Thursday, October 10, 2013

The new target

Yesterday when talking about David Cunliffe's promise to immediately raise the minimum wage to $15/hour, I pointed out that that totemic figure had been eroded due to inflation, and that we needed to set them a new target. So what should it be?

The $15/hour target was set in late 2007. Using the Reserve Bank's inflation calculator, its worth $17.01 now. Depending on the rate of inflation, it'll be worth somewhere between $17.50 and $18.50 by late 2017.

Will they do it? It would be a big ask, requiring not just an immediate increase to above $15/hour, but large increases every year after that as well. Labour can be relied upon for a 75 cent a year increase (roughly twice the rate of inflation), which would get them to $16.50. They'd probably need to be pushed for more. OTOH, if they make good on their promise to introduce a living wage for public servants, that would help drive wages upwards, and give them more space to increase the minimum. And on the third hand, even assuming the high-inflation scenario, they could catch it up in two terms without breaking a sweat. And that latter prospect gives them room to manoeuvre. Provided they're making strong steady progress, and clearly heading for that goal, then I think people will be happy enough.