Minimum wage increase

The Government has announced that the minimum wage will increase from $15.25 per hour to $15.75 per hour from 1 April.

A release from Michael Woodhouse:

The minimum wage will increase by 50 cents to $15.25 an hour on 1 April 2016, Workplace Relations and Safety Minister Michael Woodhouse announced today.

The starting-out and training hourly minimum wages rates will increase from $11.80 to $12.20 per hour, remaining at 80 per cent of the adult minimum wage.

“The Government has once again taken care to ensure the right balance has been struck between protecting our lowest paid workers, and ensuring jobs are not lost,” says Mr Woodhouse.

“An increase to $15.25 per hour will directly benefit approximately 152,700 workers and will increase wages throughout the economy by $75 million per year.

“With annual inflation currently at 0.1 per cent, an increase to the minimum wage by 3.4 per cent gives our lowest paid workers more money in their pocket, without imposing undue pressure on businesses or hindering job growth.

“The Government has increased the minimum wage every year since coming to office, from $12 to $15.25. This is an overall increase of 27% compared to inflation of around 11%.

“Our steady increases to the minimum wage reflect the Government’s commitment to growing the economy, boosting incomes and supporting jobs.”

So it is a little bit more than inflation.

David Farrar promotes and defends this at Kiwiblog in The minimum wage under National

So I thought I would point out how the minimum wage has moved from 1 April 2008 to 1 April 2017.

  • Hourly rate – from $12.00 to $15.75 – a 31.3% increase
  • Gross Annual FT minimum wage – from $25,029 to $32,850 – an increase of $7,821 or 31.3%
  • Net (after tax/ACC) Annual FT minimum wage – from $19,798 to 27,684 – an increase of $7,886 or 39.8%
  • CPI (inflation) gone from 1044 to 1218 (estimate) – an increase of just 16.7% (includes GST increase)
  • Real Net Annual FT minimum wage – from $23,097 to $27,684 – an increase of $4,587 or 19.9%

So a FT worker on the minimum wage has 20% higher spending power than nine years ago. That awful oppressive poor hating National Government.

An alternative view from Anthony Robins at The Standard in Minimum wage increase doesn’t meet real costs (the CPI is broken)

Any increase in the minimum wage is better than nothing, but National’s increases have not kept pace with the real cost increases (notably housing) faced by low income earners. That is why we are seeing the rise of the working poor, and increases in homelessness and poverty.

The skyrocketing cost of buying an existing house is not included in the CPI (“Inflation is 0.4 percent, and Mr Eaqub calculates that if house price growth was included, inflation would have been 2.5 percent, or more, in each of the last three years”).

The cost of rent is factored into the CPI with a weighting of 10%, in fact for low income earners rent can be 40% to 50% of their income or more (“The report said the lowest 20 percent of earners spent 54 percent of their income on housing in 2015, compared with just 29 percent in the late 1980s”). So the CPI already massively underestimates the real inflation that low income earners face – and rents are rising fast in Auckland and elsewhere.

There are similar issues with other basics like electricity, which is how power prices have risen more quickly than the CPI.

In short, the CPI is broken, especially with respect to housing. (Over the last three years we have developed a better measure, why aren’t we using it?). Under National minimum wage increase have failed to keep up with the real cost increases experienced by low income earners. That is why we are seeing the rise of the working poor, and increases in homelessness and poverty. Shame.

He also took a swipe at Farrar:

* National’s pet blogger tried to spin the snakeoil on Twitter too – an interesting discussion followed.

From one of Labour’s pet blogger? Throwing around pet names leaves one open to boomeranging.

Another view from further left, Mike Treen at The Daily Blog: $20 an hour now! Make the minimum wage a living wage!

There are widespread and unacceptable levels of poverty in this country and inequality is getting out of control. One way to address those issues in a meaningful way is to progressively increase the minimum wage in real terms.

Should every 16 year old or 18 year old in their first job be paid $20 per hour?

Housing costs are a real and large issue, but bumping up all wage rates to compensate seems to be silly. Far better to sort out housing supply and costs.

6 Comments

  1. What was David Seymour talking about yesterday …?

    Oh yes, housing, housing and housing …

    The CPI is worse than “broken”.
    It was purposely broken like a breach of contract or dishonoured Treaty.
    It’s become a machination of chicanery.

  2. NOEL

     /  25th January 2017

    The CPI removal and replacement with inflation indexing doesn’t just apply to the minimum wage. War Disablement Pensions for those who put their lives on the line for the country, are just one example where the CPI was removed.

  3. Make sense of this if you can …

    http://www.stats.govt.nz/browse_for_stats/economic_indicators/cpi_inflation/home-ownership-in-the-cpi.aspx

    Post-truth statistics …?

    The important dates are 1980, 1993 & 1999 so, regrettably for me, I can’t really assert that its ALL a result of Rogered-nomics and its Neo-Fear fallout ….

    Arguably only two-thirds of it are … ?

    All three dates correspond with National governments though … Muldoon, Bolger, Shipley I think …

  4. PDB

     /  25th January 2017

    Mike Treen: “There are widespread and unacceptable levels of poverty in this country and inequality is getting out of control”.

    Are these the ‘alternative facts’ the left are currently discussing…….

    Inequality and poverty in this country have remained stable since the mid 1990’s.

    • Roger and Ruth saw to it that inequality and poverty reached their zenith and couldn’t get much worse in this country after the mid-90s PDB, that’s all … Not without risking real civil disobedience and instability …

      They won’t push it beyond anything that can’t be catered for by building more prisons …

      This National government has ensured that “much worse” indeed means exactly what it says, by allowing it to gradually and continually get a “bit worse” all the time … Its like a creeping gangrene now … Housing & homelessness – which bleed profusely through various economic bandages and ‘tourniquets’, poverty & so-called ‘child poverty’, inequality and the pay gap …

      … and building more prisons …

      • PDB

         /  25th January 2017

        What you and your ilk fail to realise is that the minimum wage is not a maximum wage, nor is it meant to be a wage for life. The ‘living wage’ is a nonsense considering it doesn’t take into account the different living conditions, lifestyle, family, location etc etc that would make everybody’s particular ‘living wage’ unique.

        The rest of your post is the beating of the same old broken drum – the fact is living standards are higher in this country now then they have ever been. Concentrating one’s focus on the odd rich A-lister and what they earn, calling people sharing houses with others ‘homeless’, or believing in some made-up child poverty figure means reality is being overlooked in favour of blind ideology.

        Again Treen is wrong – unacceptable poverty is incorrect (unless he means the ‘scaled-down’ version of poverty where the internet is an essential item for human survival), and income inequality is not ‘out of control’.