Key's figures dodgy on minimum wage - blog

Fri, 11 Nov 2011 10:10a.m.

John Key visits a McDonalds

By Patrick Gower

Everyone knows it’s got bloody hard to live on the minimum wage - even John Key admits that.

His defence is that a rise from $13 to $15 an hour will cost jobs.

Key has used this defence in a televised debate, and he's used it to workers on the shop floor as seen in my story last night.

But what Key doesn't want to admit, is that this claim is not the full picture and may just be fear-mongering - a rise may not cost jobs at all.

That's what Treasury says in this advice from March 2010 obtained by 3 News under the Official Information Act.

Yes, that's right - the Treasury.

The Treasury are the big guns - Government's quasi-independent economic advisers.

And the Treasury says the "claim" (yes Treasury calls it a "claim") a minimum wage rise may cost jobs - "has not been true in the past".

In fact, it says "we have evidence" this is not the case at all.

It’s talking about "empirical" stuff - what's known as hard evidence.

The March 5, 2010 email from Treasury to the Department of Labour, obtained by my colleague Brook Sabin under the OIA, says of the claim: "(It) has not been true in the past, so without new evidence the balance of probabilities is that a higher minimum wage does not generally lead to higher unemployment."

Uh oh. Where does that leave Key's "15 bucks an hour will cost 6000 jobs" figure?

Well, that came out of the Department of Labour minimum wage review done later in 2010.

It says under a $15 an hour minimum wage "employment growth" could be reduced by 4100 and 5890 jobs.

It’s an estimate - and it’s about potential new jobs.

So for starters it’s not about 6000 people being sacked because the bosses can't afford them.

So the Department of Labour report actually mentions about 6000 forecast new jobs that might not happen under a theory that the Treasury doesn't believe.

And one more thing: the Department of Labour report also says: "research from the United Kingdom suggests minimum wages may have no effect on employment, or that minimum wage effects may still exist, but they may be too difficult to detect and/or very small".

So let’s sum this up.

- John Key says the minimum wage rise could cost 6000 jobs according to a Department of Labour report.

- But the Treasury has advised the Government it doesn't believe the assumption this was based on has any credence - we don't hear Key saying that.

- The Department of Labour report is actually a "forecast on forecast" of jobs-that-might-be-created-not-being-created. Confused? Exactly. (The crucial point is it’s not saying bosses will have to sack people.)

- The Department of Labour report even contradicts itself and says minimum wage rises might make no difference.

- The Department of Labour report doesn't mention that Treasury has a counter view (Treasury sent the March 5, 2010 email to the Department of Labour as a submission on the youth minimum wage so they can't say they didn't have it).

So it’s clear that the "cost 6000 jobs" line Key is using is a little bit dodgy.

That's politics I guess - you play the most powerful hand you have. You don't issue footnotes with your claims.

There's equally powerful arguments that the minimum wage could even help things by putting a bit more cash into the economy.

And with the unions estimating there's 100,000 people on the minimum wage and 300,000 on close to, low pay should be a big political issue.

For some reason, like asset sales, it isn't the festering issue you'd think it would be.

Labour is losing an argument with Key over the minimum wage - an argument that on paper it should be winning. Whose fault is that? Not Key's.

The minimum is $13 an hour - somewhere around $430 - $450 bucks in the hand a week.

You do the math based on market rents, food, petrol, power bills - for the average family, it really is a shocker.

There's a coalition of the willing who want to do something about it: Labour, Mana and the Greens want $15 an hour. The Maori Party want $16 an hour.

And a final note - interesting issue for the Maori Party this one.

Will they make a substantial rise in the minimum wage a condition of their support for National after the election?

If they pulled that off - that really would be Mana-enhancing.

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26/01/2012 10:23:03 a.m.

kenny wrote:

Dont you guys see, by setting a gauge on wages is just another form of controll. The taxes will go up along with fuel food and rest. Everyone will want a piece of your new found wealth. So the ballance continues between the rich & the poor. What we find is that minimum wage is usually the maximum in so many cases and the prestige of manage is lost due to the narrow gap caused by a lack funds brought about by the minimum wage.

22/11/2011 7:09:40 a.m.

Kiwi wrote:

It is well known that NZ is a low income country.It has been a low income country for too many years.Whatever profits made by businesses are kept at the top.No trickle down effect as the National government in the 1990s advocated.John Key recently said he felt the pain the lower paid had to live with due to the increasing prices in such essentials as food.But that was the only admission he made about the poor at the time.He also told those who depend upon Foodbanks,due to the increasing prices in foods,that they(especially beneficaries)are making poor decesions.I doubt John Key or any member of the National Party would be able to live on a minimum wage.But he doesn't seem to mind keeping wages low.So with wages being so low in this country it is understandable why so many NZers are going overseas for work.It is interesting to see the young lady that John Key took up to Waitangi nearer to Election 2008 is also heading to Aussie.She has seen the light and sadly it shows there is no work with a proper income for her and probably most of her friends in NZ.NZ has lost its direction due to the low income and out of touch of reality government(s).National has proven to be the most out-of-touch of reality whilst advocating in this election they are making a brighter future.A brighter future which doesn't do anything for the lower paid except to wring more money out of them and begrudge them for having dreams they would so much like to bring into reality but only if they had the money.

21/11/2011 8:45:32 p.m.

Anita wrote:

This is about scaremongering. John Key cannot back this up with facts. He couldn't care that there are hundreds out there that are struggling to put food on the table. This is a harsh realilty for many these days. As long as the gap between the rich and the poor continues to get bigger and more money continues to go to big earners like himself.

19/11/2011 8:14:11 p.m.

Rose wrote:

We have a small business, both of us working 6 days and we have 1 employee. We are thinking of hiring another person to help out. If the minimum wage rises, we are definitely not hiring, we just has to work harder ourselves.

18/11/2011 4:41:05 p.m.

Digby Green wrote:

What would Treasury know ? They have never forecasted anything right. Why not make the minimum wage $25.00 and then everyone will come back from Aussie ! In the USA and Canada their minimum wage is $8.00. I think such a wage rise would kill many of our exporters. Kiwifruit, wine, timber, seafood. Australia is only one country. We are competing with Chile and Argentina, and trying to export to countries with wages of $1.50 an hour.

18/11/2011 8:46:16 a.m.

Jer wrote:

The title should read 'Gower's editorial dodgy on minimum wage misinformation'. Seriously bro, get your facts straight before you write these articles. It's getting embarrassing. I know you like to ignore one side of every argument, but now it's getting too obvious. You need more smoke screens for your bias.

17/11/2011 4:17:49 p.m.

Dave wrote:

What the "John Key fan club" need to do is re-read the article. Its about the prime minister selectively telling the public the story he wants them to hear and burying the treasury version. You may be OK with JK's version of the truth....I'm Not!

16/11/2011 5:08:49 p.m.

Neil wrote:

@f 15 Nov 2011 8:32a.m
That is one of the reasons we are a low-waged economy, and people are leaving this country. Actually, a low minimum wage is not the real problem in this country. The problem with this country is that we have created the hand-out believe.
We won't go the extra bit to get a better education, its somebody else’s fault that I wagged school, its somebody else’s fault that i didn't pick up a book and educate myself. You want to know something F i was one of them i left school at 16 with no qualifications. Do you know what changed my attitude, having a young family to support. Knowing that i couldn't survive with a low wage income. I did something about it i studied through Open Polytechnic, obtained a qualification and started my own business. Everybody can do it, they have to have the want and educate themselves. While we give out hand-outs and keep apologising for how bad and hard it is for lower social class and keep talking about them like that they will continue feel they should be looked after by the middle to wealthier people. It is time the people stopped feeling sorry for themselves and got off their backsides and did something for themselves. No one has to live in poverty it is their choice to do so. If they real wanted to do something about they can.
I have had opportunities overseas to advance my career and would have taken them but decided not to. It is not all about money why people leave this country it is about their choice to better their life.

16/11/2011 9:47:32 a.m.

bOb wrote:

"Antonia 14 NOV 2011 8:24P.M. Careful Gower. You're letting your politcal bias show. What's happened to balanced reporting?? Why don't you just become a Labour spin doctor & leave political reporting to someone who's more objective" What a joke, just a while ago people were bitching about Gower taking nationals side to much, just because he believes a few things the left believe in doesn't automatically make him a Labour fanboy. I think your bias is effecting the way you see things as well.

16/11/2011 8:48:51 a.m.

Richard wrote:

The difference between Labour and National seems to me to be that Labour want to rob the rich to help the poor. National rob the poor to reward the rich.By the way polls are going you poor people have a lot more paying to do. Me? I am going to a well paid job in Australia.Tired of all the lies that wannabe tv star holding the PM job tells.