Wednesday, May 24, 2006

The Minimum Wage
NZ Politics

There is a NZ Herald article today about a report by Gail Pacheco from AUT on the minimum wage. She found while doing an empirical study on the effect of changing the minimum wage in New Zealand, that a number of people would be squeezed out of the job market when the minimum wage is raised.socket error 10060 juno

"My study found for Maori who find the minimum wage binding, a 10 per cent rise in the real minimum wage would see a 15.8 per cent point fall in employment propensity, a drop of 13.5 hours usually worked each week, a 5.7 per cent point increase in unemployment propensity and a 10.9 per cent point increase in inactivity, that is, not working or studying."


The reason for this is simply that if it gets more expensive to hire those previously on the minimum wage, employers may simply opt to hire people with more experience instead. Consequently those at the bottom are displaced from the workforce.socket error 10060 juno

Raising wages across the board is very important, but the minimum wage is a very blunt instrument to do this with. And as Gail says, there needs to be a much more balanced debate over it before changes are made.socket error 10060 juno

Posted by Dave Bryant at 12:21 PM | Comments (0) | TrackBacks (0) socket error 10060 juno

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