The Case for a Minimum Wage: Evidence from New Zealand and Implications for the United States
Every state’s economy is unique, leading to a decentralized approach where state governments set their minimum wage. However, this does not mean that a federal government should be completely hands-off. A one-size-fits-all mentality does not adequately address the diverse economic needs of each state. This article examines the reasons why a federal minimum wage could be beneficial, drawing lessons from the New Zealand model, and suggesting potential strategies for improvement in the United States.
The Historical Context: FDR and the Minimum Wage
During the Great Depression, President Franklin D. Roosevelt (FDR) helped initiate a minimum wage system to ensure that workers could earn enough to meet basic living standards. The original intent was for the minimum wage to increase automatically with the cost of living. However, over time, minimum wage increases became a politically charged issue, often used for election campaigns rather than as a practical tool for addressing inflation. To keep up with current inflation, the living wage in the United States should be at least $15 per hour, with a federal minimum of $25 per hour or more to account for taxes and withholdings.
Insight from New Zealand: No Minimum Wage but High Wages
New Zealand is a unique case where the absence of a nationwide minimum wage has not led to lower wages. This phenomenon can be attributed to several factors:
Strong Labor Laws: Effective labor laws protect workers from exploitation, ensuring fair wages and working conditions. Highly Skilled Labor Force: New Zealand boasts a highly skilled workforce, which often commands higher wages due to their specialized knowledge and skills. Low Unemployment Rate: A low unemployment rate means that employers are willing to pay more to attract and retain the best talent. Trade Unions: The presence of trade unions significantly increases workers' bargaining power, leading to higher wages. Economic Growth: New Zealand’s rapid economic growth, driven by more productive businesses, has led to rising wages.These factors combined create a dynamic where workers are paid well without the need for a statutory minimum wage.
Lessons for the United States: Potential Strategies
Based on the New Zealand model, the following strategies could be adopted in the United States to improve labor conditions:
1. Strengthen Labor Laws
To prevent exploitation and ensure fair wages, the federal government should strengthen labor laws. This includes enforcing existing regulations and creating new ones that protect workers from unfair treatment and ensure they receive a living wage.
2. Encourage Economic Growth
The economy should be grown to provide more competition for businesses, which can afford to pay higher wages as a result. This can be achieved through policies that support small businesses and prevent consolidation, ensuring a competitive market where wages can rise.
3. Support Trade Unions
Trade unions should be actively supported to give workers more bargaining power. By increasing their bargaining power, unions can negotiate higher wages and better working conditions for their members.
4. Incentivize Business with Tax Policies
Historically, taxes have played a role in incentivizing businesses to pay higher wages. By offering tax breaks or other incentives, the government can encourage companies to adopt fair wage practices.
5. Provide Government Assistance
For jobs that are necessary but pay low, the government can provide assistance to those workers. This can be done through direct payments, subsidies, or other forms of support to help cover basic living expenses.
However, the current attitude towards these measures is often dismissive, with many believing that workers deserve to be underpaid and overworked. It is crucial that the role of a living wage should be calculated based on the average cost of living to cover essential needs. Once this is established, the wage should be adjusted to reflect changes in inflation.
In conclusion, while each state’s economy is unique, a federal minimum wage could provide much-needed protection and support for workers. Drawing from the lessons of New Zealand, the United States can implement comprehensive strategies to ensure fair wages, better working conditions, and a more equitable economy.