Minimum wage rise not choking the job market
If the inflation-busting increase in the minimum wage would hurt anyone, presumably it would be big business. But the reaction from New Zealand’s leading business lobby to yesterday’s news of a 50-cent increase to $15.75 per hour could barely be described as muted. ‘‘We aren’t putting out a statement,’’ a spokeswoman for BusinessNZ said.
Instead, the organisation helpfully forwarded the advice it sent to its members.
This noted that while New Zealand’s minimum wage was already ‘‘among the highest in the OECD’’ as a proportion of the average wage (about 53 per cent), the announcement was ‘‘not a surprise’’ as the rate had to be reviewed annually.
Indeed, this year’s announcement marks the ninth year in a row that the minimum wage has been increased since National took office, from $12 to $12.50 back in 2009.
All but two of the increases have been 50c an hour, with 25c increases in 2010 and 2013.
All up, the increase has been more than 30 per cent, more than double the rate of inflation over the period. (Add to this that in its final year of office Labour made an election year increase of 75c an hour, so the increase in a decade is 40 per cent).
And the impact of this apparent profligacy on the economy?
Critics of raising the minimum wage have long claimed the real victims are the poor, because employers cannot afford to take on new workers.
‘‘The Government knows very well that hiking the minimum wage faster than inflation means those most vulnerable are priced out of the job market,’’ Taxpayers’ Union executive director Jordan Williams said, echoing similar warnings from last year.
Logic suggests that someone will miss out because some company, somewhere, cannot take on that extra employee.
This would be apparent in a time of recession (perhaps offset by the fact that lower paid workers, who tend to spend every dollar they earn, have more in their pocket).
But in the third quarter of 2016, unemployment fell below 5 per cent for the first time since 2008.
The number of handwritten signs on shops and restaurants across New Zealand seeking staff this summer is hardly scientific, but it suggests the constraint many companies face is finding workers, not paying them.
In previous years, the Government has hinted that the decision to increase was an agonising balance between being generous to tens of thousands of people affected, while not wanting to price workers out of the market.
Back in early 2015, as he raised the minimum wage to $14.75 an hour, Workplace Relations Minister Michael Woodhouse warned that had the increase been to $15.50, it would ‘‘constrain employment growth’’ by 5000 jobs.
This year Woodhouse’s release contained no such figure, noting instead that another $65 million would be pumped into the economy from the increase.
Perhaps the research on the looming job losses has not been finalised, or perhaps it shows that the minimum wage could have gone to $16 without making much of an impact after all.
As it happens, the latest increase seems destined to pass with almost no-one noticing.