Unionist Matt McCarton’s article in the Herald on Sunday (31-01-2010) supporting an increase in the minimum wage to $15, while rubbishing the Government’s decision to increase it by only 25c, is economic lunacy.

Citing a poll which found that two out of three New Zealanders want to see the minimum wage increased to $15 per hour, he argues that an increase in the minimum wage to $15 in the current economic climate will have no impact on unemployment whatsoever. He goes on to claim that in his experience if all employers in an industry pay a higher wage to their staff it makes no real difference to any of them.

Now these are interesting arguments. At face-value increasing the minimum wage appeals to our social conscience and seems to be a great idea. After all, people are suffering at the bottom and we want to give them a hand-up. What better way to do this then by increasing the minimum wage. Individuals will have more money to spend helping them move away from the poverty line and - according to Mr McCarten – employers won’t care about the increase in wage costs as long as everyone else is paying higher wages too. Sounds great, right? But something about that last argument doesn’t ring true…

Let’s look at it from a different point of view. If the price of something increases, does it not make you think twice about buying it? Of course it does. If the price increases too much it may even stop you from buying it altogether as you simply cannot afford it.

What if it is an essential good – something you just cannot do without? Well, if it becomes too expensive, you will either seek out an alternative or, if no alternative is to be found, you will buy it but will end up sacrificing something else that you would normally get to be able to pay for it.

This theory holds true in all areas of our lives. So why does Mr McCarten think that employers will behave differently?

If employers have to pay higher wages, then they will think twice about how many people they employ, the number of hours that they will get staff to work, the amount of work they expect employees to produce and the type of employee they will hire. While a minimum wage law can set wages, it does not guarantee jobs and an increase in costs will have employers reviewing all these aspects of their business.

Employers do not have an endless amount of money from which they can pay employees’ wages just the same as employees do not have an endless supply of money from which to pay their bills. Both must work within a budget and if costs increase, decisions must be made on what is affordable and what is not.

Studies in the U.S have shown that at their current wage levels an increase in the minimum wage would result in a decrease in employment of low-skilled workers by 1-2 percent. The theory that an increase in the minimum wage results in an increase in unemployment is reflected in New Zealand’s own employment statistics. Forty four percent of unemployed people in New Zealand are under 24 years old. Since youth-rates were abolished in 2008 more than 13,000 15-19 year olds have lost their jobs. How can anyone argue that increasing the minimum wage has no effect on employment, when the figures show so clearly that this is not true?

They can’t.

Let’s look at an example. Mark graduates from high school with below average grades, no work experience and no desire to go to University. He does not want to go on the dole so he applies for a few jobs and manages to get one working in the kitchen at a local restaurant earning $12.50 per hour.

Mark starts at the bottom but the boss notices his initiative and starts to give Mark more responsibility. Gaining critical work experience Mark is able to get a promotion and an increase in his wages. Mark’s employer, seeing his potential, offers to pay for him to complete a Diploma in Hospitality Management at the local Polytechnic. Mark completes the Diploma and takes over managing the restaurant for his boss.

The restaurant takes off under Mark’s management and becomes renowned for its service and food quality. Other restaurant owners notice the success of the restaurant and soon Mark is being head-hunted by an international hospitality company who wants Mark to manage their business. Mark is now highly respected in his industry and can command a high salary.

Alternatively, Mark finishes high school with below average grades, no work experience and no desire to go to University. He does not want to go on the dole so he applies for a few jobs paying the minimum wage which recently increased to $15 per hour.

Unfortunately for Mark, because of his low-skills and lack of work experience, he is turned down for all of the jobs as he is told they can only afford to hire someone with experience. Mark has to go on the dole. He continues to apply for jobs, but the number of job-seekers has increased for some reason and he finds it hard just to get an interview. A year passes and Mark’s self-confidence and sense of self-worth is at an all-time low.

Finally, he manages to secure a part-time role working at a restaurant. Mark works hard, and the manager noticing his initiative offers Mark a role with more experience, but tells him they cannot afford to give him a pay-rise. Mark takes on the role anyway, as he is keen to get more experience, but is disappointed that there is no increase in pay.

The restaurant that he works at needs a new manager and Mark talks to his boss about the role. His boss tells him that, although he thinks Mark would be good in the role, he needs a Certificate in Hospitality Management. He tells Mark he would have to pay for it himself as the restaurant cannot afford to.

Mark is still on the minimum wage, so he cannot afford to pay for the course. His boss hires someone else who already has the qualification and experience. Mark becomes disillusioned with his job and his work quality starts to drop. His boss talks to him about it repeatedly but it makes no difference. After a while, Mark quits at the restaurant as they clearly don’t value him as an employee. He goes back on the dole while he looks for another job.

This example highlights the side-effects of increasing the minimum wage can result in. Increasing the minimum wage to $15 would result in a decrease in the level of employment, either through loss of jobs or a reduction in working hours. Increasing the minimum wage also has an impact on other benefits that employees don’t think about straight away – break times, staff training, staff bonuses and the possibility of overtime.

The reality is that the people that the minimum wage hurts the most are the very people that it is trying to help – those workers with low-skills. Although increasing the minimum wage may seem like a great idea, the unintended consequences make it far too costly. In today’s current economic climate New Zealand simply cannot afford it.

Legislation this week - 9-11 February, 2010

Question time will resume on Wednesday 10 February, 2010.

- Motion without Notice: Condolence motion regarding Haiti disaster
- Motion without Notive: Condolence motion regarding Squadron Leader Nick Cree
- Prime Minister’s Statement
- Valedictory statement: Jeanette Fitzsimons

Government Bills:

Appropriation (2008/09 Financial Review) Bill – Second Reading
ACT to Support

Children, Young Persons, and Their Families (Youth Courts Jurisdiction and Orders) Amendment Bill – Second Reading
ACT to Support

Child and Family Protection Bill – First Reading
ACT to Support

Judicial Matters Bill – Second Reading
ACT to Support

A more detailed rundown of Parliament this week can be viewed by clicking on 'In The House' or at http://www.roy.org.nz/inthehouse

The new school year got underway last week with 9,900 new entrants starting their first day of school with brand new backpacks, shiny shoes, and freshly sharpened pencils. I am sure it was a mixture of nerves and excitement for parents and students alike. The new entrants are joining 754,000 other students who will be attending schools around the country this year.

The new school year has seen several changes from 2009 in the number of students enrolled and the diversity in our classrooms. Birth rates, migration rates, and the current economic climate are all factors that affect the makeup of New Zealand school rolls.

Primary school rolls are expected to increase by about 2,250 compared to the 2009 school year. The growing number of new entrant students enrolling is a direct consequence of the number of births increasing since 2003 following a lower birth rate from 1992-2003. This is predicted to be the peak until 2012/13 when the high birth numbers of 2007/2008 will start to affect primary school rolls.

The economic climate also appears to have affected student numbers as retention of students at the other end of the spectrum – secondary school leavers - has increased by 6.8% between 2009 and 2010 compared to 2008-2009. It is possible that reduced employment prospects have influenced many students’ decisions to return to school beyond the years of compulsory education.

New Zealand classrooms are also becoming more diverse with increasing proportions of Maori, Pasifika, and Asian students. Over the last decade this has been a growing trend with the declining numbers of European/Pakeha students and increasing numbers of Maori, Pasifika, and Asian students. In addition, New Zealand gained 1,600 students between the ages of 5 and 17 through migration last year

With the school year now in its second week I am sure students have formed many new friendships and are settling into their new, or not so new, schools. As Associate Minister of Education, I am once again looking forward to seeing for myself students in their classrooms throughout the year.

When I received an invitation to visit the Karori Sanctuary today to see the current re-development taking place and have a walk around the bush I jumped at the opportunity. Wellington put on a perfect sunny day today for some bird and wildlife spotting.

The Karori Sanctuary is unique and is one of Wellington’s true assets. The Sanctuary is just ten minutes from the city centre and provides a wonderful opportunity to see New Zealand birds, insects and lizards in their natural environment of New Zealand native fauna. On my trip this afternoon I saw amongst other things three Tuatara sunning themselves on rocks, some very well camouflaged green geckos and a number of different birds including Saddlebacks, Fantails, Hihi and Bellbirds.

Nancy, the Chief Executive of the Karori Sanctuary Trust was a wonderful tour guide and started the visit off by showing me around the building which will become the new visitor centre. All guests will pass through the centre on arrival at the Sanctuary and have the opportunity to view displays and a movie from multiple levels. I was impressed with the thought behind the new development, with exhibitions planned to highlight not only Wellington region’s conservation efforts but other New Zealand sites serving to protect our native wildlife such as Codfish Island and Kapiti Island. Visitors will also be able to learn about the story behind New Zealand’s native birds and the evolution from Gondwana to the New Zealand we live in today.

The Sanctuary is still open to the public during the renovations and summer is a great time of year to take a look around so I highly recommend a visit while the sun is still shining – overseas visitors in particular will be impressed with the variety of unique wildlife New Zealand has. I’m definitely planning another visit to see the new facilities and exhibitions when they open at Easter this year.

More on the Karori Sanctuary can be found at http://www.visitzealandia.com/Site/Zealandia_Home/Default.aspx

Yesterday I took my teenage boys to view the original Treaty of Waitangi documents at the Archives New Zealand (National Archives) in Wellington. They don’t normally open at the weekend, but did yesterday to mark the 170th anniversary of the signing. The Treaty, after restoration from damage caused by age, rats and water damage, is displayed in glass cabinets in a vault – the Constitution Room - and has subdued lighting to protect the parchment and paper of the nine documents that form the written Treaty. To my surprise the boys were as interested in the original Treaty as I was and they clearly enjoyed telling me the odd fact or two that I hadn’t been previously aware of!

Also housed in the vault were a number of other precious historical documents including the 1893 Women’s Suffrage Petition.

Waitangi Day provides us with an opportunity to reflect on where we have come from and how we have evolved as a nation. In 2006 I went to Waitangi and was impressed with the positive attitudes and welcoming environment I saw. It was the first peaceful Waitangi Day for some time and this was probably due to the fact that the Maori Party had just been elected to parliament.

Media commentary in the run-up to Waitangi Day for the past couple of years has largely focussed on flags, Republic vs Monarchy, National Anthems and this year there was even a survey on whether or not we should replace New Zealand as the name of our country! These topics all provoke a wide range of responses, especially the flag debate. Although symbolic these debates only address the cosmetic – as one friend said to me recently “the paint on the yacht that is New Zealand”. The real issue we should be addressing is a constitution for New Zealand – principles that our legislative framework operates on. I’m not saying it will be easy but it is, in my view, an essential basis for the future of New Zealand. Then we can decide on a flag and a National Anthem that represents everyone.