Wednesday, December 21, 2005

A Christmas present for the poor

The minimum wage is increasing again - from $9.50 to $10.25 an hour. This is the biggest increase Labour has made during its time in office, and shows that they will at least be trying to achieve that $12 / hour target.

Needless to say, this would not be happening under a National-led government, and it does provide some hope to those wondering whether there's really any difference between a center-right government led by national, and one led by Labour...


More evidence that Labour fails to understand what minimum wage really means - it guarantees that if one's labour is worth under a particular value (the 'minimum wage') one is effectively not worth employing.

Have a read of Outlawing Jobs: The Minimum Wage, Once More if you're interested in learning more. Particularly relevant is:

If the minimum wage is, in short, raised from $3.35 to $4.55 an hour, the consequence is to disemploy, permanently, those who would have been hired at rates in between these two rates. Since the demand curve for any sort of labor (as for any factor of production) is set by the perceived marginal productivity of that labor, this means that the people who will be disemployed and devastated by this prohibition will be precisely the "marginal" (lowest wage) workers, e.g. blacks and teenagers, the very workers whom the advocates of the minimum wage are claiming to foster and protect.

Social Darwinists could have no better allies than the Labour party of NZ.

Posted by Duncan Bayne : 12/21/2005 12:09:00 PM


Your claim rests on the beleif that that labour markets follow perfect competition, or anything close to it. They don't, as is evidenced by the fact that in recent years raises in the minimum wage (in NZ and England) have not been followed by increased unemployment but by decreases in unemployment.

Posted by Terence : 12/21/2005 01:43:00 PM

It can be a reasonable strategic decision for a country to raise minimum wages in order to force low wage jobs overseas and to encourage the development of higher wage jobs. Probably in god economies this wil work if it is a bad economy it is likely to at least cause temporary hardship for the poor (ie becoming unemployed).

Problem is - politically - you cant change it up and down all the time.

Posted by Genius : 12/21/2005 06:11:00 PM

Or you guys could just start being honest with yourselves and want to slash wages to 50c an hour and force all low wage workers into sweatshops, effectively bringing back slavery. Thats why we have minimum wages, so we dont have stinking sweatshop hellholes where workers cannot earn enough to eat? Is that what you want??

Posted by Millsy : 12/21/2005 07:31:00 PM

Terence - are you claiming that the drop in unemployment was related to the raise in minimum wage? I think you'll find if it wasn't, the drop would have been greater.

Besides, claiming NZ unemployment rates as evidence is a bad idea given the rise in people on various other types of benefit, not to mention dubious 'educational' schemes which also drive the rates down.

In fact, you could probably disregard the, what is it, 1/5th of the population who work for the Government? After all, that's just a more rarified form of welfare :-)

Genius - who died & made you God? What right have you, or anyone else, to dictate by force what kind of economy NZ develops? Moreover, what gives you the idea that it's possible to control economic development?

Again, read Ludwig von Mises, who proved that central economic control is in fact impossible, due mostly to the ammount of data involved.

Millsy - mmmm, smell the burning strawman.

Posted by Duncan Bayne : 12/22/2005 10:37:00 AM

duncan, and others interested

The mechanisms for increased employment through higher minimum wages are simple enough.
Poor people spend all their money (and then some), so when you give them more of it to spend it boosts the entire economy equal to the drain it applies. It does hurt low-wage employers relative to others, but that's usually a positive overall.
It doesn't hurt anyone much though, employers of minimum wage earners usually can't function with fewer workers, and are normally only competing directly with other minimum wage employers: overall, no real ability to make layoffs in the first place, and little or no direct competative disadvantage with increased wage costs anyway.

Most importantly, increasing low end wages allow poor people to have proportionately more discretionary spending, icreasing the free flow of money and thus making capitalism work better (assuming it's reasonably free to work it's magic).

As for exporting poverty, as mentioned by Genius, yes, that's rather unfortunate, and pretty much complete here. Perhaps if we had stronger unions or an actual left-wing government they'd have something to say about the import of slave-made goods.

Posted by tussock : 12/22/2005 04:48:00 PM


Hurt some so that others may benefit? Even if you're right about the benefit (and I assert that you are wrong), your position is scarcely moral.

You're still ignoring the fact that (especially in the highly competitive low-margin areas like, say The Warehouse and such), if someone is worth $5 / hour, and the Government makes you pay them $6 / hour, you either have to put prices up (hurting the minimum-wage earners the most, as they're the ones who buy from such places), or not hire the person. You can't have your cake, and eat it too.

BTW, with respect to 'perfect competition' - have a read of Platonic Competition, again from the Mises Institute:

The "pure and perfect competition" doctrine seeks to replace the competition among producers in the creation of wealth, with a competition among consumers in the form of a mad scramble for a fixed stock of existing wealth. It seeks a state of affairs in which no additional buyer can obtain a product without depriving some other buyer of the goods he wants — for that is what competition at full capacity would mean. It seeks to make men competitors in consumption rather than in production. It seeks to transform the competition of human beings into a competition of animals fighting over a static quantity of prey. In other words, when it denounces capitalism, it is denouncing the fact that capitalism is not ruled by the law of the jungle.

Posted by Duncan Bayne : 12/23/2005 11:25:00 AM

Hey Duncan,

Why dont you just say you want to bring slavery back?

I know that is what you want.

Posted by millsy : 12/23/2005 11:56:00 AM

Won't ... feed ... trolls ... won't ...

Posted by Duncan Bayne : 12/23/2005 04:12:00 PM