Question 3: What was the actual impact of changes to the minimum wage on employment in New Zealand over the last decade? Is there any evidence it lead to higher unemployment?

28 May

Increases in the minimum wage were accompanied by growth in total employment and the percentage of the potential workforce employed.

When Labour was elected in 1999 the minimum wage for someone under 20 years of age was $4.20 an hour. The adult rate was $7.00. The previous National government had also believed higher minimum wages were bad for business (or at least their business mates) so had only increased it by only 87 cents an hour during their 9 years in power.

A study by Canadian Labour economist Jim Stanford reveals that “During the 1990s, when the minimum wage was frozen in nominal terms (and declining in real terms), New Zealand’s employment performance was hardly outstanding. …… Initially, the employment rate declined (with the recession of the early 1990s). Even during the subsequent economic expansion, however, the employment rate barely exceeded its pre-recession level of around 60% of the working age population. The average employment rate for the decade as a whole was 59%. After 2000, however, when the minimum wage began to increase in real terms, the employment rate also began to increase substantially. It grew from 60% at the outset of the decade to a peak of over 66% by 2009 – before falling off with the global financial crisis and associated recession (See Graph 3). The average employment rate for the decade as a whole was 64%. New Zealand’s overall labour market performed much better when minimum wages were being increased in real terms, compared to the preceding decade when they were being decreased in real terms.”

Graph 3

(Part of a series of extracts from “Exposing Right Wing Lies” by Mike Treen, Unite National Director)

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One Response to “Question 3: What was the actual impact of changes to the minimum wage on employment in New Zealand over the last decade? Is there any evidence it lead to higher unemployment?”

  1. Toni Joa May 28, 2012 at 4:51 pm #

    All I know is, the cost of living increases 12 – 15 months before wages come close -and wages are always 12% below the increase in the cost of living. So we are always on the back foot. Rent increases, road taxes and Vehicle licenses increase, gasoline increases, milk increases, bread increases, and wages stay the same. Cheese is a ridiculous price. Butter is even worse. Staples we always relied on, milk, bread, cheese – are now out of our reach. Mutton and lamb are completely out of our range – the only protein coming close to being affordable anymore is chicken – even that is ridiculous at $24.99 a kilo. We are so close to only being able to afford dog food – and even that is a ridiculous price – what happened to New Zealand? $5.99 for a loaf of bread, unless you want starched white bread? How about our cheese? Our milk? I am so disheartened; feel like going back to USA to live.

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