Why the minimum wage is good for business

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Cross-posted from The Conversation:

Last week Australia’s Fair Work Commission increased the national minimum wage to A$16.87 an hour from 1 July, 2014. The usual suspects rolled out the usual arguments denouncing this initiative, and Treasurer Joe Hockey joined them, arguing it will cost jobs and hurt employment growth. The Australian Financial Review led on the argument Australia would become “entrenched as the most expensive labour market in the world” making a headline of the long established fact that Australia sets one of the highest rates of pay for the most vulnerable in the workforce.

It is a curious argument to make: cite the lower headline minimum wage rate in the United States, the United Kingdom and other developed countries as a sign that Australia is pursuing a flawed economic approach, as if Australia were not the OECD country with one of the world’s lowest unemployment rates.

But the facts do not support simplistic arguments about wages policy.

The AFR’s comparative analysis put Australia at the top of the list of “global” minimum wages by US dollars per month.

By comparison, it’s worth considering two fundamental points:

(a) The three countries with lowest minimum wages currently have the highest unemployment (i.e. Greece, Spain and Ireland).

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(b) Amongst the countries compared in the table, those from the English-speaking world (Canada, UK, USA, NZ and Australia) have some of the lowest unemployment rates. The big difference amongst them, however, is proportion of low paid workers. As a general rule low minimum wages nurture high levels of low paid employment (defined by the OECD as those earning less than two-thirds of median earnings). Australia and New Zealand, with among the highest minimum wages in the world, have both low levels of unemployment and significantly lower levels of low paid employees.

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Social safety net

These facts do not mean that high minimum wages are necessary to reduce unemployment and low pay. What they highlight is that the connections between wages policy and labour market outcomes are more complex than assumed by most critics of the FWC. This is something of which the FWC is acutely aware. It and its predecessors have spent over a century devising principles on how best to manage the complexities. Its decision last week was the latest development in its thoughtful and appropriate response to the complex matter of wages policy. Why is this the case?

First, why should Australia, given its strong economic fundamentals, see a high minimum wage as a source of shame or embarrassment? It is a policy that defends the value of hard work, encourages self-reliance by workers and their families, and that provides incentives for business and the economy overall to become more productive.

The United States and the United Kingdom provide plenty of evidence for what happens when minimum wages are too low for workers to support themselves and their families. At some point government steps in to prevent the entrenchment of social disadvantage and the educational, health and criminal justice costs that come with it. The burden of administering policies to help working families below the poverty line – such as food stamps or earned income tax credits – fall on government bureaucracies or the not for profit sector, can carry a social stigma for the affected families, and do nothing to affect the root cause.

The business case

Low minimum wages are not just socially damaging. Low minimum wages also harm other local businesses, by reducing the spending power of a community. This argument is transforming the debate in the United States and is one factor behind a number of successful initiatives at state and city level to increase the minimum wage well beyond the current US Federal rate of US$7.25 an hour. Recently, Seattle City Council voted to increase the minimum wage in its zone to US$15.00 an hour. It follows other areas, including the Washington D.C. metropolitan area, which has agreed to increase its minimum wage to US$11.50 an hour.

In the United Kingdom, where the current adult minimum wage rate is GBP 6.31, a living wage movement has successfully campaigned for public sector, local councils and other prominent employers to pay a higher “living wage” rate (GBP 7.65 outside London and GBP 8.80 in London).

Among the living wage’s supporters: Conservative Mayor of London Boris Johnson, who has said “Paying the London living wage is not only morally right, but makes good business sense too”. Higher minimum wages are a stimulant to work smarter, encouraging innovation, investment in technology and reorganising jobs and tasks to make the most of the capability of the workforce. As evidence, FWC cited the recent increase in labour productivity as one of its grounds for reaching its decision.

When trying to compare countries it is worth remembering that price should not be blind to quality. Even among low paid workers, the proportion of Australians with post-school qualifications is growing and, although there is room to improve, workplace literacy and numeracy standards are high comparatively. The recent OECD Survey of Adult Skills found that Australia combined above-average adult literacy scores with a high level of equity. Why shouldn’t Australian employers pay more when they are getting a higher quality product?

Forget the politics

Second, the real reason wage rates are so low in other countries is politics, not economics. In the United States, where the federal minimum wage is set directly by legislation, there have only been 29 increases since 1938.

Individual US lawmakers are too fearful of campaigning by corporate interests, even when they have the cover of a supportive president such as Barack Obama, who has endorsed an increase to US$10.10. A number of US states have adopted measures to automatically index minimum wage rates to resolve this problem. In the United Kingdom, there have been steady increases in the minimum wage since the Low Pay Commission was established in 1997.

These are precisely the factors that the Fair Work Commission takes into account each year in its minimum wage case and they are the reasons why the latest increase is entirely justifiable on economic as well as social grounds. Far from being ashamed or embarrassed by our wage rates, Australians should be proud of our minimum wage and the institution we as a nation have nurtured for over a century.

Article by Damian Oliver and John Buchanan from the University of Sydney

Leith van Onselen
Latest posts by Leith van Onselen (see all)

Comments

  1. It certainly helps to have customers who can buy your goods.

    Although there is a theoretical attraction to doing away with the minimum wage, so many of the costs (land, housing, fuel, food, power etc.) are artificially inflated by the government. It’s no use the anti-minimum wage people whining about that when they ignore all the other costs, and the fact that those costs place a floor under the income anyone needs to live.

  2. How onerous for business to pay a livable wage. What happened to the good old days when you could just round up the unwashed masses and press them into service. Chain them to the fast food counter, lock them up at night and feed them breadcrumbs. By golly the idea of those plutocrats having to suffer by paying workers just breaks my heart.

  3. higher wages IN TRADE EXPOSED businesses makes them uncompetitive

    if minimum wages are in domestic services, then it doesnt really matter

    • outsidetrader

      The high aussie $ has a more significant impact on trade exposed industries than the minimum wage.

      Perhaps the government should be putting more effort into devaluing our currency than devaluing the efforts of our lowest paid workers…

      • “Perhaps the government should be putting more effort into devaluing our currency”

        That would be my first priority!!!

  4. One of the worst articles posted on MB in a while. Full of logical fallacies and sophistry.

    For example:

    “(a) The three countries with lowest minimum wages currently have the highest unemployment (i.e. Greece, Spain and Ireland).”

    Are they trying to infer that the low minimum wage CAUSED high unemployment? Could it be that maybe something else is causing the high unemployment? Correlation is not a proof of cause.

    Did you know an increase in ice cream consumption is correlated to increased murder rates? Stop eating ice cream!!!

    http://www.buzzfeed.com/kjh2110/the-10-most-bizarre-correlations

    I am not sure why MB is cross-posting this dribble.

    • In fairness, I plotted the values of minimum wage and unemployment as an xy-scatter, and the result lives up to its name – scatter. A bunch of uncorrelated dots.

      Suggest that there is no correlation to be found here, at least on the data presented.

    • No, they are not inferring that low minimum wages cause high unemployment.
      As they state later
      ‘These facts do not mean that high minimum wages are necessary to reduce unemployment and low pay. What they highlight is that the connections between wages policy and labour market outcomes are more complex than assumed by most critics of the FWC.’
      In other words Hockey, the AFR and others are oversimplifying by inferring that higher minimum wages cause unemployment.

    • I suggest TD that point (a) is a direct rebuttal to those who state without evidence that increasing minimum wages increases unemployment.

      That is, accepting your argument, the case against increasing the minimum wage is similarly subject to the ‘correlation is not causation’ warning, and what little evidence there is points in the opposite direction.

      • The data presented above does not support the proposition that any relationship exists between minimum wage and unemployment.

      • emess,

        I agree that either side of an argument should back it up with logic or evidence. So lets do a logical run through of minimum wage laws by using a thought experiment.

        Lets say tomorrow minimum wages were set at $100 per hour. Think about the consequences. Then imagine the minimum wage was set at $80 per hour. Think of the consequences. Continue until you get to our current minimum wage of $16.87 per hour.

        If you look at the $100/hr scenario you will notice that even though the demand for goods and services are still present in our economy the supply will not be there without an increase in prices. Think of an average restaurant. The demand from consumers may still be there however the supply won’t be without a massive increase in prices. Some goods and services may still be available though e.g. doctors may still be able to operate profitably. You may argue that all that would happen is for all businesses to increase prices. If this were the case though the purchasing power after inflation of $100/hr may be the same as present day $20/hr. Therefore this won’t enable the minimum wage laws to meet their policy objective of reducing poverty.

        If you step down the increments you will notice more businesses that can operate profitably than before. The supply of goods and services in our economy increase. As our economy produces more we are wealthier as a nation.

        By this logical extension a minimum wage of $16.87 would stop a smaller subset of goods and services being produced than otherwise would have been. Alternatively it would mean that some businesses would increase their prices to cover the increased cost of doing business as per above. This would mean that people with the skills to earn above the minimum wage lose purchasing power to those that don’t have the skills. Effectively a wealth transfer from the skilled to unskilled which I think is unfair if you believe in free market economics.

        Therefore minimum wage laws increase poverty as it denies the supply of goods and services that would have been possible in a free market. The minimum wage laws are a wealth destruction/transfer policy as it either denies jobs to some workers looking to build up their marketable skills or it transfers purchasing power from people who earn above the minimum wage to those on it.

      • TD, that analysis depends on the level of the minimum wage not falling below what is required to sustain that particular worker and their family.

        If it does that, then either government steps in and supplies a bigger support such as food stamps, or there are other undesirable social outcomes such as increased crime etc etc.

        Both of those issues need to be added to your analysis. What may well make perfect sense at the $100 per hour end of the scale may fall down at other levels.

      • drsmithyMEMBER

        By this logical extension a minimum wage of $16.87 would stop a smaller subset of goods and services being produced than otherwise would have been.

        By the logical extension of your argument, without a minimum wage people can and will be employed for $0.01/hr.

        Do you think someone can live in Australia on 8c/day ?

      • Thanks TD You saved me a lot of slow typing! The article is totally worthless and at best misleading.

    • surfbeach2536

      The minimum wage is too low and should be set at a level high enough so that people can work and live a comfortable existence.

      It is not an argument about competition it an argument about humanity. What we should be looking at is how to make the minimum wage work.

      What is going to happen as robots and machines take over many of the jobs we have today? My guess is we will have to create employment in areas that we hadn’t considered as employable roles previously and pay people to work in those roles.

      It is a bit like the question asked in a sexual harassment in the workplace scenario, “who has the power?” and from what i have seen it certainly isn’t the person on the minimum wage. Society needs to stick up for the underdogs

      • surfbeach

        I think you have the wrong end of the stick. The problem is not so much the level of the minimum wage which, comparatively, is quite good. The problem is the simply outrageous cost of doing anything in Australia – including trying to live on a minimum wage.

        Attacks on the minimum wage would be more cogent if they were accompanied by attacks on all the outrageous exec salaries as exemplified by Bank exec salaries that parasitise the whole economy. Similarly lawyers fees, Govt execs of semi-private utilities, featherbedding everywhere, stupid WHS laws, and a whole host of other privileged and undeserving examples. This is not to forget UE’s constant well founded tirade against the cost of ‘land’.

        We cannot afford what we do. That is simply a fact. However there needs to be a conversation about the structure of the whole damned place.

    • dumb_non_economist

      TD,

      Would you like to do likewise and provide some evidence instead of insinuating that high UE is caused by high min wages and forget the dribble, please!

      • It’s pretty simple DNE. If you have limited pricing power, and you have exhausted all the other ideas you have to reduce your costs, and your wages get too high you drop staff. Academics can dream up all the BS they like. That is simply a fact!!!!

        Now the numbers can be confused by a whole lot of oter factors including a nation’s access and readiness to flog off its natural resources; it’s willingness to go into debt rather than trim its cloth; it’s overall income structure; etc etc etc.

        Economics has become full of this stupidity. Simple matters of fact are supposedly demonstrated to be wrong by so-called counter-intuitive logic because simple correlations are confused by a host of factors. We need to stay with the simple facts and look at what other factors are at work.

    • drsmithyMEMBER

      Are they trying to infer that the low minimum wage CAUSED high unemployment?

      No, they’re highlighting that high minimum wages don’t cause high unemployment and low minimum wages don’t cause low unemployment.

      Could it be that maybe something else is causing the high unemployment?

      Yes. That would be “the point”.

  5. The bigger issue is that the rich are continually getting richer and the poor getting poorer, fk letting Australia end up like the US. Less money for business and more for workers is a nice change.

  6. The arguments in this article are an absolute shamble!

    The effect of min wage and progressive income tax policies is the exact opposite of what they profess to achieve. They disincentivise, punish and exclude people from employment.

    There’s no shortage of useful stuff to be done out there! Yet we have unemployed people because they’re too expensive for the most basic of labour. There are so many people (my mum including) who would love to have something to do outside the home. Anything. She wouldn’t care how much money it paid, as long as it was something.

    We gotta have a real debate about a low overhead framework for sub min wage labour, try it and see where it takes us.

    This article makes no sense an is not worthy of this site!

    • I wonder if I posted with an avatar of Adolf Hitler and proceeded to espouse veiws the polar opposite of what we would have expected from him – how many people would conclude I was a troll.

      • Haha, fair point. Actually the avatar is just a coincidence – I set up a gravatar account a long long time ago for a completely different purpose and turns out MB fetches it.

    • +1

      A lot of government policies achieve the opposite of their stated goals. Just don’t expect the government to point this out to you.

      • No, someone posts with an avatar of a socialist revolutionary leader – you don’t appear to know who Che Guevara was – and proceeds to argue a veiwpoint directly opposite to one that the man himself would have supported.

    • drsmithyMEMBER

      There’s no shortage of useful stuff to be done out there!

      Reality disagrees. Real unemployment is 10%+.

      Yet we have unemployed people because they’re too expensive for the most basic of labour. There are so many people (my mum including) who would love to have something to do outside the home. Anything. She wouldn’t care how much money it paid, as long as it was something.

      You should introduce your mother to volunteer work.

      We gotta have a real debate about a low overhead framework for sub min wage labour, try it and see where it takes us.

      Why ? We already know where it will take us. History (heck, present-day America) shows the outcome.

      The point of a minimum wage is to set a floor on living standards.

      Basically, if you can’t afford to employ someone at the minimum wage, it’s not because the minimum wage is too high, it’s because your business model is broken.

      • “Basically, if you can’t afford to employ someone at the minimum wage, it’s not because the minimum wage is too high, it’s because your business model is broken.”

        Drivel. The minimum wage is set by a bunch of bureaucrats..
        I think you’re confused. How do you question the profitability of a business model if before there exists a business owner making a profit providing jobs and goods & services, and now there is no business and no jobs and nobody is providing those goods or services because of a legislative change? Maybe the business doesn’t close down, but now the sector doesn’t attract investment because the margins are lower. Current business valuations are lower. Less new businesses start up and prevents living standards from improving.

        Advocates are content for it to be law in Australia that businesses providing products and services borne by lower skilled workers have to give an additional %x of their bottom lines to the workers themselves to help strengthen the so called ‘safety net’. Most of which goes back into the banking sector via rents and repayments or towards living expenses food and energy rather than into the wider economy..

        And, they believe this transfer is legitimate, does not encroach on either parties liberties and has no negative side effects.

        Well, good luck down that path.

      • drsmithyMEMBER

        The minimum wage is set by a bunch of bureaucrats..

        Indeed. Which is why it’s so low.

        I think you’re confused. How do you question the profitability of a business model if before there exists a business owner making a profit providing jobs and goods & services, and now there is no business and no jobs and nobody is providing those goods or services because of a legislative change?

        Quite easily. But I do start from the position of not being able to do whatever I want, and bugger the consequences, which you might struggle with.

        A different example might help you. Imagine back to the days before those pesky pollution regulations, when you could basically dump whatever you wanted, wherever you wanted. Now, as an “entrepreneur”, you ran a factory and liked to dump all the nasty chemicals and other waste into the local river because, well, it was the cheapest thing to do. However, a bunch of people in the town downstream, sick of getting cancer and other nasty afflictions from your pollution, got together and passed a law saying you had to deal with it responsibly. Suddenly, your profitability is affected because now *you* have to deal with the costs of your pollution, rather than pretending there aren’t any.

        Maybe the business doesn’t close down, but now the sector doesn’t attract investment because the margins are lower. Current business valuations are lower. Less new businesses start up and prevents living standards from improving.

        As opposed to paying people below poverty level wages preventing living standards from improving, you mean ?

        “We had to destroy the village to save it” is not particularly sound reasoning.

        Advocates are content for it to be law in Australia that businesses providing products and services borne by lower skilled workers have to give an additional %x of their bottom lines to the workers themselves to help strengthen the so called ‘safety net’. Most of which goes back into the banking sector via rents and repayments or towards living expenses food and energy rather than into the wider economy..

        Non-sequitur.

        And, they believe this transfer is legitimate, does not encroach on either parties liberties and has no negative side effects.

        I am still waiting for one of you “entrepreneurs” to explain why your glorious capitalist utopia requires an oppressed, poverty-stricken underclass, and how that “does not encroach on either parties liberties and has no negative side effects”.

        Well, good luck down that path.

        Yeah. We might end up in a country where even the poorest in society are paid enough to not be desperate. The horror !

      • Smithy, from ur earlier posts I can see our views are diametrically opposite, so not gonna try and convince u.
        But just try and answer one question: those 10%+ unemployed – if they were given the option of sub min wage employment – don’t u think some of them would take it while continuing to look for other work at least?
        My main issue with ur position is that u would completely deny them this choice.
        As for ur argument on living standards – what living standards do u think are appropriate for those priced out of the labour market? Zero?
        Wages and prices are two sides of the same coin. One of the most insightful comments I’ve read (on MB I think): why do u pay $5 for a cup of coffee? Cos the person serving u has a $400k mortgage to service. It is the madness of our current indebtedness that drives up labour wages and by extension prices of goods.
        Increasing the min wage contributes to that same dynamic.
        And yes I agree with the other readers that it’s a direct hit against small businesses – the part of the economy that creates jobs. Big business on average loses jobs.

      • drsmithyMEMBER

        Smithy, from ur earlier posts I can see our views are diametrically opposite, so not gonna try and convince u.

        I’m really quite easy to convince of just about anything. All you need is a moral position and evidence.

        But just try and answer one question: those 10%+ unemployed – if they were given the option of sub min wage employment – don’t u think some of them would take it while continuing to look for other work at least?

        Probably, but why should they just so an employer can get richer underpaying them for their labour ?

        As for ur argument on living standards – what living standards do u think are appropriate for those priced out of the labour market? Zero?

        False dichotomy fallacy.

        Wages and prices are two sides of the same coin. One of the most insightful comments I’ve read (on MB I think): why do u pay $5 for a cup of coffee? Cos the person serving u has a $400k mortgage to service. It is the madness of our current indebtedness that drives up labour wages and by extension prices of goods.

        Yes. The property bubble is a dominant force in our high cost of living.

        Increasing the min wage contributes to that same dynamic.

        Amazing how the solution is always to make the poor poorer, rather than the rich less rich.

        How about we attack some of those top-end management and CEO salaries and bonuses ? Maybe look at the massive increase in capital share over the last couple of decades. Perhaps some targeted taxation to encourage better investment and employee remuneration.

        Once the fat and waste at the top end of town has been pared back, we can start talking about whether the poor buggers at the bottom end are paid too much.

        I am still waiting for you to explain why we require an oppressed, poverty-stricken underclass, or how you expect an economy to function when most people’s incomes have been cut back to the bare minimum.

        We already know what the society you espouse looks like, because America is showing it to us. If you’re so keen to live in America, just move there and stop trying to fuck up this country into some sort of pseudo-Feudalist corporatocracy as well.

      • I don’t believe in overtaxing the higher end incomes either smithy. I am in fact for a flat tax rate regardless of ur income level, at a relatively low %age. And for substantial land taxes – the case for those has been made convincingly on MB before.
        If anyone still thinks that higher taxes on high incomes is achievable in practice – I got news for ya: it’s not. They will always find loopholes. So enough with the class warfare rhetoric. I am neither for the wealthy nor for the poor. They will always be there. Social mobility is why matters and that’s what’s gotta be addressed.
        As to ur highly insulting words at the end: in a lot of ways I think it is ur path that will get us to where America is headed now – a crony-capitalist corrupt state with strong socialist overtones.

        U want more interference from government in our lives? I will never buy the premise that the ideas of a few bureaucrats are somehow better than the ideas of the many – the result of market forces.

      • drsmithyMEMBER

        I don’t believe in overtaxing the higher end incomes either smithy. I am in fact for a flat tax rate regardless of ur income level, at a relatively low %age.

        Well there’s a surprise. More policies that maximise wealth disparities and put the tax burden disproportionately on the poor.

        How about a flat tax on wealth ? That sounds fairer.

        If anyone still thinks that higher taxes on high incomes is achievable in practice – I got news for ya: it’s not.
        Not while the neoliberals and similar free market extremists are running the show, that’s for sure. But eventually their unfair, unsustainable system will fall apart (as is currently happening).

        So enough with the class warfare rhetoric.

        The only person here advocating class warfare is you.

        I am neither for the wealthy nor for the poor. They will always be there. Social mobility is why matters and that’s what’s gotta be addressed.

        Yes. And we know how to address it. Progressive taxes, high wages for the working (by which I mean people who make most of their money from salary) classes, comprehensive public services, generous social welfare and safety nets, strong regulations, , strong workers rights and protections, etc.

        We also know NOT to improve it. Which is basically everything you’re advocating.

        As to ur highly insulting words at the end: in a lot of ways I think it is ur path that will get us to where America is headed now – a crony-capitalist corrupt state with strong socialist overtones.

        Reality disagrees. We can look at the Northern European countries, or even America in the post-WW2 Capitalist Golden age to see where the things I advocate lead. High class mobility, low wealth disparities, strong democratic principles, etc. Meanwhile, the ideas you advocate that have taken over in the last 30 years – low taxes, undermined public services, minimal social safety nets, reduced regulations, few workers rights – have (unsurprisingly) taken American to where it is today.

        My words aren’t “insulting” unless you are completely oblivious to what you are _actually_ arguing for. Which, in fairness, it seems you are.

  7. ellipticcurve

    Higher minimum wages and regulation empower politically connected monopolies and big business at the expense of small business. It’s just ONE MORE barrier to entry, one more reason why starting your own business is difficult.

    Somebody explain to me how having to pay more for labour benefits the owner operator of a petrol station if he has to pay more for wages? Or the corner store milkbar or fruit & veg store competing with Coles and Woolies across the street? Or a mechanic shop trying to train a couple of apprentices if now he has to let one go? Or a news agency / tats operator with one or two full time staff who has to close down or come out of retirement to run the store because %12 super and another minimum wage increase leaves no margin? Or a Post office owner/operator that has to drop their one staff member back to part time or pay cash in hand to make ends meet? Or someone running a bottle shop with uni students stacking shelves part time? Or a charcoal chicken shop, bakery, hairdresser, florist, that clothing store across from Target for which labour is one of the biggest expenses in their business?

    How does increasing the COST of labour in more and more borderline profitable services that we use, or small businesses that we rely on for variety and specialities not affect the workers or the owner operators willingness to expand and hire? How about them, their investments, the value of their businesses… their bottom lines.

    Big business 1 – Small business 0

    This article belongs in the Socialist Times not MB

    • drsmithyMEMBER

      Somebody explain to me how having to pay more for labour benefits the owner operator of a petrol station if he has to pay more for wages?

      It doesn’t.

      It benefits the poor suckers working who now (at least in theory) earn enough to house and feed themselves, which is the point.

      If you can’t afford to employ people at a high enough wage for them to live on, then you need to find a better business model, or get better at running the one you have.

      It’s particularly comical you’re making this argument in the context of Australia, where labor share has been dropping and capital share going through the roof for a couple of decades now.

      How does increasing the COST of labour in more and more borderline profitable services that we use, or small businesses that we rely on for variety and specialities not affect the workers or the owner operators willingness to expand and hire? How about them, their investments, the value of their businesses… their bottom lines.

      Maybe you should tell us why you should be able to pay someone less than they need to survive on, just so you can get a little bit richer, and why that’s a good thing for your employees who now have to go begging for food, or live in an alley, or rob the guy running the store next to yours.

      • you’re making this argument in the context of Australia, where labor share has been dropping and capital share going through the roof for a couple of decades now.
        labour share down
        capital share down
        land/license rent/rort share up

    • Geez Dr Smiithy the instant bloody expert on small business!!!!!!!

      Stone the bloody crows!!! If ever there was someone totally ignorant of small business it is this bloke. To be ignorant of small business is OK -most commenters are! Mostly people stick to their knitting in regard to small business..But tthis bloke pretends he’s a bloody expert!!!!!!

  8. I understand the case against the minimum wage and I agree that a minimum wage would not be a part of a well functioning society.
    The minimum wage is a bandaid-type solution. It partially masks a range of problems and doesn’t address the real underlying problems.
    What I have noticed however is that the people who call for a reduction/removal of the minimum wage are, in my opinion, the lowest form of scum of society. They are callous “let them eat cake” scum. Just something I have noticed.

    • +1 that’s its the bandaid solution. I think about Howard’s attempt at ‘work choices’, what the outcome of that election would be if the price of land was half what it is now (through sufficient supply etc). Would it have been so objectionable then?

  9. I’m all for higher minimum wages for all the reasons above

    However, I think the real threat to Australia is not all the people earning $20,000 pa that could end up on $25,000 but the large bulk of people in the big cities in middle management, government service etc earning six figures twiddling their thumbs and the grossly overpaid mining and services industry

    The fallout to consumption and housing from the pressure of these wages falling back towards international levels far outweighs any threat of a higher minimum wage IMO

    • ellipticcurve

      Who’s earning $20k a year?

      The minimum wage puts an unskilled worker over $32k PA plus super and benefits. The cost to business is a mandated circa $40k for 1 employee per financial year when you include benefits, superannuation and government taxes. I pay many wages, it is the largest cost in my business and the biggest disincentive to expand and hire more workers.

      I agree 32k is not a good wage to raise a family and pay off a mortgage, and irrespective of the economic climate (bubble down under, overpriced housing, consumption economics) i’d advised against having kids and buying a house if you can’t afford it.

      The point of low wages is cheap positions. Cheap positions are training and skills opportunities. Why do we have ‘unskilled’ workers in the first place? How do people with no skills that aren’t worth 40k+ a year get a job and get skilled if the barrier to entry keeps going up?

      The truth is these people become increasingly tangled in the so called safety net we’re trying to strengthen, making it more like a trap.

      If we had a robust naturally occurring labour market without the distortions of Government the natural progression for a worker in their life wouldn’t be Soviet Russian style you are born a labourer and die a labourer – it would be unskilled to skilled transition based on merits, abilities and experience. It would be easy to get a job do all sorts of things, grow your skills set and work your way to a comfortable living standard. That’s how it used to be.

      The problem with these discussions is that there is seldom a consideration for what society misses out on when we generate new or exacerbate existing distortions through policy. The goods and services that no longer exist, the ones that don’t come in to existence and the cost of removing labour capital and investment capital from the market are seldom recognised as a loss to society.

      • drsmithyMEMBER

        For some reason this is triggering a “security response”. Let’s try it in installments.

        Who’s earning $20k a year?

        Probably some of the million-odd part time employees who want more work but can’t find it.

        I agree 32k is not a good wage to raise a family and pay off a mortgage, and irrespective of the economic climate (bubble down under, overpriced housing, consumption economics) i’d advised against having kids and buying a house if you can’t afford it.

        You are missing the point, which is that even the lowest-paid jobs should pay well enough that raising a family and paying off a mortgage *is* possible.

      • drsmithyMEMBER

        The point of low wages is cheap positions. Cheap positions are training and skills opportunities.

        Contemporary employers providing training and skills ? In minimum wage jobs no less ? Surely you jest.

        Employers today have zero interest in such things. Their belief – which I imagine you share – is that skills are something employees need to provide and improve themselves, out of their own pockets and in their own time. “Personal responsibility” and all that.

      • drsmithyMEMBER

        Why do we have ‘unskilled’ workers in the first place? How do people with no skills that aren’t worth 40k+ a year get a job and get skilled if the barrier to entry keeps going up?

        That argument works all the way down to zero. Then we get businesses leeching off unpaid “interns” like they do in the US.

      • drsmithyMEMBER

        If we had a robust naturally occurring labour market without the distortions of Government the natural progression for a worker in their life wouldn’t be Soviet Russian style you are born a labourer and die a labourer – it would be unskilled to skilled transition based on merits, abilities and experience. It would be easy to get a job do all sorts of things, grow your skills set and work your way to a comfortable living standard. That’s how it used to be.

        I guess that’s why America – the typical poster child for these sorts of arguments – has some of the lowest levels of class mobility in the developed world, right ?

        The problem with these discussions is that there is seldom a consideration for what society misses out on when we generate new or exacerbate existing distortions through policy. The goods and services that no longer exist, the ones that don’t come in to existence and the cost of removing labour capital and investment capital from the market are seldom recognised as a loss to society.

        The problem with these discussions is the people advocating we strive for the lowest cost of labour (except their own, of course) never think it through to the endgame they desire where all but a handful make barely enough to survive on (if that) and no-one has any disposable income to actually buy stuff and generate economic activity.

        Actually, scratch that. The problem with these discussions is people like you ignoring reality.

      • Oh Geez…and you live in the real world?????? Cosseted protected high salary earner! Give us all a bloody break!!! You are dead set ignorant.

    • +10000000000

      Many many workers sitting in offices on 100k (vitally, contributing taxes, true), who ought not enter this argument until they’ve lived on the minimum wage, or better. $20/hr casual with no pricing power.

  10. If a low skilled worker takes home an extra few grand it will be a significant increase for them but they are still in a very tight position

    My question is what is going to happen to the 500,000 or so employees in mining & mining services on $100,000+ when they lose their positions and end up working at Maccas? (Ok being a bit cheeky there but anyone tried to get a skilled job of any kind recently? You must have strong industry experience to get a look in)

    And what effect a drop like that will have on the economy

  11. Andrew that’s not a minimum wage problem.
    With a telco engineering degree and 17 years of continuous employment I was overskilled for every job I went for (Northern Rivers NSW). Couldn’t even get an interview for anything.

    • tmarsh…so many years of a distorted economy has brought us to this point. The Bankers earn multi-millions for what? A policy of lending for housing and sfa else? Blimey that takes hard work and genius!
      Because we have ignored the productive economy and regarded it as totally unnecessary we have arrived at this. The way to get ahead is to sit on your arse and buy houses with debt. The only ones who do well are those who service that industry or government! It’s been thus for 50 years wth the exception of odd booms in mining followed, inevitably, by disasters.

      What a bloody shambles!