By Elizabeth Davies
From April 1st the minimum wage will increase from $13.75 to $14.25 an hour. Some would argue that the increase is impeccably timed, what better day than April Fools' Day to start a grand joke at the expense of New Zealand’s ever growing population of working poor.
As one of my jobs is already slightly over minimum wage, this increase will translate to an extra $6 in my bank account each week. That’s a whole Subway lunch meal, small drink and cookie included. Thank you Mr. Key and congratulations, you’ve provided low income families and working young people with an additional reason to resent you.
The Labour Party have been quick to reassure everyone that if they were elected they would raise the minimum wage to $15 within 100 days. The Green Party go further, wanting to bring everyone up to the living wage of $18.80 an hour. Labour leader David Cunliffe has declared the 50 cents increase "insufficient" and whilst I’m inclined to agree, I’m also aware that a drastic increase to the minimum wage wouldn’t solve all of our country’s economic woes. The massive financial consequences could mean job losses for young and unskilled workers. If I’m honest I’d rather have a badly paid job than no job at all.
Council of Trade Unions economist Bill Rosenberg said the 50 cents increase was "unfair given several years of stagnating wages, an economy that is starting to grow, and widespread concerns about how that growth will be shared". It seems everyone is talking about our growing economy and how everything is looking up. This increase doesn’t seem to reflect that same optimism but rather seems like kitchen scraps, begrudgingly given.
According to Rosenberg, the National Party led government has raised the minimum wage 14% in the last five years, including the latest increase. After accounting for inflation, that’s a 3% increase. Greens co-leader Metiria Turei said that translates to $2.25 an hour in the last six years. She went on to compare that figure to the Prime Minister’s $35,500 a year salary increase over the same time. Obviously the jobs aren’t comparable but the figures are still going to piss people off. It’s a bit like me having to wait to get my tiny pay cheque two days late because my boss apparently doesn’t have the money, then watching him drive away in his brand new Maserati.
Some people believe the minimum wage shouldn’t have been increased at all, stating New Zealand’s comparably high minimum wage as a valid reason. Our minimum wage is commonly compared to that of the states which is US $7.25 (about NZ$8.65). I’ve never been a big fan of the "but hey, at least we’re better than blah blah blah" argument as a defence, and in some cases it just plain doesn’t work.
One of the most common minimum wage industries in New Zealand is hospitality and the same can be said for the states. The one glaring difference between here and there is the cultural expectation of tipping. In New Zealand a tip is an incredibly rare gem, often given by foreigners who are blissfully unaware that we don’t really do that here.
So yes whilst American servers have a lower minimum wage, they often earn more as tipping is culturally mandatory. They also see a reflection of their quality of work in their pay cheque. A good waiter earns more than a bad one. Whereas in New Zealand you can smile till your face hurts or completely avoid eye contact and make strange animal noises, and you’re probably going home with the same amount of money – not a lot.
My reaction to a 50 cents an hour pay increase was an understated, "oh really? Cool", because in my position beggars can’t be choosers and I don’t really feel I have the right to complain. That being said, I have a tertiary education, no kids to feed, no credit card debt and I’m still in possession of my youthful, naive optimism that one day the minimum wage won’t be so painfully relevant to my life.
If I were a 45 year old woman with three kids to feed, and a full time cleaning job I probably wouldn’t be quite so nonchalant. I recognise the importance of striking a balance for minimum wage employees and employers, but it’s increasingly difficult to ignore the huge numbers of New Zealanders living hand to mouth, hearing news of our "rock star" economy and wondering when the financial reward will be handed down the line.
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Elizabeth Davies is a 23 year old post graduate journalism student at Auckland University of Technology. She lives with her partner in Epsom and spends her free time refurbishing vintage furniture and attempting to bake while fighting a daily battle against her bank balance. She writes a weekly article for interest.co.nz on money matters and financial struggles from a young person's perspective.
100 Comments
Tip: If finding it too hard to make ends met living in Auckland; MOVE.
$14.25/hr in a provincial town would go as far as $30+/hr in auckland. I remember getting min wage at my first job in p.n and I felt like I was loaded! Was paying $60/week rent flatting in a pretty sweet house. Could put a lot of money away. No parking costs or over the top bus/train fares to pay, just $10 pretrol each week to get around the corner to work. No sitting in traffic. Home by 5:10pm every day. Worked on own projects and additonal study with my time off to keep busy and up skill. Easy living...
The campaign for a "living wage" (a minimum wage high enough not to need state support- $18.80) is pretty much (within a few percent, and then you are in arguements about the degree of error in the inflation adjustment) what the inflation adjusted minimum adult wage was in 1969.
Here is an article about the political storm that goes on when U.S. cities go it alone to raise the minimum wage back to 1969 levels for the U.S.
http://www.theguardian.com/world/2014/feb/22/seatac-minimum-wage-increa…
From what I remember of the early 70s it was not a horrible time to live- less foreign travel and expensive imports, but more involvement in local things.
Seventies was good for couples with both people working.
The parallel import laws were a killer though - if the contracted importor wanted to charge a fortune...or just didn't want to import a product line..then that was just tough luck. Price of cars and electronic gear used to be enormous!
So what you are suggesting Boatman is that our taxes should supplement low income earners rather than the employer (beit local business or large Corporations) paying a little extra.
I don't understand your logic considering you regularly bash the left for these 'hand out' ideaologies and then accept this is a better alternative?
Interestingly, as an experienced teacher with child no. 2 on the way, we may also qualify for WFF which to me is ludicrous! 14 years teaching and I apparently need my income supplemented!
If they increase the minimum wage then we should all get a pay rise of 2.5% before we get a scenario of a waiter/waitress earning nearly as much as a first year teacher.
And further to your comment below re:John Key we are entitled to be criticial of his policies as low to middle income earners continually get financially squeezed.
"employer (beit local business or large Corporations) paying a little extra."
And you call yourself an educated teacher!!! Gods save us all.
Why should employers take a pay cut? If other peoples' wages are going up why would employers, or more importantly business owners, expect their pay packets to go down??
Your "paying a little extra" stops when? the first rise in min wage? The next? perhaps you think employers should be paying not receiving paychecks? BEause where do you think employers, business owners, are getting their money from? Money trees? Springs running flush with coinage springing out of caves in their back section?
Perhaps you have employers confused with the government, who can just take what ever taxes they want to give to government paid employees.
How aware are you that many small business owners make less than minimum wage? Some of those, who don't rent their houses, often make UNDER HALF minimum wage. Often buying on credit, backed by hoped capital growth, or even life insurance policies.
And the wait staff at least sell to the public and if they do a crap job, then that business goes broke, all their customers are there by choice, spending at their discretion. They should be getting MORE than government employees such as teachers in _public_ schools. You want school teachers to be paid more, then get those who use your services, the schoolchildren, and their owners, to pay for those services!! If the market segment you are catering to doesn't or can't afford to pay the price you demand, then that is a problem that any _educated_ person with economic sense should realise. At least with wait staff, they don't expect 3rd parties to subsidise them
Cowboy,
Ironically, I milked cows for 5 years during my uni studies to reduce my student loan and to afford to live (without luxuries I might add). I learnt a lot from my employer, he gave me responsibility and paid me fairly, including pay rises based on my work ethic and reliability.
He would occasionally joke to friends (with irony I hope) that if he paid peanuts that he would get monkeys. Paying someone what they are worth to you is debatable, but he learnt that low wages and long hours would only create dishonesty and resentment towards the employer. I should know, because I occasionally worked for some A-holes and their employees were not much better!
To be successful in business you invest in the resources to earn more income. ie, invest in more land, milk more cows requires more staff unless of course you do it yourself. How much you are prepared to pay your staff is at your discretion.
BEause where do you think employers, business owners, are getting their money from? Money trees? Springs running flush with coinage springing out of caves in their back section?
The consumer.
And you call yourself an educated teacher!!! Gods save us all.
Yes, and am proud of what I have achieved in my career thus far.
How aware are you that many small business owners make less than minimum wage?
Very aware, my father is self employed where business is sporadic and my sister is just starting out with her husband in a new business concept.
The thing is they are intelligent enough to weigh up the risks and capital to invest. They also understand that times will be tough, but they have a good support network and are very determined to make a go of it.
I'm sorry that my comments upset you Cowboy.
I'm interested to know what Elizabeth would do? Perhaps raise it to $20 per hour? Why not, under her logic suddenly poor people would be significantly better off.
If this were possible and so simple, then surely be a huge vote-winner for governments around the world?
So maybe she should exercise some sense and consider why this does not occur. Perhaps, just perhaps, it would mean that struggling employers would be forced to make layoffs.
Duh.
I'm glad my somewhat incendiary comment solicited a reply...so while I have you here perhaps you can define the magic number for us rather than imply that the proposed minimum is too low and $20 is too high.
Unfortuntely, there is no magic number that results in zero job losses. Logically, every increase in the minimum wage will result in a roughly proportionate number of job losses.
So I'm all ears to hear what this so-called balance might be? (and don't go quoting the so-called living wage either, that is just a made up number advanced by unions who rely on the associated publicity to keep the funds from their members rolling in...)
Across an economy, your assumption that there would be a proportionate loss of jobs is a fallacy. The evidence is that low earners tend to spend most/all of their money, and generally do so locally, so increasing the revenues of a whole range of local businesses. Some of those businesses will, as you note, have to now pay higher wages, if they are a minimum wage type of business. Some will be happy to employ more people as their revenues increase.
So there would likely be some dislocation between industries and businesses, but likely no net loss of jobs with a modest increase. As Elizabeth notes, there would no doubt be a point where a very high adjustment would be too disruptive in the short term. So some sort of balance, and graduated increase may be ideal.
The 50 cents coming you have to assume won't tip the balance in most cases.
The levy is being reduced due to
1) increased investement returns
2) Reduced estimates of future liabilities arising from current claimants. (some argue this is basically cuts. ACC doing a better job at minimising payments to claimants, or not givining them the same level of help they are used to)
It could just as easily go up next year if we ACC have a bad year investing in the market, though they have a very good track record.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=111…
John Key is on the record that increasing the minimum wage by 75 cents would have cost 2,300 jobs. So we assume the 50 cents increase would have cost perhaps 2,000 jobs.
You kept your job Elizabeth. What about those who lost it? What about those who may never ever get that first job because the jobs they could get are simply not worth doing at the price employers have to pay?
In my opinion the minimum wage is a silent war against the young and poor. It sounds good, unless you appear to notice all the people who never will get a job. You may not see them in Epsom, but I see them in Otara.
I agree Berend - but the young and naive don't really understand the bigger picture, they just focus on how something affects them individually. It seems Elizabeth is happy for others to lose their jobs, just so long as she can buy another subway sandwich for lunch each week.
The hypocracy of the political left is laid embarassingly bare on blogs like these when more than a soundbite is required.
Just cause JK says it, it must be true?
oh yes that's some robust data eh?
Consider that with more money in the "poorer" ppls pockets they have more to spend, surely that will create jobs?
Otherwise why give tax cuts? cant be to create jobs can it?
What sort of jobs will be lost?
Are we really saying that there are some employers out there so close to not making a profit that an extra 75cents and hour will put them out of business?
On a 40 your week that is an extra $30
regards
Best way for wages to go up is to have low numbers of unemployed.
Supply and Demand works everywhere and employment is no exception.
When you hear about employee poaching, pay increases which assists in retaining current staff, employers having to recruit off-shore, people changing their employer, etc then you know that there will be a natural increase in wages. The natural state of the market has to be left to its devices and everyone is better off.
If people work in a low paid job is that not their choice?
If people live beyond their means is that not also their choice?
Governments setting a minimum wage is just another economic distortion which is legally allowed and covers the rear ends of people who refuse to make personal changes and choices.
All Politicians use the business community like their own private managed fund and this is not working in lifting people in the poor, low earnings area out of the hole they are in.
Well to start with it seems there is little evidence that increasing the min wage costs jobs..
http://www.salon.com/2013/08/10/increased_wages_wont_reduce_employment_…
Supply and demand is econmics 101 and the world is far more complex than that.
Poaching etc happens in the skilled staff ranges and not minimum wages, so different argument.
Low paid, no its often not their choice.
Beyond means, well if the basics cost more than their wage they have no choice.
yada yada, libertarian extremist views....less than what? 1000 votes in an election and seeing the libertarianz party disbanding should tell you effectively no one wants such extremist politics. I mean you cant even put up more votes than the fundie christians.
regards
You don't endorse personal responsibilty do you Steven?
If they basics cost more than their wage - they have choices!
You either increase your income or decrease your costs!
There is far too much "I can't attitude" which really equates to "I don't want too".
Socialism should be voluntary not compulsory. Most business gives readliy to people and causes already as they understand the need to assist the wider community. In fact Kiwis in general are known for their generosity in donating to issues and causes.
If you want to genuinely help others, an enforced financial helping hand when they are physically capable of change is not the right way to help them. Most of what we do in life is 90% attitude - 10% know how. If you have the attitude you'll overcome the obstacles.
I"m curious as to why you always go off on a tangent into political diatribe. It tells me more about you then me!
Of course I endorse personal responsibility....in terms of shades grey, ie unlike extremists who only see black or white I think there should be as much personal responsibility as possible. However there should also be a safety net and re-distribution of wealth to give equal opportunities and outcomes.
Costs etc, well now frankly you are being stupid. As the costs of living rise due to the cost of energy rising, yet we have had 30 years of ever increasing inequality, well simple the "poor" cannot keep up.
Your opion on what socialism should be is moot...it isnt...simple...
Political diatribe? and you think your statements are not just that? attacking the poor for being "no good? being lazy? with no justification but your own extremist ignorant political views?
yeah right.
regards
Surely you can see that the result of equal opportunities is not going to be equal outcomes. How could it be, when people are not equal in the talent, determination, preferences that they bring to the opportunities that they have?
What is the basis of your statement that "we have had 30 years of ever increasing inequality"? Just yesterday Bernard posted a chart showing that inequality has not risen since the 90s.
Yes and no, or you are making a strawman argument here in not comparing apples with apples. Giving equal opportunities gives "poor" ppl with the same determination and talent the opportunity to have an equal outcome with those from a "rich" background. Surely that means a more productive person benefits the econony? Also just because you are from a "well off" back ground is no gurantee you will be productive or even good you can be just as much a parasite.
Surely you can see that inequal opportunities almsot guarantees that those with talent and determination inequal outcomes are far less likely to achieve their potential both in numbers of them and individuals?
I have no idea where BH got his chart from...but there certainly are others showing just how well globallythe top 1% does v the bottom 20%
regards
Absolutely nothing I said, in any way, suggested that I thought people from well off backgrounds are more likely to be productive. I totally agree that there should be equal opportunities. I completely agree that unequal opportunities will lead to wasted potential.
But the point still stands that equal opportunities will not lead to equal outcomes. That is because people have different talents, determination, preferences. Some people from rich backgrounds are lazy and stupid. So are some people from poor backgrounds. Neither group of lazy, stupid people will do as well, given the same opportunity, as will hard-working, talented, ambitious people from rich or poor backgrounds. Given equal opportunities, outcomes will be unequal, not between the people of different backgrounds, but between the lazy and stupid on the one hand and the hard-working, talented and ambitious on the other.
This in turn means that unequal outcomes is not, in itself, proof of unequal opportunities. If poor people all stayed poor and rich people all stayed rich, that would indicate unequal opportunities. But that's not the case. There's plenty of churn going on - many people who were in the lowest income decile a few years ago are not there now, and the same goes for many who were in the highest.
I would advise against drawing conclusions about New Zealand based on data about global wealth distribution. Everybody in New Zealand is close to the top of that distribution.
About that whole supply/demand scarcity of workers drives up wages theory- doesn't really work if the companies that are employing people feel their profits are better served by cooperating with each other against their workers. Hence the law suit in the States.
http://www.forbes.com/sites/timworstall/2014/03/02/karl-marx-warned-us-…
I will make the prediction that even if the plaitiffs win, that the companies will still have been better off financially for having done it after damages.
DH - price fixing of Labour is anit-competitive and inefficient and the supply and demand side is seriously distorted.
I am always amused by our NZ media when a story breaks out on match fixing and all the tsk tsking that goes with it. Yet the same media don't seem able to comprehend that there is very little difference between match mixing and price fixing. I could name several areas in NZ business where there are some unusual pricing mechanisms occuring purely by my observations as a consumer.
Last night on TV 1 for instance the MSM were more interested in pesky house flies for a current affairs story. Reality TV for the life of a fly takes MSM journalists to a whole new level at the bottom of the heap.
The whole concept of setting a mimium wage is in reality a price fixing mechanism which distorts prices and no doubt the more ruthless companies extract a premium out of such policy settings. The people on the minimum wage are the people who need protecting the most as they perhaps aren't as knowledgable or educated as they should be and yet the protection provided via minimum wage keeps the majority of them hostage to the low wage.
The ramifications of such a stupid policy of price fixing a minimum wage filter through every part of the economy.
Difficulty with minimum wage (and minimum conditions) and often the low education of those who find themselves in that situation is that they often (a) think the system is...sorry "should be" ... set up to see they're looked after. and (b) they aren't really aware of what situations the minimum wage/work conditions laws were supposed to prevent.
The matchstick trade is the classic, and a google on matchstick girls highlights it.
But also it exist to stop what is actually happening in the UK with up-and-coming financial candidates. Years of free labour as an intern, working for the profits of others, crazy hours, cramming all night... for a shot - and then once in the door, no recognition and tons more work handed over to your boss just to keep your place on the cliff, and your shot at being an abuser.
"Consider that with more money in the "poorer" ppls pockets they have more to spend, surely that will create jobs?"
No it doesn't create jobs, because even though they have "more" to spend, that "more" comes from business who have to put up prices to pay it. Because of the overheads involved, the "more" is _less_ than what goes on the sales tag.
the only way to reduce the overheads to keep the price low is _less_ jobs, which really cuts back the sales levels...
It takes moment but work out how much production and turnover is required if margin is reduced by 5%, if the net margin is originally 15%, to keep net profit stable. Now redo, with a 3% increase in wages, including a lift of 3% in retained earnings (ie to keep the business income matched to wage growth.) - use 15% tax on wages, 30% tax company.
Because of the ratchetting effect of Keynesian efforts, tax cuts are seldomly big enough to create significant positive change - especially when any spending in line with a tax cut (which is not uncommon as the small amount of discretionary spending goes nicely with a prolonged increase in debt servicing) ... the result is a brief nudge in credit buying, but the economic benefits are rapidly lost to increases in interest and OCR style inflation control. And if the interest is reduced instead of increased we start to see buying sprees like we did just before GFC. (eg once you've got a slight downhill run, it desn't take much acceleration to really shoot up the velocity effects (especially if you're not got your foot on the brake))
This is a stupid comment. It's funny how increasing the minimum job is going to cost jobs. There is never any mention that what costs jobs in reality is the total wage bill of a company. Instead of focusing on the working poor perhaps the issue is disparity of income in an organisation. Now I am not suggesting everyone should be paid the same but quite often the pay scale does not reflect the value of the employee to the company. Perhaps a maximum ratio could be applied to the work place of say 15. So the highest paid worker can be paid no more than 15 times the lowest paid worker.
If a company can't afford to do this the manger is going to have a hard time justifying why he should be paid so much.
In a company I can do without a casual or cleaner or low-skilled worker a _LOT_ easier than I can do without a specialist or manager.
A low skilled workload I can reshuffle onto others, or sometimes just drop that whole task load.
Can't do that with higher paid workers....that's WHY they're higher paid, because they can justify and demand it. (although some of the sods, especially in government, that get the Higher Salaries commision to set the pay rate should be removed entirely)
I occasional comment on people, mostly wage earners, about "peasant thinking". It's endemic through NZ, which I attribute to the poor standard of financial awareness and teaching, probably from our teachers being on such an insane payment system, and not having to earn their own sales.
If I hire a maintenance man, a school leaver to do odd jobs. Spray weeds, clean troughs, pickup fallen branches, crush boxes burn rubbish.... it's all simple jobs and worth little to the product buying consumer. The employee has little responsibility, if he makes a mistake, it's inconvenient, and I have to have much higher skilled staff service all his equipment, check and process his wage and holiday book, and set up job lists for him (with instructions and checked safety equipment). With NZ employment law and everything falling on the employer, it's a huge responsibility and risk. One which the consumer isn't going to want to pay more for.
I have a specialised relief milker. Everything has to safe and available and in working order, but they know how to check and troubleshoot problems. What's more they have responsibillity for hundreds of thousands dollars assets, and the entire millions of invested shareholder funds relies on them to be able to handle their job effectively. The job itself is narrowly defined, their responsibility clearly delineated (get cows, roll up fence, move cows slowly and professional, milk cows, check refrigeration and health standards, clean professionally, ensure cows safely stored and safe and healthy, all in reasonable timeframe. They don't set the schedules or rules, they aren't responsible in any way for budgeting or strategic planning. Like the casual staff, they are not expect to contribute financially or materially. The consumer again, does not care about their performance beyond that it is done to minimum standard and is not willing to pay extra for them to work...but might avoid the product if things are done poorly. The value of this persons work is not in the hours they work, but in their ability to capture and deliver quality cheaply.
And the other end of the sacle we have a head of Fonterra. He doesn't work on farm, he doesn't touch the product in the slightest. He protects Billions or trillions of dollars worth of investment. A wrong slip from him can result in hundreds of farms worth of work being paid in fines or reparations. A poor call can result in customers completely avoiding entire lines of finished product. It is not the hours, but the choices he makes that are important.
As the business owner, I have to supply money and loans and security. I have to push the primary strategies of the business. I get to build the plant and work it. I have to read the laws and contracts, and provide labour. My choices shape whether or not product is saleable and thus whether or not sales will be higher enough to pay employees. If something breaks, I am where the buck stops for making everything better. All the other problems and legal responsibilities of the other employees rest on me. Where other employees must do their jobs, I am required to see the things that haven't happened yet, so I can put together their plans...and when they get enthusiastic, respond appropriately to make them happy but also to keep the company doing well. The consumer doesn't want to pay me at all...yet without me there are no jobs, there is no product to purchase, no interest for the investors, no dividends for the shareholders. How much do you think I should have to pay per hour for this privilege??
I understand what you are saying, I am a business owner myself. When I was talking about a ratio of income I think this idea has merit. I was not suggesting that the business owner limits their income, they can take what they want from the business. All I'm suggesting is that limiting the income inequality for employees to 15 times will ultimately lead to a better domestic economy as minimum wage earners are also consumers except they tend to consume all of their money. Which means there are more people with enough money in their pockets to buy your product.
If people need a top up from government subsidies to live on top of a minimum wage job then the workplace is really getting a subsidy from the government because the money they arn't paying them get's paid by everyone.
I'm not anti business or profit, although in a zero growth world profit does become a zero sum game.
"..limiting the income inequality for employees to 15 times will ultimately lead to a better domestic economy as minimum wage earners are also consumers.."
This is a classic principle of industrial economics, also said in this way by Henry Ford;
There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible.
What I wonder about is the effect of globalisation, because it does seem this principle is a closed system principle. If the goods or services are exported to a consumer outside the domestic economy things seem to break down.
As a business owner, you be able to appreciate how suicidial it is to try and run at breakeven.
I'd happily press down the top earners but the difficulty there is that they are much fewer in number than the lower wages, and have so much more influence on the business.
The difficulty I have comes through NZ employment law/department of labour regs. They make the assumption that if business A has ten staff and 1M turnover, then business B must be able to supprt ten staff and that if they don't have 1M turnover it must be deliberately gaming the system. Never mind that A is 20years old and has 5M in shareholder equity, and B is 4 years old and started with 50k in owner-equity.
Either way it is assumed in NZ that their staff are all equal, and that they have similar value and should be paid similarly. Afterall if it happens for one game-setter then it must be true for everyone else.
Despite that one manager might be well worth 80k a year...the other I won't even let on the premises.
On a previous business I had a couple parttime helpers whom I used to wear the extra cost, as having been poor myself I know they appreciated the work even at minimum. However when push cam to shove and I had to upgrade some plant in the business, and do some repairs to vandalism on a rental...the piggy bank was bare, and since I'd kept margin low rather than pass on cost, there wasn't anything extra in the companies accounts either....that's what saw that business go under. Which is not something I would wish on anyone.
The real question to me...is WHY do they need the increase in wages? where are the rises coming from? time is the same price, so is sunlight, rain and gravity. So just where is the cost that's coming from that keeps pushing prices up?
As a business person I know that I must keep a cap on every expense that I can't pass on - and I must pass on all expenses (including casual labour price increases) to customers. Price competition is a bitch. But better to lose customers than sell at a loss.
So as a business person, how are these employees cutting their costs? Why can't they cut their costs? why are their expenses being pushed up out of their ability to sell their services for a decent margin?
* As a business owner, and as a (ex?) poor person, how do we reduce their costs and preserve their margin because I'm betting that's what they're really wanting.
If they're just expecting gold-plated limos and giant flatscreen TV's ...then they must increase the value of their product, which is beyond the scope of this problem.
And yet, embarassingly, corporations like Mondragon exist to show that alternatives are actually possible. And having been around for more the 50 years, having more than 80000 employees, and with 14 billion Euro in revenue in 2012, not just possible but also worth thinking about.
"And the other end of the sacle we have a head of Fonterra. He doesn't work on farm, he doesn't touch the product in the slightest. He protects Billions or trillions of dollars worth of investment. A wrong slip from him can result in hundreds of farms worth of work being paid in fines or reparations. A poor call can result in customers completely avoiding entire lines of finished product. It is not the hours, but the choices he makes that are important." So what's the score when the top brass stuff up and leave suppliers 70 cents down on where the payout should be, around $1b or so. About 8% of gross. How does that compare with a worker stuff up?
There was a good but brief discussion on the minimum wage on The Nation on the weekend. One comment that stuck with me was "if the minimum wage is a magic bullet for raising living standards why not just raise it to $100 / hour...". It is all about balance, ensuring that jobs are not lost all together or businesses failing. Another fine line that low wage employees dance is with automation, unions should take note also, if human costs keep increasing a machine may just step in. A fine line that ex-cow milkers can tell you all about.
Happy123, the balance is between being reelected, and the number of people who lose their job, and those who will never get their first job. If the latter is small enough, politicians will pay that price. If you accept a minimum wage, you accept that people will lose jobs/never get jobs (unless obviously the minimum wage is so low nobody get's paid it anyway).
The $100 an hour argument is stupid. As I mentioned above the minimum wage increasing dosn't cost jobs or lead to inflation. It is the total wage bill of the company increasing without any extra output.
Relatively simple solution is to tie the top paid employee via a ratio to the bottom paid employee. If the GM gets a $50,000 pay rise great but so does everyone on the bottom pay tier according to the ratio say between 10 and 15. If the company can afford to pay the top person $150 an hour then paying the lowest person $15 an hour shouldn't be a problem. If it is it incetivises the GM to make more money so he can give himself a payrise and everyone wins.
" As I mentioned above the minimum wage increasing dosn't cost jobs or lead to inflation."
Yes you mentioned it but you were wrong.
The reason that the $100/hr doesn't happen is because it immediately shows the flaws in that choice. Prices would jump immediately, business don't have big enough reserves to wait for prices to come up, like cooking the live food slowly so it doesn't notice.
By going up slowly the flow on effects are not so noticable and can be mitigated short term. The company might have margin and reserves to meet 40c rise, which on hits them in their principal repayments, and the shareholders will get 2c less per share so won't scream.
Do it a few times and the prices go up almost at random as one business finds it can no longer absorb the cost, and the rest of the market segment mark to them for relief. Across the board some jobs get grandfathered away and tasks reassigned but everyone just assumes the dark shape moving up on them ha always been there, it's not a wolf slowly moving up on them. And business fail, a few here and there, but that always happens doesn't it.......
And people check their statistics. why last years numbers were that much different to the year before. perhaps it's no so bad...because given enough time, population growth and technology and events (eg GFC, dotcrash) are far bigger disturbers than the constant movement that's occuring.
It's a global market place for talent, if there are artificial restrictions on pay for top performers they will simply go elsewhere and their talent with them. I'm not against the idea of paying people more but it's important that it's done using a system that doesn't encourage unintended consequences.
Don't listen to this callous, cold hearted bunch.
Obviously we can't print wealth out of thin air - but - we can certainly retain a hearing ear for our fellow men and women in need. Especially when life and hard work deliver some financial power to our hand.
Some of lifes great lessons about wealth include;
- Only a rat can win a rat race.
- Cock of the roost one day, feather duster the next.
And perhaps most telling;
No man (or woman) is an island, entire of themselves.., so do not ask for whom the bell tolls, it tolls for thee.
So yes whilst American servers have a lower minimum wage, they often earn more as tipping is culturally mandatory. They also see a reflection of their quality of work in their pay cheque. A USA employer is only required to pay $2.13phr to a tipped employee if tips make their wage up to minimum wages.
An employer of a tipped employee is only required to pay $2.13 an hour in direct wages if that amount plus the tips received equals at least the federal minimum wage, the employee retains all tips and the employee customarily and regularly receives more than $30 a month in tips. If an employee's tips combined with the employer's direct wages of at least $2.13 an hour do not equal the federal minimum hourly wage, the employer must make up the difference.
http://www.dol.gov/elaws/faq/esa/flsa/002.htm
The difference between paying $7.25 or $2.13 equals $10649 a year saving in wages for the employer.
It also appears the USA hasn't increased their Fed minimum wage since 2009.
- For work performed on or after July 24, 2009, the federal minimum wage is $7.25 per hour.
Of course its relevant to the debate , the COL in the US is lower as a consequence of the lower wage rate .
The truth is that we pay through the nose for having people on such a high minimum wage, and while we accpet that , there is little point in burdening the consumer with any more cost increases .
Auckland is one of the most expensive places in world to have a restaurant dinner or get a haircut .
In Auckland the cost of rent, power, rates, insurance recovery is much higher, the cost of quality materials for same reason + fuel is much higher too. All that and wages must be passed on to the customer... and since the seatings are smaller (often one or at most two per evening) it means prices are higher.
However I found that high end meals tended to be lower than the swank cost quoted overseas.
($3-500 per couple budget, rather than $4-800 for equivalence) although admittedly you seem to get more bang for your buck overseas...but I put that down to higher traffic.
"often given by foreigners who are blissfully unaware that we don’t really do that here."
It's not just that it's not customary. It's also that hospitality is paid the same as any other industry here. That is the service staff have already been paid wages by their employer from the price paid by customers.
That's not just customary, that's the law. Employers must pay a minimum wage, so that staff don't need to beg.
Why should i tip a barman and not a check-out attendant? The american system is just so arbitrary.
Often the service staff in the US are only paid a retainer, or for popular places even pay for to work a space (like renting a business to on-sell their services).
What is called a "tip" by employer and customers is actually their payment for services. In NZ such services are routinely included at fixed rate into the purchase price, then paid as employment, not as contractor/franchisee.
Anecdotally this originated from price wars, and that some people did not want to have wait staff, while others would pay a premium "To Insure Preferencial Service". This allowed advertising to have really low prices, and good staff could earn good money for any value-add. Lousy staff would get little or no tips. Often the tips are pooled and split, sometimes between staff, sometimes the house takes a cut.
I often tip wait staff, even in NZ. They are often at marginally above minimum wage, and 5-10% on a rare luxury spend for me is going to mean a lot more for them than it pains me.
Sometimes, when I used to be broke...I couldn't afford it (eg when kitchen staff brought a meal to my room when on training courses) So now, if I can afford it, I will do so.
Prime Minister John Key says Kiwi wages are rising and being a low wage economy isn't something we should be worrying about.
http://tvnz.co.nz/national-news/cheap-aussie-accent-drives-nz-call-cent…
Just like there's no need to worry about the hundreds of thousands of NZ children living below the poverty line.
Haven't heard much from you lately Kate.
Yeah I have someone close to me that was in the executive for a call centre company a year or so back. They are on razor thin margins with high rates of staff turnover and second rate Aussie managers that have been duck shoved over here. Won't take much for them to fall over, but they survive for now an our low wage economy. Funny thing is they are Auckland based, makes you wonder how they hell the staff afford to live as I had the priviledge of the wages being paid.
What Poverty line ?
We have yet to see these wretched people who allegedly live is such abject poverty they and their offspring are starving .
Simply , there is no reason for anyone to starve in New Zealand , a massive % of our national budget goes on helping those who cannot feed themselves .
Campbell Live is, and has been looking for them for over a year , and has yet to find one family in such a terrible predicament .
wage levels have to have an impact on jobs - as most businesses have relatively fixed incomes - i manage a government contract with a fixed income - the contract could pay 10 people on $15 an hour - and i could make use of them - but it was hard to get people on that wage who had the skills i needed - in the end i am paying about $21 an hour - but can only afford to employ 7.5 FTE - they still maneg the job as more efficient and higher skill levels but that choice means 2.5 less people in a job - simple economics!
Personally I would think that a big jump in the minimum wage, would see middle class workers looking for a similar % pay rise and just end up with inflation.
The only way I can see to start sorting out our high population of poor in this country is to move away from welfare handouts to a guaranteed job, how else do you fix the social wellbeing of the country?
How do you guarantee a job? How do you ensure that the person can do it well? ie what employer wants to be saddled with a useless person?
Who pays for it?
Think of the waste of energy and materials....
There is no reason to suppose that increasing the minimum wage would cause such an outcome, I mean I'd assume that most middle income earners ppl are already earning the maximum they can.
Now if you increae the min wage you create an income disparity between WINZ payments and the min wage, and when working you get a WFF. I do now some ppl that have gone and got jobs because of that difference.
regards
lowering the minimum wage means a lot of miscellaneous bits and pieces can be afforded.
With a high minimum wage menial work is just too expensive, everything has to be linked to some overpaid earner (who in NZ is probably just pouring their money into real estate), or to a end-consumer.
And it's not waste energy and materials, it's called life. That's how energy and materials find human purpose.
lifting minimum wage, without increasing prices (inflation, which RBNZ penalises leveraged busiensses), costs jobs. I let two casual staff go, last round because of of the rising cost - costs are rising (how strange) so something had to give.
Businesses make small yields. putting up minimum wage comes straight from margin/yield. What might appear to a employee to be $10+tax (so what) can take a lot of resources to make that much *net profit* in sales. (ie might mean extra $400 sales required that week)
IF rising minimum wage were so effective:
(1) why do they have to keep doing it faster and faster.
(2) why not make it $30/hr or $50/hr if it was actually effective. (keep in mind the thin yield from their employer business)
The very reason they having to increase for a "living wage" is from the the costs from the last rounds of minimum wage increase... (and business interest and tax recoverys)
Are you sure about the tax recoveries- Going by Treasury
http://www.treasury.govt.nz/government/financialstatements/yearend/jun1…
in 2012 the government got 29% of it's revenue from individual [taxes], 10% from corporate taxes, 18% from GST, and 20% from "Sale of Goods and Services"
finding some 2005 figures 43% of revenue was from individual taxes. So it seems to me the government is far, far less senstive to what changes in peoples income will do to tax recoveries.
Also, if people are arguing putting up the minimum wage will increase unemployment over the econonmy generally, then there should be some evidence that in the past putting up the minimum wage has actually increased unemployment or putting down the minimum wage has decreased it. It is not the case. My explanation, consistant with the data, is that it tends to balance out overall- the minimum wage decreasing relative to the cost of living is good for companies that work on fixed income contracts with the workforce at a minimum wage level, but raising the minimum wage tends to benefit small businesses supplying to the local community (the kind of people we don't here much from here) as the people most likely to spend their money locally have a little more.
Now, no-one is saying raising the minimum wage by a very large amount wouldn't be disruptive and would magnify the winners and losers, but that is actually a separate issue (and an imaginary one for the people bandying around the $100 figures) to what is a desirable level- It is like the arguements around aoblishing corporate tax- it could happen, but the bigger the change the more disruptive it will be in terms of the incentives it offers various parts of the economy, and the more winners and losers are magnified. That should be pretty self evident to anyone that lived gthrough the early 80s.
Yes I'm sure about the tax recoveries... you see the 30k in taxes I paid this year? Where do you think that money came from? Also businesses have to pay GST on wages paid, so that gets added to the customers bill.
Every capital upgrade (eg to increase productivity) carries a 30% directly penalty in tax burden...where do you think the money comes from. It must be added to the customers bill.
That's the problem with increased taxation, it creates an inflation effect so customers are less able to pay for sales. So there's less money to pay the wages, and therefore less wages to make sales...
Got you.
Yes, there is GST charged on wages. and on interest.
When I sell something.
eg a computer $1000(ex gst).
parts and misc expenses cost $900(inc gst). wages $50. interest $20. net profit b.t. $30.
How much GST do I get to claim back?
15% x 1000% = $150 owing to IRD
GST rebate on purchases
$900 / 1.15 = 782.61
782.61 * 15% = $117.39
Therefore my GST owing is 150 - 117.39 = $32.60
The Goods and Services tax owing from each business in the chain is the GST (15%) charged on WAGES, interest and profit before tax/dividends.
Therefore put up the wages, the cost of wages is recovered....PLUS GST
You either missed or ignored the point that I was making- In 2005 43% government core income was from individual taxes, in 2012 it was 29%. So in terms of tax recoveries, the government is less dependent on individual tax than it used to be. I'm not saying people aren't taxed (I know I am), and that wasn't the point I was making.
_My_ point was that if you charge tax on wages or businesses that cost MUST be passed on to the customer.
Put up the minimum wage, by $0.10 then the business must recover that $0.10 + 12% + another 15% on that total ($0.1288)
What happens to the governments coffers is utterly irrelevant to the issue. The issue being minimum wage. The problem is that increasing minimum wage increases prices FASTER that the earner is receiving. And that's not counting any other rising factors (eg other staff wanting to stay ahead of minimum wage, business owners expecting to keep margins ahead of inflation...)
As for the government core income. Yes as a business owner, and an investor...well aware that the government is developing other revenue streams that don't affect the herds of voters....
" if people are arguing putting up the minimum wage will increase unemployment over the econonmy generally, then there should be some evidence that in the past putting up the minimum wage has actually increased unemployment "
I laid off two casual staff.
How much proof do you need?
Remember the offical figures get massaged, to keep down unemployment numbers people (like me) were "encouraged" to take temporary courses, do temp jobs, part time jobs, or go on different benefits which don't show up as unemployment. Or also speaking from personal experience) just get told I don't qualify as I was offical made redundant, not made unemployed, thus won't be counted for at least 6 months, and my assets (except primary abode) are under $7k
I fully accept your assertion you laid off two staff in response to an upcoming 50 cent rise in the minimum wage coming in from next month, in a general climate described as the finest economic conditions of a generation. I'm not going to argue that with you.
However, at a level of the entire economy there is scant evidence of your personal experience being a national truth. While unemployment is manipulated to keep people off it, it is always manipulated to keep people off it, that hasn't changed much over the decades. And if you look at the statistics of people with jobs instead of the unemployment figures of people without, it shows a similar lack of evidence for increasing the minimum wage decreasing jobs across the entire enconomy. There are industries that are winners and industries that are losers. Not much changes overall.
It was the price rise before that.
They were originally taken on at $10/hr. I personally wore the increase in cost until it hit $13/hr ... by then I was paying $6/hr personally for them to be there... from my wage of $9/hr.
For some reason it just didn't seem to make sense for me to take all the risk, chase around after them, prepare their workload and fix their emergencies... for $3/hr for me...when they were getting $13 just for labour and no responsibility for gear, breakages or damage.
No unemployment is not manipulated to keep people off it. That's the "public lie". Yes it's run as a poverty system _intended by wealthy people to make that happen. In reality it becomes what is known as the poverty trap. to qualify you must have nothing, then you get not enough to get back on your feet.
Took a trip around town yesterday...many shop frontages for rent. many factories sitting unfilled. not all of us can work at McDonalds or sell houses to each other.
Take a look at your figures over larger periods. Look for the signs of people gaming the numbers. I was one of thousands shunted from unemployment benefit to sickness benefit when the figures looked bad. Then when they wanted to check the sickness figures after "rumours" were heard, hundreds of us found ourselves allocated to training courses, parttime work, or being told we had to requalify with stand down period. Three weeks later, the courses were all cancelled before they started and the "requalifiers" found themselves back on the lists with backpay. Thou Shalt Not Question The WINZ.
So check the numbers of employed in each sector, cross check that with minimum wage, and against school leaver numbers.
Now do the same against interest rate changes.
Oh look....when interest is lowered spending occurs, building consents go up everytime. BC's are a prime indicator, money easing occurs. Dollar lifts. import prices drop. buying occurs. sales numbers are up. sales are up jobs numbers go up.
You want a _real_ indicator? Look at the increases of apprenticeships.
That's middle income, non-foreign financed businesses, based on their confidence over 4 - 7 year projections. Doing real work for people spending discretionary income. allow for aforementioned credit spending to create inflated bubbles. there's your general climate....beccause taking on an apprentice requires losts of money, lots of time, a commitment to the future, and requires increase in sales. It also results in a real asset to the community.
PS: also if you're looking at the employment numbers, remember to remove all government employees from the data sample.
CNBC SQUAWK BOX TRANSCRIPT: Monday, March 03, 2014
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BUFFETT: I wouldn't fight him on it-- on the minimum wage, but I think you can accomplish way more through the earned income tax credit without negative effects than the minimum wage. I mean, if you could have a minimum wage of $15 and it didn't hurt anything else, I would love it. But clearly that isn't the case. So there's tradeoffs on the minimum wage, and it's very hard to quantify those tradeoffs. People come out what these exact studies. They don't know.
BECKY: No, but the CBO recently came out with a study that suggested half a million jobs would be lost, 500,000, if the government were to go to $10.10 an hour by the year 2016. They said that it could be either zero or it could be a million jobs that were lost. Where do you think the likely falls?
BUFFETT: I agree with them. They don't know. I don't know. You know directionally that it goes-- the situation. Otherwise, you know, we'd have a $15 minimum wage if it wasn’t going to affect employment, I'd be 100% for it. But, it would. So I don't know and it's very hard to quantify the tradeoffs. And usually you just get proponents of either side just pulling out the figures to substantiate their position.
The earned income tax credit I think is much clearer. I mean that puts more money in the pockets of people who are working for low wages. And that's what I'd like to see. And it doesn't distort the market system in any great way. But, you know, that's the way I would go.
what would Buffet know :)
We already have the credit (rebate) and its bought us time, but the underlying problem is not being addressed so no amount of time-buying is going to make the problem go away, it will just make it harder to dodge each time.
The rebate goes to a credit, then the credit is trade-able to favour the prospective employer, and then we're really talking subsidisation of employment! At that point we have to ask ourselves where just giving the poor cash handouts wouldn't be simplier and easier to trace, but we only allow it to working poor...and to stop them misspending their allowance, we pay it each pay day. So we have those above the line paying PAYE, and those below the line receiving a PAYE, and the line progressively moving upwards... At what point do you admit that the systems busted...
Elizabeth , your frustrations are what almost all of us go through in our 20's .
Its a rite passage , until one realises that our idealistic ambitions of our late teens move on to something more grounded in reality .
Starting out is hard , there is never much money about , pay rates are terrible , there is a lot of one-upmanship among your peers , everyone seems to be doing better than you , you often live in shared accomodation , and saving seems impossible .
And it seemingly goes on for years and years unless you plan your way out of it .
You need to tackle these things slowly , listing your goals , desires , wants and needs is a good place to start , and quantifying these in terms of dates , times , cost , etc
It helps by staying out of expensive (bad ) debt, paying yourself first ( 10 TO 20% of your take-home pay should be put away for YOU AND PUT IN A SAVINGS ACCOUNT ) , enjoying the small things like picnics in the park instead of drinks on Ponsonby Road, etc.
Everyone is concerned about the people living a hand-to-mouth existence , even John Key I am sure would not like to see the poverty one sees in places like India, and even America for that matter .
You need not worry about ever finding yourself in a hand-to -mouth postion as you are far too intelligent and clearly hard-working .
Its important to bear in mind that there will always be people on the minimum age (whatever that number is ) and those folk will always struggle financially , whether it be through any one or a combination of these:-
- Circumstances beyond their control such as ill health , etc
- A lack of education ( for which there is no excuse in NZ) ,
- A lack of skills,( ditto no excuse)
- Alack of basic life skills
- A lack of a decent work ethic
- Out of control Debt that they incurred , (for which I blame the lack of consumer protection Law like the UK)
- A lack of Financial literacy ( for which I blame the education system)
Surely a better approach to raising living conditions for the poor is a universal basic income. One of the things I like about the UBI is that it would easily allow you to drop minimum wage dramatically while preserving the total incomes of people on low wages. So many distortions are removed.
Plus there's an appealing simplicity to it. UBI, flat tax, no minimum wage... huge admin savings!
Definitely agree that education is a big problem though. In NZ schools there is ZERO financial or economic education. Should be a compulsory course at secondary.
In NZ schools there is ZERO financial or economic education. Should be a compulsory course at secondary.
I assume from this ill-judged comment you have not stepped foot in a secondary school for some time.
It is called Economics, Accounting, Business Studies and Mathematics.
The problem rests with society including parents in educating financial literacy to young people. There are folk on Wall Street fleecing millions from private investors. Perhaps they should be getting some assistance in financial education. It wasn't the 13-18 year olds that caused the GFC and collapse of Banks and other lenders. It was mostly middle aged men who would step over their dead mother to make another dollar.
I know it is a bit late to come in on this argument, but I don't think it is about the minimum per se, for me it is about the minimum wage becoming the default wage and people who are happy to pay experienced and loyal people buggar all more than it - caregivers as a case in point
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