Mimimum Wage

The Herald puts the minimum wage into context:

New Zealand’s minimum wage is still close to the highest it has been, as a proportion of the average wage, since the late 1970s.

It is also the second-highest of any developed country in relation to the median wage, although well below richer countries such as Australia in dollar terms.

So we have one of the highest minimum wages in the world, and people want to make it even higher.

You can’t make a country richer by just passing a law demanding people get paid more. The key to lifting wages is increased productivity – that is how we will close the gap with Australia.

Internationally, OECD minimum wages are quoted as a ratio of the median weekly income of fulltime employees – a lower figure than the average wage because the average is pulled up by high earners above the median, or mid-point.

On this basis, at last count in 2007, New Zealand’s minimum wage was 57 per cent of our median income – a higher ratio than in Australia (54 per cent) and ahead of all other OECD countries except France (63 per cent).

And an increase to $15 would put us even ahead of France, with a minimum wage at 67% of median fulltime income. Can one of the poorest countries in the OECD afford the highest relative minimum wage? Of course not.

And in another story:

The Warehouse human resources manager Paul Walsh says under-18-year-olds fluctuated between 30 and 33 per cent of his company’s 7500 staff in the four years up to June 2008, then plunged to 25.2 per cent in the year to last June and 24.1 per cent from July to this week.

“It’s dangerous to draw a conclusion that it’s purely the minimum wage rate that has affected that, but you would have to say it must have had some impact,” he says.

I predict youth unemployment will remain relatively high, even after adult unemployment starts dropping.

In any case, Pacheco argues that the minimum wage is an inefficient way of tackling poverty because many minimum-wage earners are actually teenagers or second earners in wealthy households.

She says 16.6 per cent of all those earning within 50c an hour of the minimum wage between 2006 and 2008 lived in the richest three-tenths of all households.

A point I have made. The focus should be on family or household income, not individual income.