Yesterday Andrew Leigh* had a fascinating letter ($) in the Australian Financial Review. Fascinating because it gives an insight into social democratic thinking.
Almost a decade ago, I published a study which concluded that increases in West Australian minimum wages led to some job losses. This result should not have been a surprise to anyone: I doubt there’s a person in the country who believes that we could double the minimum wage tomorrow without some job shedding.
That’s a good start – Andrew Leigh admitting that increased minimum wages results in job losses. But then see what he does – he introduces a cricket analogy.
Shop assistants and hairdressers, early childhood workers and cleaners are among the workers who rely on minimum wages.
To pretend their pay packets are irrelevant is like complaining that Australia lost nine wickets in the first innings of the Adelaide test.
If you can’t also acknowledge that we made 570 runs and won the test, you’ve kinda (sic) missed the point.
Okay – so Australia lost 9 wickets in the first innings of a test match. He is quite correct to say that we also need to look at the runs made in the first innings of that test match. So far, so good. BUT … the same people who made those 570 runs also ended up losing their wickets. It isn’t the case that some people lost their wickets and other people got the runs.
What Leigh seems to be saying is that it doesn’t matter that some people lose their jobs as a result of increased minimum wages as long as those who don’t lose their jobs are better off for the pay increase.
While the evidence is somewhat mixed, it seems likely, on balance, that raising the minimum wage delivers a considerable pay increase to the working poor.
While tossing a bunch of other people into unemployment.
* As always launching into Andrew isn’t necessary and will result in grumpiness on my part.