Friday, 26 May 2006

'Maori most affected by minimum wage' says academic

Here is some sense. From an academic. I know that's surprising.
Maori would be most adversely affected by a rise in the minimum wage, says an AUT senior economics lecturer.
See. Good sense. And of course she's right (and have you noticed that a lot of AUT lecturers are not the politically correct line-toers that many of their colleagues over the road are?), and she's backed it up with research:
"My study [says Gail Pacheco] found for Maori who find the minimum wage binding, a 10% rise in the real minimum wage would see a 15.8% point fall in employment propensity, a drop of 13.5 hours usually worked each week, a 5.7% point increase in unemployment propensity and a 10.9% point increase in inactivity, that is, not working or studying."

Pacheco says the minimum wage is a blunt instrument and there needs to be a more balanced debate around increasing it.

Doesn't there just. As Linda Gorman's entry in the Concise Encyclopaedia of Economics summarises,
minimum wage laws can set wages, [but] they cannot guarantee jobs. In reality, minimum wage laws place additional obstacles in the path of the most unskilled workers who are struggling to reach the lowest rungs of the economic ladder.
Decades ago -- before the onset of today's widespread economic ignorance -- people knew that. Indeed, there were white, male economists about who supported the minimum-wage laws precisely because they knew they would adversely affect blacks and women. 'Progressives,' such as Richard Ely, Louis Brandeis, Felix Frankfurter, the Webbs in England etc., wanted women kept in their place -- which meant 'the home' -- and racist economists in US and South African unions wanted blacks kept in their place -- which meant 'not in white men's jobs' and 'not in our country clubs' -- and they knew that raising the minimum wage would put women and blacks out of work. Notes Thomas Sowell for example,
The first federal minimum wage law, the Davis-Bacon Act of 1931, was passed in part explicitly to prevent black construction workers from "taking jobs" from white construction workers by working for lower wages. It was not meant to protect black workers from "exploitation" but to protect white workers from competition.
Notes Walter Williams for example, in his 1989 book South Africa's War Against Capitalism "racists recognized the discriminatory effects of mandated minimum wages," and he quotes Gert Beetge, secretary of South Africa's avowedly racist Building Worker's Union, in response to contractors hiring black workers, who said:
There is no job reservation left in the building industry, and in the circumstances I support the rate-for-the-job [minimum wages] as the second best way of protecting our white artisans.
More on the 'secret history' of the minimum wage in Tim Leonard's paper, Protecting Family and Race: The Progressive Case for Regulating Women's Work.

LINKS: Maori could be affected by minimum wage rise - Gail Pacheco, AUT, Scoop
Minimum wages - Linda Gorman,
Concise Encyclopaedia of Economics
Ignoring economics - Thomas Sowell
Minimum wage, maximum folly - Walter Williams
Minimum wage escalation - Thomas Sowell
Protecting Family and Race: The Progressive Case for Regulating Women's Work - Tim Leonard, American Journal of Economics and Sociology, July 2005

TAGS: Minimum_Wage, Economics, Politics-US, History-Twentieth_Century


  1. An illustrative way to show how minumum wages hurt those in lower socio economic groups is to suggest that if a rise of $1 is a good idea, then a rise of $2 must be even better,$10 better again, and an increase to $500 an hour would be a tremendous boost to the well-being of the workers.

    Of course as the hourly rate increases there are fewer people who will find employment. And at $500 an hour only a few would be employed, these people being those with specialist skills.

    If you advocate a minimum wage, why would you not advocate that it be set at $500 an hour? If you do not advocate a minimum wage of $500 what makes a $10 minimum wage any different?

    As the minimum wage rises those with the least skills are the ones who are first harmed. As has been pointed out before, all a minimum wage does is make those touchy feely types who sit in their offices on a good salary feel as if they are helping the poor. Unfortunately they are doing the exact opposite.


  2. So given that the proponents of minimum wages today must know that this happens, as is blindingly obvious, why do they continue to advocate it?

    A sarcastic individual might think of the benefits to the its advocates of the "implicit discrimination". After all, those who advocate minimum wage seem to also be those who benefit from the discovery of systemic racism.

    "Look, here is racism and sexism! You aren't employing women and Maori! This is something we must legislate to fix. Disadvantaged people, vote for us!"

    "Excuse me, but your previous legislation is causing the problem."

    "Are you calling me a racist? How dare you! Let's legislate some speech-laws while we're at it!"


1. Commenters are welcome and invited.
2. All comments are moderated. Off-topic grandstanding, spam, and gibberish will be ignored. Tu quoque will be moderated.
3. Read the post before you comment. Challenge facts, but don't simply ignore them.
4. Use a name. If it's important enough to say, it's important enough to put a name to.
5. Above all: Act with honour. Say what you mean, and mean what you say.