The festive season is well behind us, but this week I feel like the Grinch who stole Christmas.
 
Like the Yuletide, this strikes annually. It coincides with the Government’s annual review of the minimum wage.
 
Last year’s review saw the adult minimum wage increase from $14.25 to $14.75. Monday’s announcement was for a further 50 cent rise to $15.25.
 
Though a 3.3% rise, it is hardly a princely sum. Indeed, $15.25 is more than 20% lower than the $19.80 an hour advocated by the living wage movement. That rate is calculated through research carried out by the Family Centre’s social policy research unit. The Centre says the living wage is intended to enable workers and their families to earn an income that allows them “not just to survive, but participate in society”.
 
No one could be against enabling New Zealand workers and their families to prosper. Indeed, at the Initiative, that is our mission: to develop and promote social and economic policies that will provide prosperity for all New Zealanders.
 
Unfortunately, it is not as simple as regulating the floor below which hourly wages may not go. If it were, why not lift the floor to the living wage, or even higher?
 
The problem is that labour markets operate like other markets. Lift the price charged and less is demanded. A higher wage is good for those who have jobs. But what about those whose employers can no longer afford them? Or worse still, who have not yet persuaded an employer they are worth taking on?
 
The workers at the margins in New Zealand tend to be young and unskilled. Increasing the hurdle they have to overcome to persuade an employer to take them on does them no favours. To the contrary, it deprives them of the right to sell their labour for what its worth. And shutting this cohort out of the workforce increases their risk of long-term welfare dependency.
 
The position is exacerbated because the minimum wage in New Zealand is already relatively high. Indeed, at 67% of the median wage, New Zealand’s minimum wage ranks among the highest in the OECD.
 
Jobseeker Support for an 18-year-old in 2016 is $156.51 gross per week. That equates to a little under $4.00 an hour.
 
A policy that makes it harder for our most vulnerable to move from $4.00 an hour to earn an hourly wage, let alone a living wage, hardly seems like the Christmas spirit.