National bows to minimum wage myths - ACT

National's move to increase the minimum wage by 50 cents this April is yet another example of the Government's lack of resolve when it comes to economic issues, says ACT Leader-elect Jamie Whyte.

Late yesterday, Prime Minister John Key confirmed the minimum wage will rise to to $14.25 an hour from April 1 this year. Labour says it will bump that to $15.00 if it gains power. The Greens favour a push to the "living wage" of $18.80.

Labour Minister Simon Bridges said the 50 cent rise balanced the needs of businesses and workers.

"Setting these wage rates represents a careful balance between protecting low paid workers and ensuring jobs are not lost."

Advice to cabinet was that a 50 cent rise could cause the loss of around 2300 jobs.

The Starting-Out and training minimum wages will increase from $11 an hour to $11.40 an hour (or 80% of the adult minimum wage) from April 1.

"The economists in the National Party aren't stupid, They know that this will have adverse effects for New Zealand workers and the economy. Yet they continue to intervene in wage rates, in an attempt to position themselves as moderates," says Dr Whyte.

"In doing this, National perpetuates the myth that minimum wages protect the poor.

"John Key has skimmed over the inevitable consequences of this intervention, saying job losses will be 'relatively negligible'. What Key doesn't acknowledge is the unseen effects of minimum wages -- those businesses which don't directly lay off workers will be discouraged from employing more, or replacing those who leave voluntarily in future.

“The best thing that low skilled workers can do is get work experience. It's hard to think of a more cruel policy than passing a law that bans the people most in need of work experience from getting any.

"Furthermore, many businesses will pass on their increasing employment costs to the consumer, contributing to the rising price of living which many New Zealanders have come to accept as normal.

"ACT doesn't think it's okay for the state to put up barriers to employment. Nor does ACT think it's okay for the state to intervene to drive up the cost of living.

"Only ACT can provide the economic spine so badly needed in any center-right government."

Earlier, economist Eric Crampton told NBR Mr Key's plan to raise the minimum wage could cost jobs - and has outlined an alternative.

“New Zealand’s minimum wage is among the world’s highest, when we consider it in relation to the median wage," the Canterbury University lecturer told NBR ONLINE.

"I get nervous about disemployment effects of the minimum wage when the minimum wage is more than half the median.

"If we want to support the working poor, targeting assistance through wage subsidies like Working For Families can do the job without forcing low-skilled workers out of the workforce."