Wednesday, 20 November 2013

Minimum wage laws are keeping Europeans out of work

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The New Zealand Labour Party still wishes to raise the minimum wage. Indeed, the so-called “Living Wage” is their stalking horse for this. Correlation is not causation—that’s what explanation via handy flowchart is for. However, European data on minimum wages is (how can I say this politely) highly illuminating:

“Regarding the minimum wage, here is some data for Western Europe:
    “There are nine countries with a minimum wage (Belgium, Netherlands, Britain, Ireland, France, Spain, Portugal, Greece, Luxembourg). Their unemployment rates range from 5.9% in Luxembourg to 27.6% in Greece. The median country is France with 11.1% unemployment.
    “There are nine countries with no minimum wage (Iceland, Norway, Sweden, Finland, Denmark, Austria, Germany, Italy, Switzerland). Five of the nine have a lower unemployment rate than Luxembourg, the best of the other group. [The lowest rate is in The median country is Iceland, with a 5.5% unemployment rate. The biggest country in Europe is Germany. No minimum wage and 5.2% unemployment.”

So, with minimum wage laws: unemployment ranges from 5.9% to 27.6% (the median for these countries being the same as the EU-wide rate).

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And without minimum wage laws: unemployment ranges from 3.1% to 12.5% (most, apart from Italy, well below the total EU rate) .

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The pain is even worse for youngsters in places like Spain and Greece, where youth unemployment hovers around a horrifying 75%—with three-quarters of youngsters being told by their government that they may not work at rates offered them.

Why would anyone wish to inflict that on New Zealand youth?

Here’s Stephen Hicks on the moral, economic, and political arguments for and against minimum wage laws.

[Pic from Wikipedia. Hat tip and links c/o Stephen Hicks. Unemployment data updated to Sep 2013]

1 comment:

  1. People that oppose increasing the minimum wage or even having one tend also to support benefit cuts, the unemployment rate in Europe is high for various reasons which is an entirely separate debate but it is fair to say there just aren't enough jobs, the jobs that pay minimum wage may be regarded as 'menial' but they are nonetheless essential, as the wages are so low it is impossible to support a family, obtain a mortgage or even to enjoy a reasonable standard of living without various 'benefit top ups', we are told that working is better than claiming benefits and we often hear politicians talk about job creation taking people off benefits but the vast majority of benefit claimants actually are working, so it's a futile debate many careers advisors or employment agencies have actually never taken anyone off benefits, employers want to keep wages as low as possible resulting in an increase in benefit claims to supplement meagre wages, people do have to live somehow, even the great unwashed, hoi polloi or whatever term the comfortably smug use these days. The 'get a better job' argument doesn't wash either as even if someone progresses from street cleaner to brain surgeon, somebody else still has to fill the vacancy created, presumably for minimum wage.

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