Minimum wage law not the way to growth

21 December 2005

Minimum wage law not the way to growth

An eight per cent increase in the minimum wage in the face of an economic downturn is not the way to economic growth, according to Business NZ.

"You can't just legislate higher wages into existence," Chief Executive Phil O'Reilly said.

"Forcing employers to increase wages by legislation actually harms unskilled people.

"In a situation where, because of minimum wage law, the wages of low-skill people are higher than the value they can add, then an employer choosing between an low-skill or a skilled employee will always choose the skilled one. This makes low-skill workers even less likely to find jobs.

"Minimum wage law also creates a knock-on effect - pushing up every else's wages because of relativity claims. Increased wages without increased productivity just erodes the economy through inflation. "The best route to high wages is through higher skills and productivity. Business would rather the Government kept its focus on these important issues, rather than harming low-skill workers, businesses and the economy with minimum wage law."

ENDS

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