Research shows NZ minimum wage policies not as effective (or damaging) as some claim

Apr 12, 2021

Research shows NZ minimum wage policies not as effective (or damaging) as some claim

Motu Research has just released research that reviews the changes and impacts of the Statutory Minimum Wage in Aotearoa New Zealand over the past 20 years. The research finds minimum wage policies are not as effective as claimed by its supporters – or as damaging as claimed by its critics.

New Zealand has seen dramatic changes in minimum wage levels since 2000. The adult Statutory Minimum Wage in New Zealand has risen substantially (75% in real terms) since 2000.

The minimum wage now directly affects about 9% of all Kiwi employees, but has much greater impact on teenage workers (57% of 16-17 year olds and 43% of 18-19 year olds in 2020).

“Surprisingly, it is hard to find a clear statement of what minimum wage policies actually aim to achieve”, says Dr Dave Maré of Motu Research.

“We reviewed the possible motivations for minimum wage policies and examined changes of minimum wages, analysing how they have affected workers outcomes. We found the minimum wage now strongly determines the wages of teenage workers.” says Dr Maré.

“However, because minimum wage workers are spread across all household income types in Aotearoa, minimum wages are poorly targeted as an income redistribution policy”.

The research by Motu (funded by the Ministry of Business, Innovation and Employment) finds no clear evidence that increases in the minimum wage have led to negative employment losses for affected groups. However, the risk of losses is found to increase disproportionately when the minimum wage directly affects a high proportion of workers, as it does for youth and low skilled workers.

Read the research paper here.

Background information

Our analysis uses data from Statistics New Zealand’s Household Labour Force Survey and Income Survey, with supplementary information from the Integrated Data Infrastructure.