Minimum Wage Must be Lowered

A recent Kiwi Party press release set my teeth on edge. I sat up straight, stared at the screen and then held my head in my hands. "No, not this". Yes, the Kiwi Party wants to raise the minimum wage to $15 per hour...

"...the Kiwi Party backs a policy which would raise the minimum wage to $15.00 an hour.” The party leader said.

Mr Baldock’s suggestion to Government would be to offer a tax credit to employers which will offset the extra cost, thereby making the policy fiscally neutral to business. The increased wage will then be inflation adjusted.

“The Kiwi Party’s policy is to uphold New Zealand’s tradition of all workers rights. We want to see the people of this nation being paid a fair wage. This is a huge step towards creating a stable living environment for all Kiwis”

When the minimum wage is raised to a level above what employers on a whole are prepared to pay their workers, then it becomes artificial. At some point, that higher pay-rate will come back and hit the employee in the stomach like a sack of spuds. Because if the employer is not truly getting his $15 per hour worth of value out of his employee, then he has to soak up this extra expense somewhere in the business, and he will most likely accomplish this by raising the price of his goods.

Whether the Government reimburses the employer or not is irrelevant, because it's not their money to give - it's the money they stole from the employer in the first place.

What is meant by these terms "fair wage", a "stable living environment", and "worker's rights"? A wage can be determined to be fair if the employee and the employer are agreed on it. A stable living environment - at the end of the day, why should the employer have to make sure that his employee has a "stable living environment". Of course I completely agree that worker's have rights, and these must be upheld. But, ahem, where is the mention of the employer's rights?

Why is there this fascination with the Government running our everyday lives? How can it be a good thing for them to force employers to pay their employees $15 an hour, and then (mind the red tape), offer them a tax-credit.

Patricia Schnauer, Justice Spokeswoman for ACT and Member of Parliament talks some sense in the article ACT's Approach to Employment Law (1999). Below are a few comments relating specifically to the concept of a minimum wage from her article...

"...You cannot help workers by legislating for a minimum wage, compulsory unionism, or a national award system. Such policies increase unemployment and reduce living standards because workers and employers are prevented from coming together to make deals that suit them best.

Minimum wages impact particularly negatively on low-skilled workers, since it is these workers who are often denied a chance in the workplace as a result of the mandated minimum. The huge number of Maori in our dole queues is in large part due to this misguided policy."

"Income adequacy is far more effectively addressed through the tax-and-benefit system than through a minimum wage. Consequently ACT supports repealing the minimum wage, thus providing a major boost to job creation."

"...Mainstream economists have long recognised that a minimum wage costs jobs: no employer will hire a worker if the extra value produced by the worker is lower than the mandated minimum."

While I strongly disagree with a minimum wage as high as it is at the current time ($12.50 per hour), there is a place for a minimum wage, but it should be set far lower, perhaps around the $7 per hour mark. This would be for the sole purpose of ensuring that workers were not persuaded, forced, or left with no option but to work for a ridiculously low pay-rate, for instance $2 per hour.

With a nice low minimum wage ($7 per hour), Employees would be empowered to get the best possible job at the best possible pay. Because if they were putting in the effort - and their employer was not rewarding them for this by paying them at a good rate, then the employee could simply move on.

And from the other side, with a low minimum wage, the employer would be able to afford to pay his workers what they were truly worth. Instead of having the slack eighteen-year-old and another hard-working, long-serving and trusted employee on the same (or very similar) pay-rate, the employer could reward each worker accordingly.

Performance-Based-Pay is the only way.