With the government shackled into a coalition arrangement which forces them to go right more often than left, I sometimes wonder what the point of having a "Labour" government is. Today, they reminded me why, with the largest increase to the minimum wage since 1999. Labour has raised the minimum wage every year since coming into office, and boosted it by almost 60% over that period - about three times the rate of inflation. This hasn't just boosted incomes at the bottom of the heap; it has also helped raise them higher up as well - and with no adverse effects on employment. The net effect has been to redistribute income down the pyramid, from the greedy to the needy, in the process helping to counteract some of the inequality that had opened up during the Revolution. The vast majority of New Zealanders gain from this process; the only ones who don't are the selfish at the top who want to ensure that they alone capture the fruits of economic growth. And boy do they squeal loudly when forced to share.
The Employers' and Manufacturers' Association is making the usual claims about how this will lead to job losses and price some jobs out of the market due to "insufficient productivity". But somehow I don't think our local rich will be willing to clean their own toilets or make their own coffee. And I don't think they'll be willing to do that when it goes up to $12 an hour in 2008 either.
Maybe that is an argument for electing labour during good years (fiscal conservatism, increasing minimum wage etc) and national during bad economic years (willingness to cut costs and make socially hard decisions, growth incentives etc).
ReplyDeletePrecisely. You'd think they'd drop their bullshit about job losses, having had it shown to be bullshit by the last few increases.
ReplyDeleteAnyone who has hard Helen Clark at 1st hand talking about the need to harness market forces to deliver social justice will immediately see the difference between Labour and National. That is something she is very passionate about.
ReplyDeleteThe similarities occur in the fact that *both* parties recognise that strong businesses are required to provide the resources NZ needs to continue to be a good place to live. I think that this focus on business sometimes frustrates some on the left.
However, National expect the "hidden hand" of market forces to simply deliver good things to all. Labour do not share this rose tinted view on life.
"...and with no adverse effects on employment"
ReplyDeleteHow do you know?
I have just posted about this on my blog. Rising minimum code conditions have positive effects on economy-wide productivity and incomes, though they may not be so good for individual, low productivity businesses.
ReplyDeleteYou'd expect the employer associations to balance their need to represent their members, with their interest in a stronger economy overall. The lack of balance shown by their comments sums up very nicely the highly limited and visionless state of business lobby groups in this country.
From $7.20 to $11.25 - not a bad record really, $160 a week less tax in the hands of the poorest full time workers. Better than a tax cut...
Have you ever heard National, the EMA or Business Roundtable talk about the inflationary effects of huge wage rises for the rich?
ReplyDeleteJordan: Actually, the minimum wage was $7 when Labour came in - which makes it a slightly more impressive record.
ReplyDeleteAs for productivity, this again undermines the "hire another warm body" model beloved of New Zealand businesses, and applies clear pressure for them to invest in improving real productivity (either by education or capital investment). Unfortunately, given their preference for low-cost asset stripping, it might take a while to sink in...
I bet those workers at McDonalds will be well cheeseburgered off at this. They fought for more than a year, gave up all those wages and union dues to Matt and his mates and then the Govt comes along and trumps it less than a month later.
ReplyDeleteBrilliant work by the union to negotiate a deal less than the minimum wage adjustment (which we have all known was coming for some time). Doesn't look so supersized now.
This puts your lauding of the agreement as a "stunning victory' into perspective. Looks like a stunning victory for McD's.
Icehawk
I'm not sure if the labour shortage is in the minimum wage area, it is in the skilled area, which no doubt impacts that sector as rates will have to rise to retain people, or else the jobs will go altogether.
Here's an anecdote on a related subject. One of my colleagues tried to promote a staff member, but it was turned down because we couldn't give a large enough increase to overcome working for families - we were offering >5% but he needed 15% to stay even. Now there is a productivity and work disincentive.
Insider
It is never a good time for the bosses - or their party - to give workers a pay rise. Funnily enough, the same business leaders that complain about this sort of thing have no problem voting themselves fat rises at every shareholders meeting - without "productivity" being mentioned.
ReplyDeleteThe $160 extra a week mentioned by Jordan, plus working for families, is the reason Labour sits on a constant 40% or so in the polls. Working class New Zealanders know who looks after them.
I/S:
ReplyDeleteDo you genuinely believe that all high income earners are "greedy" and "selfish"?
If so, do you think that improved education (for example) is caused by greed and selfishness, or is the effect the other way around? That the more educated you become, the greedier and more selfish you become?
Spam: No. But I do believe the description applies to the small clique of extremely wealthy people at the top of New Zealand society who have backed NeoLiberalism for the last twenty years.
ReplyDeleteThe NeoLiberal policy agenda is sold as being about "growth", but one of the convenient side effects is that all of that growth is captured by those at the top, and none of it goes to those at the bottom. Fortunately, people seem to have wised up to that fact now, and are rather suspicious of those who rail about "unfinished business" and wanting to restart the Revolution. And a damn good thing too!
I stand to be corrected but I think the 4% unemployed represent about 200,000 people? The agricultural sector continually complain that they can't get workers to pick their fruit -- mainly because of the shit wages they pay -- and have persuaded the government to bring in cheap labour from the islands. Will this minimum wage increase accelerate that trend? To the detriment of those who see the dole as preferable to being exploited on orchards?
ReplyDeleteAnon: The September 2006 HLFS reported 3.8% unemployment, or 83,000 people - most of whom were short-term "churn" (literally between jobs). Less than 10,000 of those can be considered "long-term" (six months or more) unemployed, and I think only a couple of thousand had been out of work for more than a year.
ReplyDelete(Note that this figure is not the same as people receiving the unemployment benefit, since it is calculated in a different way. The number of people on the dole is 36,063 - 11,000 down on this time last year. Whichever way you look at it, unemployment is low, and the labour shortage is real).
As for the agricultural sector and their great seasonal whine, fuck 'em. They can pay real wages, or they can go out of business when their fruit rots, but if they're not willing to pay the market rate (and if they can't find workers, by definition they are not paying it), then they should be looking at some other way of making money, rather than effectively expecting their workers to subsidise their profits.
the "increase minimum wage = less jobs" myth is getting widely debunked in all kinds of fora.
ReplyDeletehttp://www.epi.org/content.cfm/issueguides_minwage_minwagefacts
I/S I think there is also an issue with seasonal work that when people who are on the dole take on extra work then WINZ take so much out of their benefit and the extra taxes they have to pay mean that the actual retention rate of what they earn after all those deductions (plus the cost of travelling) is so piss-poor that there is hardly any incentive to bother.
ReplyDeleteI have heard figures that suggest the actual take-home pay after expenses/deducation is barely 10%. So until those issues are addressed fairly by the government then it is not likely that seasonal work will become a viable way to boost the income of unemployed workers.
WINZ says it is trying to make it easier for beneficiaries to earn extra income, but this is not really the case. And that is what sucks more to me.
Icehawk, correct me if my interpretation is wrong, but you seem to be saying that "effect on employment ... must have been extremely small" because unemployment is lower than you would expect had minimum wage had been causing an increase. But then the obvious question is, how do you know what unemployment would be without a minimum wage?
ReplyDeleteThe answer is, that you don't know. The Employers' and Manufacturers' Association doesn't know. Nobody actually knows. If there's a god, he would know, because you would have to be omniscient to know exactly how many jobs haven't come into existence due wage controls.
And although no-one can say for sure how many jobs are not created because of the minimum wage law, I know from personal experience that that effect does exist. Long story short: Chinese international students who could not find a job. So they took jobs at a Chinese restaurant for less than the minimum wage. And for anyone who's thinking "Exploitation!", I'd love to see you tell them that -- they were pretty bloody happy. (Hard to imagine for some New Zealanders, but there are some people for are happy and proud to work hard, for relatively little, when they know it will lead to better things.) If the restauranteurs had obeyed the law those jobs would not exist. A minor example, I know, but I doubt it's the only case.
But at least, Icehawk, you admit that there's a chance of an effect.
che tibby, are you seriously claiming that a minimum wage increase that wasn't followed by job losses means that an increase in the minimum wage would never cause job losses? If you do believe that, please tell me why the minimum wage shouldn't be $1000 an hour. (As a side-note: I'm assuming for the sake of simplicity that your EPI "facts at a glance" is correct, even though it's about as unbiased as I would expect you would find a pro-deregulation BRT study.)
To say that wages can be artificially inflated and have "no adverse effects on employment" or no job losses (preventing jobs would be a more accurate description) is pure fantasy. It's one thing to say that those on the minimum wage are better off with more money -- and there's no doubt they're immediately better off -- but it comes at the expense of others, no matter how negligable or hidden.
You can't regulate someone else's cake and eat it too.
Comes at the expense of others? Are you suggesting that there are jobs out there that suddenly don't need doing when the minimum wage goes up? What proportion of the economy's turnover goes to minimum-wage workers anyway? Five percent?
ReplyDeleteI love this argument that if raising the min wage to $12 improved anything, why not raise it to $1000. No doubt when you're cooking you guys figure that adding salt is bullshit, because if adding half a teaspoon made it any better then adding a bucketful would make it perfect. Non sequitur, mate.
ReplyDeleteDoes Anonymous honestly believe that the chinese students couldn't get a job because there weren't any suitable jobs available? I would have thought this was more a covert racism issue.
ReplyDelete> You're claiming that the party which is most likely to cut support for the needy is what this nation needs in economic hard times.
ReplyDeletethat was not what I was thinking of - and actually I dont expect national to make much headway in that.
what they might do though is tax cuts and restructuring etc.
>You're also claiming that National is willing to cut costs but is not the party of fiscal conservatism. That's not a direct contradiction, but it is an odd combination of views.
I am OBSERVING that that is the case. if it is a contradiction take it up with Cullen and Brash etc.
Don't tell me labour is NOT fiscally conservative, that's just crazy talk. And anyone who thinks national won't cut costs is nieve.
Chris -- In many cases, yes. Imagine an employer free to set their own wages budgeting for 100 employees. Then, by law, their wage goes up a dollar short. Now they only advertise for 91 positions. I know that's a very simplistic example, but it's the concept I'm trying to get across. If costs (e.g, wages) go up, something has to be sacrificed. Some employers will wear the cost themselves, or cut overheards or whatever. But some will inevitabley hire less people. You can hate the employers for this if you want, but it doesn't change the fact that it does happen.
ReplyDeleteAnon -- considering the number of applications they made, I would think some most likely were due to racism and others weren't. But think about it, even if every job denial was due to racism that's not exactly a defense of wage regulation.
Psycho Milt, mate-- The ridiculous idea of a $1K minimum wage is to point out the ridiculousness of the claim that a minimum wage could never effect employment. So it is not a non sequitur when it's a response to such an absurd claim.
Also, your salt analogy is wrong. Salt (the taste at least) is fine in small amounts and bad in large amounts. For the analogy to work the minimum wage would have to be harmless in small amounts. It's not. Unless you set it at something very low, like $1, where it would have no effect -- but then there wouldn't be much point having it. You seem to be in the camp that thinks you can set a "reasonable" minimum wage and that every employer in the country will still hire the same amount of people, the same actual people, for the same number of hours, with the same conditions, etc, etc and adjust for the rise in costs solely and completely our of their own pockets. That's laughable. And when that doesn't happen, somebody loses. Sometimes it'll be businesses, sometimes it'll be the unemployed/able. But you won't see the problems. There's no way to reliably measure a job that never existed.
I can see the appeal of the minimum wage; the advantages for people who get a wage rise are immediately apparent and the adverse effects are virtually invisible. That's why I don't expect everyone to suddenly renounce their support for it, the good is obvious, the bad is out of sight and out of mind.
When the minimum wage goes up, the extra pay doesn't mysteriously disappear out of the economy. Maybe some employers will hire fewer people, but the increased spending power of minimum wage workers will result in increased demand, and other employers will have to hire more people to meet it.
ReplyDeleteThe "100 employees" argument is so general as to be pointless. What sort of employees? Anyone vaguely skilled (and that includes some minimum wage earners) is going to have some sort of infrastructure or equipment associated with them. Any employer who left an empty space on a production line or a $100 000 tractor without a driver for the sake of keeping the total wage packet static would be an idiot. Even the apocryphal McD's employee probably couldn't be given their marching orders without leaving a space behind the counter or in the kitchen with equivalent value in turnover far higher than their potential wage increase.
ReplyDeleteThis is what I don't like about the reductionist form of free-market economics. People are not interchangeable units, and workplaces are poorly represented by dimensionless flows of money. Unless you're an accountant tallying up contractor's fees, that is.
chris, [clap clap clap].
ReplyDeleterepeated studies in the US of A have demonstrated that raising the minimum wage does not adversely effect employment of low-skilled workers.
CMT -- I'm glad that you at least acknowledged the possibility of adverse effects on employment. But if I/S and Laila Harre etc, are right that those benefiting from the minimum wage are the terminally poor, I'm not quite as optimistic as you that their new spending power will create new jobs.
ReplyDeleteChris -- The 100 employees example was intentionally vague to illustrate how preventing job creation can happen, not that it will always happen. You ask "What sort of employees?" and fill that blank with examples that suit you, conveniently leaving out ones that don't. But they exist. Can you honestly not imagine jobs that are borderline affordable for the employer? Off the top of my head, how about a restaurant needing two extra waiters on weekends? I know that one for a fact. Think about it -- if you're a greedy capitalistic boss and the choice is between making your current employees work harder, or faster or hold back on a wage increase for them, or give them more hours, etc, or advertise for a new staff member, you're going to take the cheapest option. And if that new staff member is legally more expensive than you're willing to pay, then they're gone before they exist.
And even if -- and this is a humungous, unrealistic 'if' -- you were right that no employer would ever remove/prevent a job because to do so would be idiotic, then consider the fact that there exist idiotic bosses. I remember working in a supermarket where, if it were legal, I'm sure we would've been paid less, and we were often understaffed. So were more people hired? No, we were just told to work harder. So unless you're going to support a Minimum Employer IQ and Minimum Employer Compassion laws (and magically enforce them), then be honest and admit there are, at times, real detrimental effects on employment due to artificially high wages.
che -- I understand you might be too busy to write more, but if that comment is the strength of your argument, I wonder what you would make of the fact that there are multiple studies in the U.S that come to the opposite conclusion.
Anon (can you use a pseudonym at least?),
ReplyDeleteI didn't deliberately pick examples that supported my case, I just thought about the first few examples of low-wage workers who came to mind. I take your point about cases like waiting staff, but I would argue that there are issues surrounding part-time and casual workers that go beyond minimum wages; sick leave, for instance.
The point I'm trying to make is that if a company has X amount of work to be done, it gets it done by hiring X amount of people, not by paying X amount of wages. Idiot bosses aside (and I've had a few of them myself), that is how things should average out.
That people on the minimum wage are poor means that any extra income they get is more likely to create new jobs, not less. A middle class individual getting an extra $40 a week might just stick it in a savings account, but people struggling to get by are likely to spend every last cent.
ReplyDeleteChris -- At the risk of looking stupid I have to admit I don't fully understand what you mean. If what you're saying is that things, as a whole, will average out regarding work being done, then yes, you could be right. But people are still going to lose out. Consider that if you're the person who doesn't have a job because it had the equivalent of an economic abortion, then knowing that businesses and the economy will soldier on is probably going to be little comfort. Not only to your bank balance, but your self-esteem, work experience and list of references when making that next job application.
ReplyDeleteCMT -- Assuming you're right, more spending doesn't automatically mean more jobs. That's not to say that it doesn't, just that it's not automatic. For instance, if someone on the minimum wage spends another $40 on groceries in a week that doesn't automatically create a new checkout operator.
So Anon, do an equivalent number of low-paid workers go unhired whenever the board grants the CEO and themselves another fat raise?
ReplyDeleteOr does your version of economics apply only to the lowly-paid?
If a person is working for between 9 and 12 dollars and the company sacks them because it cannot afford that, then odds are that they are working in a job they should never have been in the first place.
ReplyDeleteEither they are the close to zero value employees sneaking into the workforce to destroy value (surely you all know the sort of ppl) or they are undervaluing themselves.
Well Huskynut, if you're asking whether CEOs and board members put their own wealth before others, then yeah, I'm pretty confident they do.
ReplyDeleteThat's actually the crux of my "version of economics" as you put it. If an employer is in the situation of choosing "less workers" or "personal paycut" then I think we all know which they'll pick. And raising wages by law means that employers of minimum wage staff will be in that situation more often. It won't happen in every case that it could, but it's inevitable that it will happen in some cases.
Labour stands for nothing except it's own paycheck every three years. It is merely a self serving branding exercise and the brand which sells at the moment is liberal chardonnay socialism.
ReplyDeleteAn example of how hollow and shallow is labour's regard for democracy, freedom and worker's rights is that in Fiji all successive coups except the latest were backed by Australian and NZ business interests, intent upon exploiting a sweatshop labour regime. Former PM Lisene Quarase was a merchant banker closely tied to foreign interests which backed George Speight's 2000 coup.
Whenever it seems that the people of Fiji are trying to get out from under the oppressive boot of colonialism, NZ and Aussie bankers back people in Fiji with frankly racist, facist tendencies.
When a guy like Bainemarama has the balls to stand up to these thugs darling Aunty Helen stomps her feet and then preens her feathers in public, proclaiming herself the darling of democracy.
Give it a rest Helen. You're begining to believe your own BS.
Kapital Kowboy, you only need one more K and your there.
ReplyDeleteI've actually worked in the kind of job where our wages were drawn from a finite parcel of money, when I was a research assistant on a project funded by a grant. I still would have been personally better off to get higher pay for a short period, then I could have saved some each week for when the inevitable happened, rather than spending most of my income on my living expenses.
ReplyDeletePersonal annecdotes aside, it seems to me that the nub of this matter is that a minimum wage increase trades off the possibility that there may or may not be fewer jobs available via some sort of supply-and-demand process (which may or may not be rubbish, as discussed above) against the near certainty that those on the minimum wage are better off if their pay is higer. How does that grab you, Anon who is anti-m-w?
No, one worker spending another $40 won't create a new checkout operator. A hundred workers spending an extra $4k a week may well. The number of jobs lost due to an increase would be small, so the number of new jobs needed to compensate is also small.
ReplyDeleteChris -- What really grabs me is when you say "may or may not". Assuming we're talking about the actual minimum wage and not about a minimum wage of something like $1, then there will be effects. It is only a question of what exactly will they be, and how severe. Regardless of whether Psycho Milt understands it, that's the point of the $1K minimum wage argument. No-one would claim that we could have that without severe negative employment effects, and having a much lower minimum wage will also have negative effects, only much lower in magnitude. And that's why people accept it. Because the adverse effects are small and because they're hidden by their preventative nature, people don't mind them. Like I said before, I don't deny that people who get a wage rise from the law are better off - they are. But only someone naive or dishonest could pretend that wage manipulation of any significance isn't going to ripple through to affect other people.
ReplyDeleteEven if you ignore the sound logic behind what I'm saying, and ignore the fact that if you look in the right places you will find real life people who can only get illegal wage jobs, doesn't it just sound a bit to good to be true? The idea that "we can legally raise wages and nothing bad will happen". Doesn't that just seem a bit too convenient?
There are adverse effects now, there will be more when the minimum wage goes up. No-one can predict what will happen, especially not the central planners who create these laws. But here's a prediction I'm really confident in: the minimum wage will go up (and up, and up) and people will support it and celebrate it. I/S will think it's great, so will Laila Harre and you too, by the sounds of it. Some supporters will admit that employment will be affected, but they'll downplay it, as if they have the clairvoyance to tell. Then right after that they'll complain about how poor, unskilled, uneducated (probably brown) people can't get jobs. Whenever you hear (or put forward) the argument that the effects will be negligable, tell that to the unemployed people who can't get jobs because no-one wants to risk $12 an hour on them.
CMT -- In the past people have told me I have "too much faith in the market". So it's kind of ironic that a Commie Mutant Traitor would expect the unpredictable adverse effects of wage regulation to be perfectly countered by the slightly more predictable increase in spending. That's a bridge too far, even for me.
I/S Wrote:
ReplyDeleteAs for the agricultural sector and their great seasonal whine, fuck 'em. They can pay real wages, or they can go out of business when their fruit rots, but if they're not willing to pay the market rate (and if they can't find workers, by definition they are not paying it), then they should be looking at some other way of making money, rather than effectively expecting their workers to subsidise their profits.
I completely agree, and I'm pleased that you're all for the market setting the wages. Now: why don't you apply the same principles to (say) McDonalds? If people are willing to work for less than the (current) minimum wage, then fuck 'em. Pay them less than the minimum wage.
Anon w-i-a-m-w, why did you choose to latch onto and talk up my "possibility" propostion, and ignore my "almost certainty"?
ReplyDeleteAnd span, the difference, as always with this kind of thing, is the relative bargaining power of the two parties, and thus how much we should let an employer get away with (which is to say bugger all).
So Chris:
ReplyDeleteWhere its a large company involved, then the relative power of that company is higher than the collective power of the employees, so we need a minimum wage. Fuck the employer (to use I/S's eloquent phase).
However, when its a small company with much less bargaining power, its still a fuck the employer? Even if there difficulty in getting employees can be largely layed at the feet of the government and there policies that result in massive marginal taxation, and are punitive to seasonal workers?
Seems that its "fuck the employer" with a bit of lip-service to offer some excuses for that.
Ah crap...
ReplyDelete^^ Read "their", not "there". More than once.
Fair enough, I don't know enough about the tax/etc situation for seasonal work to argue with you... Yes, I'm admitting ignorance on the internet, don't let your kids be like me.
ReplyDeleteChris -- Because I don't dispute the near certainty that people with a wage increase will be better off by having more money. I agree with that part. You could say "it's money in the bank" (heh). I "talked up" the possibility you proposed because it shows you're still in camp 2 (I think). What I mean by that is that there are four camps.
ReplyDeleteCamp 1) People who support the minimum wage and deny that it could ever have negative effects on employment.
Whether through wilfull ignorance or geniune naivete, this view is not realistic for the reasons I have gone over at length.
Camp 2) People who support the minimum wage and say that negative effects are possible, but unlikely or not too bad.
This view is closer to reality but not quite in it, because it doesn't acknowledge that the very nature of the effects I'm talking about are unpredictable. Even a relatively small economy such as ours is so immensely complex you would have to have supernatural powers, or a computer the size of Mt Cook to say with any certainty that the effects would be small. Those effects could be straight out job losses, or more subtle problems like fewer hours, or too many hours, or worse working conditions, or the removal/delay of pay increases. Maybe something as simple as someone taking an extra two weeks to find a job, which might not sound much but could be pretty bloody important when you've got fuck all money.
Camp 3) People who support the minimum wage and admit that they don't know what the effects are and just don't care.
It's this view that really annoys me, because the people who suffer from the minimum wage are always the worst off to begin with. It's true the people whose wages go up are fine, but then it's tough shit for the rest. People can say they don't care about poor people, but it's a pretty shitty view in my opinion.
I think most supporters stay in camps 1 & 2 (I suspect that's why this post had a few dozen comments) because it's easier, and feels good to support people in poverty. But if you face reality and think unskilled workers (that's ALL of them, not just the ones you can see) should be treated fairly then that leaves only...
Camp 4) People who don't support the minimum wage because it's a solution for some at the expense of others.
If you want people to make more money, help them produce more. Help them with C.Vs and job interview preperation. Show them where to look for jobs or lend/give them money. Teach them how to use microsoft office. I've done these things for friends and family (before anyone puts words in my mouth, I do not claim to be some kind of saint or mother Theresa, I know I'm not) and it's probably made little difference to only some people, but it's more helpful that a "give-them-more-money-or-else" law.
If you're wondering, I don't expect to change many minds with this. It's just too easy to get behind a minimum wage law. I believed in it when I was on it, and I'm sceptical I could have even convinced my teenage-self. I'd bet a Christmas ham that come April 1st I/S will have a post on how wonderful and helpful the increase will be. To argue against a minimum wage means you have to appear (not be) against the people who would get it. And if that wasn't bad enough, it means you agree with rich people like Roger Kerr. That's just too much, even if it's true.
See you in the comments in April.
Teaching people to use Microsoft Office is far more a solution for some at the expense of others than the minimum wage. Yes, a minority of people can get higher paying jobs by learning new skills, but there's a limited number of vacancies that need those skills and increasing the number of workers competing for them will push down wages in the more skilled occupations. And it doesn't change the fact that people are still needed to stack the shelves at the supermarket.
ReplyDelete