An article in Australian newspaper The Age describes a paper just released by the Reserve Bank of Australia which has found that periodic increases in the Minimum Wage (also known as the "Award" wage in Australia) did not negatively affect the level of employment in each respective industry:
The paper, published by the central bank's economic research department on the final day the Fair Work Commission hearings had to decide if 2.3 million Australians will get a pay rise in July, found "no evidence that small, incremental increases in award wages had an adverse effect on hours worked or the job destruction rate".
It used a sample of 32,000 jobs between 1998 and 2008, when award wages were increased by a flat dollar amount each year, to find jobs with larger award wage rises had larger increases in hours worked than jobs experiencing a smaller award wage rise.
"I am able to rule out adverse effects on hours worked. I also find that award wage increases do not have a statistically significant effect on the job destruction rate," said researcher James Bishop.
"If anything, the point estimates suggest that the job destruction rate actually declines when the award wage is increased."
[...] The RBA paper said their results may not "necessarily generalise to large, unanticipated changes in award wages", cautioned it only included adult positions, and that the consequences of wage increases may "be borne by job seekers, rather than job holders".
"There will always be some point at which a minimum wage adjustment will begin to reduce employment," the paper stated.
Naturally, this is proving problematic for some politicians who have been advocating against increases in the minimum wage due to fears that this will harm business.
Link to Abstract and Paper (pdf).
(Score: 5, Informative) by c0lo on Friday May 18 2018, @04:03AM (1 child)
As much as I like to believe it - the everyday life here seems to confirm it - I'd still want it verified beyond 2008.
The thing is: the 1998 and 2008 period in Australia was one in which the economy was booming. The mining industry invested in new developments and/or extending the existing ones - billions pumped into assets that cannot be moved elsewhere - the Chinese were gobbling minerals and coal like there was no tomorrow, so the Australians felt little impact due to the GFC for some extra couple of years at least.
Now, I seem to remember one peculiar thing about the GFC - there was a justification the banksters used to cast aside the due care of risk analysis - the so-called "Gaussian copula function", which was a shortcut: a statistical model deduced/based on market data, with the implicit flaw that nobody noticed (or chose to keep mum about) that the market data was available only over a period of economic growth which correlated with house prices growth (repackaging mortgages as bonds was not a thing that happened before that)**.
Where does this leave the study? It may well be valid, but I'd very much like to see it verified over a period of lower (or negative) economic growth.
It's not like this is impossible, the minimum wage increase seems pretty constant [tradingeconomics.com] in Australia - and yes, feeling of guts derived from the everyday life here, didn't cause any spectacularly significant variation in employment level (unemployment varied between 5.5% and 7.2% during the '09 - '16 period, if my memory serves)
--
** More details about that [wired.com] for those willing to read some length of text - well balanced point between "dumbing down for the layman" and "still accurate enough to provide an explanation".
https://www.youtube.com/watch?v=aoFiw2jMy-0 https://soylentnews.org/~MichaelDavidCrawford
(Score: 2, Touché) by Anonymous Coward on Friday May 18 2018, @08:04AM
Of course the economy was booming. People were paid enough to be able to afford buying things, which made the companies sell more things, which made them more money, so they could afford to pay people enough.