Dear Ministers, Leave Our Wages Alone

An email sent to Kate Wilkinson, Paula Bennett and John Key:

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Dear Ministers,

Thank you for your recent comments regarding the minimum wage for youth.

National had very sound reasons for opposing the changes made to youth minimum wage laws by the previous Labour Government, but in light of Minister Bennett's comments that she hasn't seen any evidence of a link between minimum wages and higher unemployment I wished to draw your attention to a few points.

Firstly, I recommend reading the following posts by Eric Crampton, and economics professor at Canterbury University, who has studied the government's own statistics and found increases in unemployment in youth since the law change (note, higher increases even than what would proportionally be expected due to the recession):

http://offsettingbehaviour.blogspot.com/2010/02/youth-rates.html
http://offsettingbehaviour.blogspot.com/2010/02/youth-rates-revisited.html

He has also applied similar techniques to data from previous minimum wage changes and come to the same conclusions:

http://offsettingbehaviour.blogspot.com/2010/02/youth-rates-re-revisited...

In addition, I'd suggest that both common sense and principle should be considered.

If the government were to impose a $5 minimum price on coffee, would you purchase a good $5 coffee that used to cost $5, or a bad $5 coffee that used to cost $2? Employers have no incentive to hire an inexperienced and more risky young worker, than an older, more experienced and more proven worker when they cost the same amount.

Furthermore, principally, why should the government have the right to tell a young person (or anyone really) that they may NOT work for a lower wage, even if they wouldn't mind doing so, and must instead go without a job at all?

I note that there are no shops that sell coffee for 10c or 50c (and in Wellington at least, it can cost a lot more). This is because the market creates its own minimum price (wage) based on consumer and employee demand - there is no need for the government to intervene and set prices (a wage is simply a price).

National claims to support the Free Market and smaller government and I don't see how having a National goverment fixing market prices fits with these principals.

Regards,

Peter McCaffrey
Vice President
ACT on Campus