 The Prime Minister admitted in February he could not live on the minimum wage. By Mike Treen, Unite national director.
He also claimed that increasing the minimum wage to $15 would lead to another 8000 people losing their jobs.
His Minister of Labour Kate Wilkinson supported the claim that the removal of youth rates has lead to an increase in youth unemployment.
The only claim that is true in these recent statements is that John Key couldn’t live on the minimum wage – because no one can. John Key is so rich that he doesn’t claim his official salary and allowances of $565,000 a year. But it is useful to see how the tax changes he has signalled would affect official his income of $10,865 a week or $271.60 an hour for a 40 hour week.
A reduction in the top tax rate from 38 cents to 33c for income over $70,000 a year will give John Key an extra $543 a week. This is more than a minimum wage worker can earn before tax in a year working full-time. If the top rate goes down to 30 cents he will get an extra $800 a week in the hand.
But there is more . . . because John Key says he wants to help the working poor he will cut the marginal tax rates on incomes below $70,000 a year. That means everyone earning more than $70,000 get a boost to their income from these cuts as well.
But what about his other claims. The alleged loss of 8000 jobs comes from the government’s advisors in the Labour Department. They claimed an increase to $15 now would lead to the loss of between 5,000 and 8000 jobs. With a labour force of 2.1 million jobs this is actually margin of error stuff. . .
Instead of using a model for an economy that does not exist, we can use the actual changes that have occurred in New Zealand over the last decade. When Labour was elected in 1999 the minimum wage for someone under 20 years of age was $4.20 an hour. The adult rate was $7.00. The previous National government had also believed higher minimum wages were bad for business (or at least their business mates) so had only increased it by 87 cents an hour during their 9 years in power.
The youth minimum wage went from $4.20 an hour for everyone from 16-19 years old in 1998 to $9.50 in March 2005 for 18 & 19 year olds and $7.60 for 16 and 17 year olds - an increase of 126% and 81% respectively. Youth unemployment during that time kept falling to 11.8% by December 2005 - a level not seen since 1987. The youth rate for 16 and 17 year olds was largely abolished in 2008.
During the Labour Government’s term the adult minimum wage went from $7 an hour to $12 – an increase of 71%. The youth rate went from $4.20 to $12 – an increase of 186%. Yet when Labour lost the election the youth unemployment rate of 17.9% was still below the level when they were elected 9 years before.
Youth unemployment has increased since then along with the general levels of unemployment which are a consequence of an international recession that is a product of corporate greed not workers needs. The current youth unemployment rate of around 25% is a terrible blight on our community – but the same level was reached in the recession of the early 1990s when youth rates existed and the minimum wage for adults was much lower in real terms.
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