level for another three years.

(Which would mean that after three terms of a Labour government, we'd be back where we started in 1987, before the revolution turned really toxic. Which tells us something both about how much damage was done in the 90's, and how much (or rather, little) Labour is committed to undoing that damage).

At the moment, the government is trying to raise wages. It is also trying to raise productivity. One way of doing both would be to seriously hike the minimum wage, in a couple of steps, to $12 / hour. This would both put increased pressure on wages at the bottom of the market, as employees sought to retain their existing relativities with the minimum, and it would provide employers with a greater incentive to invest in improving productivity rather than simply hiring another warm body. And at a time when there aren't really a lot of new warm bodies to go around, the latter especially seems like a good move.


the good thing abour rising minimum wages is that unemployment is a much more effective way of encouraging people to change industries than low wages.

The unemployment caused by raising minumum wage might shake some of the poor into realising that they need to seek more productive uses of their efforts. Unfortunatly humans are not particularly rational decision makers unless it's made pretty simple.

I wonder if there are any specific low wage industries we could take the hatchet to.

Posted by Genius : 3/21/2005 08:47:00 PM

Why not increase the minimum wage to $20/hr or even $50/hr?

Posted by Brian S : 3/21/2005 09:28:00 PM

While agreeing with the CTU call I would make two quick points:

1) The min wage on its own doesn't measure the material gains made by the working poor under Labour - ie) Hols Act provisions, in-work payments, social wage improvements such as income related rents...

2) Anything given by legislation can as easily be taken by a future right-wing government. Sound collective organising and bargaining ultimately offer better protection and possibilities.

Posted by michael wood : 3/21/2005 09:46:00 PM

While agreeing with the CTU call, I would make two points:

1) The min wage on its own doesn't give a full picture of the material improvements made for the working poor under Labour - ie) Holidays Act provisions, in-work payment, social wage improvements such as income related rents...

2) What is given by legislation can as easily be taken away by a future right-wing govt. Collective organisation and bargaining ultimately give more protection and opportunity than any goverment ordained minimum code.

Posted by michael wood : 3/21/2005 09:53:00 PM

Genius: Raising the minimum wage doesn't cause unemployment. See here for the details.

Brian: because generally you benchmark the minimum wage to be lower than the present average wage. Duh!

Michael: Generally, I agree. Labour's record on helping low-income earners is something they can be justifiably proud of. But all the same, I'd like them to commit to continuing progress.

As for promoting collective bargaining, that too can be repealed or effectively prevented, as the ECA showed...

Posted by Idiot/Savant : 3/21/2005 11:50:00 PM

Well since you raise the issue of the ECA, perhaps we should also consider the benifits of the old regime of cntralised pay fixing and awards... I see the CTU has finnaly screwed up the courage to even mention it recently.

From looking into '90s Industrial Relations, I've seen the old (rolled over I think until about 1992) service workers (or some such) award. Not just minimum rates higher than over ten years later, but higher night rates and weekend rates.

What we have 'gained' under Labour does not begin to make up what we have lost since the early 1990's.
On the flipside, if we ever did get non-State fostered (presumably) "Sound collective organising" by workers coinciding with low employment the resulting labour militancy and industrial choas could make a train wreck out of the economy.

We entrust other forms of adjudication to the State for the common good, perhaps we should return the role of Industrial Arbitration to its hands as well....

Posted by Jamie : 3/22/2005 10:17:00 PM

To save the trouble of double taking make that "low UNemployment" above.

Posted by Anonymous : 3/22/2005 10:21:00 PM

Idiot/savant - Note that in the Slate article you cited the author opposes the minimum wage. Also the issue is not just unemployment caused by the minimum wage. It's also the effect that it has on *all* salaries and the way some employers come to see it as a benchmark.

Posted by Brian S : 3/22/2005 11:03:00 PM

I/S - I have seen studies that say otherwise in fact that the raising of the minimum wage in australia caused the poor (minimum wage plus unemployed) to be worse off in as far as the loss due to unemployment outweighed the gain in income (they didnt specifically say that - I calculated it myself). Obviously that is not always the case and it depends on a lot of factors but to say raising the minimum wage will not increace unemployment is like saying eating fatty foods wont make me fat - its just so ridiculously counter intuitive as to reject it out of hand. The article in as far as it makes your point is just fudging - it provides no evidence jsut tries to place doubt on other data. that implies there is NO EVIDENCE otherwise he would have used it. His argument is pretty similar to the ones used to argue against global warming.

But as i noted I seriously think minimum wages can be a good thing for an economy where they destroy industries this relates to "the jobs lost are lousy jobs". the problem is that some lousy jobs suport other jobs while some are just a waste of space.

Posted by Genius : 3/23/2005 01:58:00 PM

Jamie: you're right, the ERA doesn't make up that lost ground. But it perhaps provides the tools to do so, and the CTU's "fair share" campaign is a good start.

Brian: I'm aware of that. But note that he doesn't oppose it because it causes unemployment (he's convinced it doesn't), but because he thinks that redistribution should be paid for indirectly through taxation, rather than directly by employers.

Posted by Idiot/Savant : 3/26/2005 04:32:00 PM