Council of Trade Unions media release
7 February 2011

Minimum wage adjustment is woefully inadequate

The Government’s decision to allow the minimum wage to decrease in real value by increasing it by only 25c to $13 an hour when inflation is running at 4 percent will drive our lowest paid workers into further hardship, said the Council of Trade Unions.

CTU President Helen Kelly said: “We are talking about wages that are already insufficient to meet basic costs and about a group of workers worst affected by increases in food, rent, fuel and power. These families are already reporting extreme hardship and any government that genuinely understood this would have increased the rate by significantly more.”

“The Government gave generous tax cuts to those on high incomes but gives a miserly increase to those on the minimum wage.”

“Low income earners got the worst deal from the October tax changes, which left some of them worse off even on Treasury’s reckoning, but for most of them, the gap between their incomes and high incomes grew steeply after tax. This is another unfair government decision on top of the tax changes. It particularly affects women, Māori, Pacific and part time workers.”

“It is considerably behind Australia’s system of minimum wages in its modern award system, the lowest of which is A$15.00 - about 50 percent higher than the new New Zealand minimum wage when the exchange rate is taken into account and over a third higher in purchasing power terms.”

An increase in the minimum wage benefits many more people than those actually receiving it, said Kelly. It pushes up wages for tens of thousands of people near to the minimum.

There is no conclusive evidence it undermines employment. There have been numerous studies in New Zealand and internationally of the effect of the minimum wage on employment. The latest large-scale minimum wage study is one in the US by Doucouliagos and Stanley (20091). It re-analysed 64 US minimum-wage studies including 39 relating to teenagers and found not only bias in selection of published studies towards ones which show an adverse effect for employment, but once such effects were corrected for, positive effects between an increase in the minimum wage and employment.

A very recently published study in the USA by Dube, Lester and Reich2 looked at low-wage workers over a 16-year period in all US counties sharing a common border with a county in another state with different minimum wage increases. They found that increases in minimum wages had no negative effects on low-wage employment.

ENDS

© Scoop Media