Mike Treen
Auckland, December 22, 2017
Unite Union welcomes the increase in the minimum wage of 75 cents an hour from April 1, 2018.
We see this as just a modest first step in improving the minimum wage to achieve the government’s objective of $20 an hour by April 2021. The next three years will require an increase of over $1 an hour each year to reach the target.
Right-Wing myth
Employers and right-wing economists will claim that any increase in the minimum wage will increase unemployment.
Most serious academic studies internationally actually find the opposite is the case.
The same is true in New Zealand when the adult minimum wage increased by 33% from 2004 to 2008. The proposed increase over the next four years is less than that percentage increase.
Inflation during that period was 12.5%, and hence there was an increase in the real value of the minimum wage. There was also an increase in its relative value: rising from 45.4% to 50.6% of the average wage.
Unemployment declines
During the 2004-2008 period, the unemployment rate declined from 4.7% to 4.2%.
The Labour force participation rate increased from 66.7% to 67.7%
Youth unemployment and participation rates were almost unchanged.
Inflation averaged 3% a year while the minimum wage increase averaged over 8% a year.
Some of the biggest increases in the minimum wage have occurred for young workers. In 2001, 18 and 19-year-olds were put on the adult rate. By 2005, their rate had more than doubled from $4.55 an hour to $9.50 an hour.
Were young people priced out of the labour market as the dogmatists assured us would happen? No, in fact, the opposite happened.
Employment for this group increased overall and unemployment dropped.
The big challenge
The big challenge for unions how is maintaining margins for skill and service.
The increases in the real value of the minimum wage has compressed margins for those above. This is part of the reason employers are complaining about a lack of skilled labour – they have removed incentives to increase skills and used immigrant labour instead.
Unite Union is committing to fight to restore those margins in bargaining next year.
Mike Treen is National Director of Unite Union based in Auckland.
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Photo Courtesy: Climate Change Aotearora and The Daily Blog
