Media Release
3 February 2010

Government Should Think Carefully on Minimum Wage Rate

New Zealand’s worsening unemployment figures mean that now is not the time for the government to raise the minimum wage according to lower North Island chambers of commerce.

Statistics New Zealand announced today that the unemployment rate jumped from 6.4% to 6.8% in the December quarter 2010 and among 15-19 year olds the rate now stands at a worrying 25.5%.

“Today’s unemployment numbers are further evidence that the minimum wage is set to high,” said New Zealand Chambers of Commerce Director Paul O’ Brien, who is the representative for the Lower North Island Chambers.

“Some unions have called for an increase in the minimum wage from $12.75 to $15. In our view that would be a recipe for increased unemployment as businesses are already struggling to take on new staff.

“We want New Zealand to be a high wage economy but raising the minimum wage is not the way to achieve this.

“Policies that focus on increasing productivity, improving skills and enhancing the business environment are far more effective ways to raise the overall level of wages than the government imposing a minimum wage sitting way above the market rates.

“Recent increases to the minimum wage and the abolition of youth rates have almost certainly contributed to the rising unemployment that has eventuated in recent years.

“The high unemployment rate in the under-20 age group suggests that it was a mistake to abandon youth rates in 2008. Youth rates provided an incentive for employers to give young people a “foot in the door” - increasing opportunities for them to gain work experience.

“Having worked closely with the sporting community, I am aware of large numbers of youth who have been disadvantaged in seeking employment because of the high youth rates.

“It is important to remember there is nothing stopping employers paying young new entrants more than the minimum wage of their older co-workers should they be productive enough to earn it.

“We hope that Government thinks carefully before raising the minimum wage in light of today’s announcement,” Mr O’Brien concluded.

ENDS

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