The adult minimum wage will increase from $9.50 to $10.25 an hour from 27 March 2006, and the youth minimum wage from $7.60 to $8.20 per hour. Labour’s goal is for the adult minimum wage to reach $12 an hour by the end of 2008.
When is Labour going to learn? You can’t increase someones labour value on the market by passing a law. You can’t make people pay $10 per Kg for tomatoes by passing a law to that effect. People will simply by onions instead.
As a very rough rule of thumb, a worker has to produce five times what you pay them to make it worthwhile. That is, if you pay someone $10 per hour, by the time you add on taxes, overheads, mistakes, wastage, training costs, cost of capital, etc etc etc they have to produce at least $50 per hour to make the relationship worthwhile for the employer.
If you in any way reduce that margin, the employer gains nothing by employing someone and may, in fact, lose money. Therefore if you raise the minimum wage you make it very difficult for young and/or unskilled people to get jobs at all. You also put the jobs of marginal workers at risk.
Economic conditions have been good, but few, including Michael Cullen, expect that to continue. The Labour government has enacted legislation that has made employing people even more marginal economically and very risky legally. If the economy goes south, these laws will start to bite. Coupled with an increase in the minimum wage we will see real pressure on marginal jobs.
Young people, immigrants, lowly skilled and even some older workers will be consigned to the dole, the sickness benefit, or some scam subsidised course on the local marae or polytech.
How arrogant is it for some Cabinet Minister on $200,000 pa to tell a 19 year old Samoan girl from Otara that she cannot sell her labour to the local clothing factory for $7.50 per hour? How cruel is it to tell that girl that she can never climb the ladder of success because the government forbids her getting on the first rung.
In their generosity however, the government does pay benefits and it has legalised prostitution (with no minimum price) so the girl will have options.
Just a thought: if you raised the price prostitutes could charge to $300 per….encounter, would more men become Labour cabinet ministers or union officials?