Minimum wage increase (2.5%) to take effect from July 1st

• 

  QW3RTY on 03/06/2015 - 08:36

  +1

  1.3% inflation, 2.0% cash rate and now a 2.5% increase in minimum wages.

  Yet the only thing we're buying is property.

• 

  Charity on 03/06/2015 - 10:06

  -2

  Low min wages = business's will hire more staff
  High min wages = business's will lay off more staff.

  Sadly, it is the low-income folks that are receiving min wages, will be affected the most.

  Everyone is also affected though. Consumers are also made worse off by price floors (i.e. minimum wage). Consumers are forced to pay higher prices and consume smaller quantities than they would with free-market prices. Will you still go to KFC for the 9 pieces for $9.95 $12.95 Tuesday special?

  If minimum wage was the answer to getting rid of poverty why not make it $30 an hour or $300 minimum an hour? (rhetorical)

  Problem is most govt officials never studied Economics 101, and the ones that have, pander to "what feels right to the masses" - instead of using facts.

  • 

    mskeggs on 03/06/2015 - 11:40

    How will a 2.5% wage rise cause a 30% chicken price rise? Talk about lack of Economics 101.

    Let me put it to you differently. You own a KFC. The award is $25 an hour. You get 100 customers per hour, for which you need 4 staff to handle it.
    I cut the award to $20 an hour. Do you hire a fifth staff member, or keep wages at $25 an hour, or drop wages and take the $20 an hour saving as extra profit?

    Or the reverse.
    You own a KFC, you employ 4 staff at $25 and hour to serve 100 customers. They get a 2.5% pay rise. This costs and extra $2.50 per hour. You can fire one and risk being able to serve fewer customers, or raise every customer's average price by 25 cents, or take the $2.50 reduced profit.

    Which scenario is it sane to change employment?
    The only industries where higher wages make any significant dent in employment is where the wages make up almost all the cost base, and the service is entirely discretionary. Maybe housecleaning might be an example? I can imagine if wages were low enough many more would have maids (see India, for an example). I'll leave it to you to justify why having staff earning poverty level wages might be a desirable thing.

    • 

      Charity on 03/06/2015 - 11:49

      KFC was a simplified example, my simple friend.

      Here, just for you:

      • Wages go up = any business has to charge more.
      • 

        mskeggs on 03/06/2015 - 12:14

        +3

        Right, but suggesting a 30% rise is needed for a 2.5% increase is nonsense, and an example of scare mongering to try and make a point.
        At $17 per hour, people on minimum wage won't be living an affluent lifestyle, so have limited means to absorb other cost of living rises - they need a wage rise if they aren't going to see their quality of life decline.
        The employers in any business have a number of alternatives, which you seem unaware of. For example, this week Cadbury announced they are shrinking their block size but maintaining prices. They could have taken this approach to cope with a 2.5% wage rise. Similarly, VB a few years ago dropped the alcohol content. And, of course, they could have both chosen to absorb the cost increases and take lower profits. Everywhere I have ever worked has also sought ongoing productivity enhancements, in effect asking me to do more work for the same pay. And everywhere I have worked has sought increased profitability, including raising prices to make more money if they thought they could.

        We live and work in a regulated market economy because while it is useful to have market forces driving pursuit of wealth, regulation is needed where there are imbalances in the market relationships. For example, the ACCC stops the formation of monopolies, and Fair Trading stops businesses selling shoddy goods to consumers. People earning minimum wage are by definition in the group that has the lowest power to negotiate a fair wage, so the FWC sets their pay with reference to inputs form business, unions and the community.

        I'm happy to be called simple if it helps you understand.

      • 

        [Deactivated] on 03/06/2015 - 15:27

        The percentage of profit the employer/business owner has been rising since the industrial revolution. The percentage of profit the employee takes home hasn't. My personal thoughts on this? Perhaps employers/business owners need to stop being so greedy.

        Ps. Raising the minimum wage to a liveable wage IS the solution to poverty; we have a huge class of "wage slaves" or "working poor" in Australia.

      • 

        QW3RTY on 03/06/2015 - 16:03

        1. Wages increase.
        2. Consumer spending/consumption increases.
        3. Businesses employ more resources to increase supply.
        4. New demand is matched by new supply. Price equilibrium increases.

        A 2.5% ^ in the cost of supply does not translate to a 30.0% ^ in cost of product. Conversely, as wages went up, so did prices.

        There are a whole lot of variables surrounding productivity, technical optimums/economic efficiency that will distort this slightly which mskeggs touches on, but purely on theoretical grounds for arguments sake the effective price as a % of wages remains the same.

        '#ConceptOfInflation
        '#ConceptOfWagePriceSpiral

      • 

        Charity on 03/06/2015 - 16:44

        Communist dummies!! Not sure I can dumb it down much more. THE NUMBERS ARE FOR ILLUSTRATION ONLY OMG!

        FRIED CHICKEN OR ACTUAL NUMBERS ARE NOT RELEVANT!

        The belief that increasing the minimum wage is socially beneficial is a delusion. It is short-sighted and ignores evident reality. Workers who retain their jobs are made better off but only at the expense of unskilled, mostly young, workers who either lose their jobs or can’t find a job at the legal minimum.

      • 

        mskeggs on 04/06/2015 - 08:04

        @Son ofa Zombie:
        Why are you calling out communist and dummies when people are posting that a 2.5% wage rise for the lowest paid workers is not the end of the world? And suggesting that your example of a 30% price increase was ignorant nonsense?
        OMG indeed!
        Perhaps you are getting overexcited at what is really an incredibly modest rise for some of the most vulnerable people in the community.
        Please show any evidence that raising minimum wages 2.5% has any impact on employment rates for any workers. I do not believe this evidence exists.

      • 

        QW3RTY on 04/06/2015 - 09:22

        +1

        @Son ofa Zombie: Instead of typing in bold and capitals, did you actually take time to understand the point of my comment?

        If wages go up, spending increases, supply increases to match new supply and a price equilibrium shift occurs.

        Goods cost more to produce, produced goods cost more to purchase.
        BUT workers are getting paid more to produce the goods. Nobody gets fired — hell in the short term, it could actually lead to the creation of jobs via increased consumption and consumer activity.

        I'm with mskeggs here, and would love to see some data that shows the inverse relationship between unemployment and increases in the award. Because those links seem to say otherwise.

  • 

    [Deactivated] on 03/06/2015 - 12:31

    Would you like me to get you a calculator?
    Looks like you need some help there.

    • 

      Charity on 03/06/2015 - 17:16

      Realise I made up those hypothetical numbers.

      People are now concentrating more on Chicken wings and forgotten the subject is about minimum wage.

      Yes, i would like you to get that calculator. Oh wait…

      • 

        geoffellis on 11/06/2015 - 23:11

        Your hypothetical numbers are clearly made up, because they are clearly very wrong. You talk about governments never studying economics 101 but clearly neither have you.

        Inflation for starters… rises from 1-5% every year. That means that the average price of everything rises, every year, by about that much. Which means that without a wage increase, every year, your earning power, is lower and lower.

        Inflation since 2011 has risen about 10% total. Minimum wage has increased by… 11.9

        Not much different is it… minimum wage workers have about 1.9% more purchasing power than they did 4 years ago. Hardly cause for screaming the world is going to end for a 2.5% minimum wage increase.

        And yes… prices are going to rise - probably somewhere between 1-5% like it does every year. Not something absurd like 30%. And it's going to be reflected in next years minimum wage increase. And then inflation will rise again. It's an ongoing process. doesn't change ANYTHING in the long run.