11 November 2011

CTU releases submission to the 2011 Minimum Wage Review

CTU Economist Bill Rosenberg said “this is a timely release of our submission to the Minimum Wage Review, in the context of the recent discussion of minimum wages and claims of job losses as a result of increasing the minimum wage.”

“We have long maintained that the empirical evidence does not link increasing minimum wages with a significant loss of employment, and even less an increase in unemployment. There are now numerous studies concluding “no significant impact” on employment, let alone unemployment, of increases in the minimum wage, including advice from Treasury. These findings don’t mean there will be no impact under any circumstances, but it is clear that a greater understanding of the factors connecting wages and employment cast serious doubt on negative effects that are found. Some studies even show a small increase in employment.”

“Wages in New Zealand are low – in historical terms, relative to Australia and relative to other OECD countries. It seems too obvious to need to be said, but with some politicians and business groups arguing against any sustained government action that raises real wages, it must be said: New Zealand cannot move to a high skill, high wage, and high value economy without real rises in wages and salaries.”

Bill Rosenberg said “we of course recognise that wages as a whole will not increase simply through increasing the minimum wage. Significant increases in investment in skill development for both workers and management as well as capital investment in technology and other productive assets are also needed to lift productivity and wages over a longer period. To raise its productivity, New Zealand should also be developing its infrastructure and engaging workers in workplace and industry issues.”

“Increasing the minimum wage should also happen alongside strengthened union collective bargaining. Deliberate policies to increase wages are essential. Over the last 25 years, wage and salary increases have fallen far behind increases in productivity. Wage and salary earners have not seen the wage increases that they have constantly been told rising productivity would bring.”

“Minimum wage increases can play a vital role in this.”

CTU sub to the min wage review can be found here: CTU submision to 2011 Min Wage Review . It includes an updated review of the research literature on the effect of the minimum wage on employment (see Appendix 1).

ENDS

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