Dunedin North MP David Clark makes the case for a rise in
the minimum wage to $15 an hour.
By some quirk of fate, I've had two member's Bills drawn in
my name this year. My second member's Bill aims to lift the
minimum wage to $15 an hour. It is proving more controversial
than the first.
Supposed effects of minimum wage increases have exercised a
few regular Otago Daily Times correspondents. Some comment is
misguided, but I'm glad the conversation has started. It
shows the need for an informed debate.
Public uncertainty about the effect of a minimum wage
increase mirrors uncertainty among economists and other
experts. For many economists, demonstrating a direct link
between minimum wage and employment is the Holy Grail.
Expect a Nobel Prize for whoever explains it first. Some say
a high minimum wage will cost jobs. At some point, this is
undoubtedly true. If the minimum wage was $30 an hour, many
employers would struggle to cope.
But the relationship between minimum wage and unemployment is
not clear cut. Let me give an example. Over nine years
between 1990 and 1999, the National government increased the
minimum wage by a total of just 70c.
Unemployment soared. By contrast, when Labour increased the
minimum wage $5 over the following nine years, unemployment
plummeted to the lowest levels in the OECD.
Australia has benefited from a minerals boom. But to
attribute all of its success to that would be a mistake. An
aggressive savings policy means $A1 trillion in investment
capital is constantly searching for a home. Australia has
also valued its labour market.
Australia's higher minimum wage has proven a boon for
attracting ambitious young Kiwis. Its minimum wage equates to
nearly $NZ20. No wonder 40% of a record 158,000 New
Zealanders who have left for Australia under the Key
Government were aged 18-30.
Young talent knows it will get paid better in Oz.
Top New Zealand taxpayers have one of the lowest tax wedges
in the OECD. If we don't distribute the proceeds of our
economy fairly, we'll continue to hollow out our workforce as
young folk head across the Tasman. They are calling it
What about the effect on business?
Perhaps a surprise to many, but a sober assessment of the
facts suggests that many SMEs may actually be advantaged by a
minimum wage rise. This is because many smaller businesses
already pay above the minimum wage.
Employers in these businesses know their employees,
understand how hard it is for them to make ends meet, and
value their services. Often these SMEs struggle to compete
against larger firms who operate on a lowest common
denominator principle. A minimum wage rise levels the playing
field in favour of these SMEs.
Inequality has grown dramatically in New Zealand over the
last three decades. The last Labour government began to
address this imbalance by ensuring the 25% real growth in the
economy was shared more fairly. Working for Families resulted
in 100,000 kids brought out of poverty. Income-related rents
and better hospital services attacked drivers of poverty. But
much more needs to be done.
When more than half of a minimum wage earner's income is
spent putting a healthy meal on the table for the family
every night, it is not possible to pay rent, buy school
uniforms, meet incidental expenses and heat the house.
We taxpayers effectively subsidise low wages through the
health system. All of us contribute monies that are spent
treating the preventable diseases of poverty.
It is not good for our social fabric to have kids with empty
stomachs developing respiratory illnesses through living in
damp cold houses. It is not good for our economy, either.
Unfortunately, the Government has put our country in reverse.
Economically, we are going backwards. Only population growth
props up numbers in our stagnant economy. GDP per capita has
dropped. Real wages are now lower than when John Key took
office. Kiwis are leaving permanently for Australia at a rate
of 1000 per week.
And, sadly, the Government's 2010 tax package has ensured
that the fruits of our economy are shared even less fairly
than they were before. The top 10% of earners captured 44% of
the value of the tax cuts. The bottom 20% of earners got just
2%. For the vast majority, any personal benefit of the 2010
tax package was quickly swallowed up by GST increases,
inflation and sundry others. Things such as increased
Poverty, illness and underachievement will not be addressed
until we ensure the conditions are right for all Kiwis to
succeed. We need to start by ensuring every New Zealander can
afford food, clothing and shelter for themselves and any
family they support. A $15 minimum wage brings us closer to