Harry Hunt
Numbers in this article are based on approximations.
John is the average person: he earns $49,600 – $57,300 per annum.
Bob is the above-average person: he earns $91,600 – $119,200 per annum.
Sally is the below-average person: she earns $29,400 – $35,000 per annum.
A small business owner who makes loaves of bread: this is Mike.
However:
As the average person, you had average results, most likely did not attend tertiary education but slowly made your way up the hierarchy at a job you succeeded in or a field you are experienced in. You make $25.50 an hour. This is John.
As the above-average person, you most likely excelled throughout schooling or tertiary education. You are $22,065 in debt (on average) which will take approximately 17 years to pay off. You make $44.03 an hour. This is Bob.
As the below-average person, you most likely did not complete any tertiary education; you may work in primary or secondary industry. It is likely you work a part-time job at a firm with minimal requirements, which are reflected in your pay slip. You make $18.90 an hour (minimum wage). This is Sally.
The government says, “We will raise the minimum wage by 1 dollar!” to which Sally says “This is a win! More money”, so she now earns one extra dollar per hour for working in a minimum wage job. That is one extra dollar per hour for groceries, for fuel, for transportation, for anything. This is seen as promoting growth, but in reality, this is not the case. According to the Ministry of Business, Innovation and Employment, 71,500 people earn minimum wage. Even though these are the people with much less money, they are three times more likely to spend it along with any subsidies and benefits.
In a perfect world if Sally gets an increase from $18.90 to $19.90 then John and Bob should also get an increase of one dollar. This is a basic economic principle; however, this is unlikely to happen in any country.
The fears of increasing the minimum wage are these:
Closing the gap between uneducated people and educated people.
This isn’t diversity, hierarchy or patriarchy. This is life. It should be commonly accepted that people who go to university become educated to the extent where they have put themselves into a considerable amount of debt in order to do so and should make more money than a person who didn’t do the tertiary study, has little to no debt and has no legal obligation or liability.
Small business owners, who are often the main victims of wage increases, are obligated to pay their staff an extra dollar an hour.
Statistically speaking, this is Mike, a small business owner. He currently employs 60 staff at minimum wage. He currently pays a worker $151.20 for the average 8 hours of work. However, he now must pay that worker $159.20 for 8 hours. Across all of his staff, he pays an extra $60 an hour. That’s 60 x 8 = $480 more a day hour he loses from his bottom line. This will result in Mike having to let staff go because he must be able to balance his account at the end of the day and he has an obligation to make sure his workers are paid.
This is where the minimum wage increase doesn’t help. Mike’s company makes bread. It costs him $2 a loaf to produce. He sells that to firms for $4, netting a profit of $2.00 per loaf. However, due to the increase in the minimum wage, he has already let some workers go, but he doesn’t want to lose too many due to the demand he has to meet. Therefore, he must increase his prices, so Mike decides to sell his bread for $5 to firms in order to cater for his increases in the cost of production.
This all links because Sally and her extra dollar have achieved nothing, it just puts us back to the start. She now has to pay $1 extra per loaf of bread because of Mike and Mike has to charge $1 extra for his bread because of Sally. John has not received an increase in his wage, nor is he an owner, so he just has to pay an extra dollar for bread with no benefit. Minimum wage increases force the average consumer to absorb the extra cost: this is consumer surplus. This is proof that although the numerical value of your wage increases, your purchasing power actually decreases.
We can no longer afford to raise the minimum wage; it is hurting our already buckling economy and isn’t giving us much hope for the future. On paper, a raise seems logical, an attempt to battle wealth inequality. But what it does is actually hurt the people they are trying to help while ripping everyone else off too. Unfortunately, this will never change, and it is more than likely we will continue to see unneeded increases in the minimum wage under this Labour government.