Inside of the Literature Review, the writer will emphasize on the idea of a minimum wage that affects the current increase in New Zealand. The main point of this Literature Review is to give an idea of the impacts of the positive and negative of the New Zealand wage rise. It also states some arguments that are between many companies whether a high wages is better or low wages. It reflects on many stakeholders that are involved in the issue which helps us understand the minimum wage better. The question now is what is minimum wage?
It is defined as lowest hourly depending on everyday work basis or monthly wage that is legally give to employees. Many employees work really hard to earn this pay because they either don’t have a proper degree or may have many other personal reasons. There is always an argument whether the minimum wage is effective for people to have a good living or not. Some say it helps them have a normal life and reduces poverty. Others believe that if the minimum wage is good then it would increase the rate of unemployment especially for people who have no degree and some who are disabled to work.
Obviously it would be biases because there are some who are skilled and some who are not. History The minimum wage started in 1894 in New Zealand (Timmins, 2006). In many countries there is a legislation passed regarding minimum wage by 90% of the government. In many countries the rates are different such as in the U. S people are paid 25$ per hour under the Federal Law. The minimum wage is brought so that simple needs of the workers or employees are met (Labour Office, 2006). It just means that the lowest rate at which employees sell their labour.
The reason that the minimum wage was set, because the government wanted to control the sweat shops in manufacturing industries. Most of the employees that worked there were women and young teenagers. They set the rate by how much work they did. Many employees were dissatisfied because they thought their owners were being very unfair due to the amount of work they did, the women and teenagers though they deserved way more than they got. After a while, time changed because now minimum wage is considered as helping families that need special care regarding financial status.
The minimum wage shows an ability of markets that provide income and equal rights among the members at a certain work place. There is always a good side and a bad side but it seems that minimum wage doesn’t help change reducing poverty. According to many authors and researchers, the people that hold up the minimum wage have a rise in their per capita income. In New Zealand, minimum wage was increased from the first April 2010 for an employee that whose original wage was $12. 50 per hour and it increased to $12. 75per hour. Innovation to the Minimum Wage
In New Zealand the people that get employed get a good working atmosphere for private sectors and government. Recently the Minister Kate Wilkinson of labour declared a little rise in New Zealand’s employees minimum wage (“Mallard puts up minimum wage bill,” 2010). In New Zealand the minimum wage was increased from 1st April 2010 for a 16 year old by $12. 75 per hour by not including the tax rate which is $102. The hours that the 16 year old worked for is eight hour per day, which is forty hour per week including the wage rise in training to $10. 0. The only reason that the training wage applies is for the people that need credit that consists no less than 60 credits a year (“Minimum wage Rate as of 1 April 2010,” 2010). During the 1994, the youth minimum was introduced for 16- 19 year old. So for it to have an increase definitely brings out a good impact on the changes of Minimum wage. Kate Wilkinson state that “The government is persistent on the need to find a balance between ensuring a fair wage and protecting jobs (“Minimum Wage Increased to $12. 75,” 2010).
It basically means that the government needs to show a fair balance by keeping their employees happy. They must not just concentrate on the people that have secure jobs but also make the changes of increasing the minimum wage. In the past 3 years, the increased of Minimum wage has just grown by 6. 25% for the beginners and old employees that are adults. It doesn’t matter what your age is, or whether you are a full time or just a casual employee. The minimum wage is set a rate which is not changed by any means until the company announces the innovation (Contract, 1994).
In the past years the rates of inflation towards minimum wage have changed variously. It all depends on how the economy is situated, if the economy is going well then the rates will increase by one or two percent. If the economy is not doing too well then it will go down by one or two percent. The graph below shows the minimum wage rise for the past 7 years: YearMinimum Wage 20038. 5 20049 20059. 5 200610. 25 200711. 25 200812 200912. 5 201012. 75 (Department of Labour, 2010). Impact of Minimum Wages that inflates in New Zealand There is negative and positive impact on New Zealand’s minimum wage.
It reflects on the different types of businesses and organization. Minimum wages can affect everyone in a way because it involves the workers who are paid less, employers, government, private sector, the tourism industry, and customers. Minimum wages are considered to be a tool against poverty. The affect of minimum wages are on the income that is distributed upon who earns more or less. This means that if one earns less then they have the right to complain against the Labour office. Down below is a list of sectors that makes an impact on the rise of wages in New Zealand. Impact on Employers
The rise in Minimum wages can increase per capita income which means that the standard of living of low paid workers will be better. But if the employment goes down then the minimum wages are set to a very high level. There are benefits to that but then the unskilled workers get left out. The data of minimum wages in New Zealand show that the employer can act in a different way to raise the minimum wage. For example, reducing the hours the employee works, reducing the wage relativities among staff, and not replacing the employees who resign (“Regulatory Impact Statement- Minimum Wage Review,” 2009).
Impact on Industry Sectors The minimum wage can have a strong impact on an organization because the labour cost always increases every year. Depending on the organization the labour cost will rise in different ways because it reflects on the number of employees that work on minimum wage. (“Regulatory Impact Statement- Minimum Wage Review,” 2009). In the hospitality industry many enterprises have an impact due to the rise in minimum wage. They have to have a certain budget that they can’t overcome. A lot of them go through problems when the employees go on strike or have huge demands they can’t cooperate.
In New Zealand the data shows how the firms make an effort to help in the rise of minimum wage. They try to reduce the labour and paid work hours of their staff. They also try to ignore the new employee in the place of the resigned employee and they also have more strict policy on employment. (“Regulatory Impact Statement- Minimum Wage Review,” 2009). They also try raising the price of productivity in every way possible and reduce the cost. (“Regulatory Impact Statement- Minimum Wage Review,” 2009). Fiscal Impact Sometimes it makes it hard to explain the net impacts on increase of Minimum wage.
Due to various fiscal impacts on minimum wage, it increases the unemployment rate; the social assistance also rises because the cost payment is quite expensive. If the income is set to a high rate then it increases the amount of income tax that is received which then leads to the abatement of social assistance. In this particular segment of literature review, it shows that the cost will shift from the government to the employee that will imply on the revenue. It basically means that the business you are in will pay you as you earn.
There will be no change in the minimum wage that has certain fiscal impact because of the set rate in cost (“Regulatory Impact Statement- Minimum Wage Review,” 2009). Employee Impact The Income that increases plays another key factor for the employees because it motivates them to work harder. It helps them provide great service and product. The reason it helps them is because they need to learn how to satisfy customer’s needs and wants. When the employee feels the energy that can motivate them, they exceed to the performance of the best abilities.
If the business does excellent then the owners will be happy, and when they are happy they will definitely think about increasing the minimum wage. (“Regulatory Impact Statement- Minimum Wage Review,” 2009). Comparisons minimum Wage: New Zealand Vs Australia Australia and New Zealand have the two things in common, one is the history and the other is culture. Another interesting point is that there the structure of economy has a lot in common. In 1983, the two countries have been doing free trade and migration between themselves. These similarities explain the level of wealth that increases each year.
The GDP of Australia is quite higher than New Zealand because of the population and more tourists involved. (“Explaining the income gap: are Aussies and Kiwis that different? ,” 2008). Looking at an expert economic calculator, the average family would be better of living in Australia. The research shows that they can earn $5000 Australian dollars that makes their living twice as better than New Zealand. The New Zealand Institute of Economic Research show that the Kiwis immigrated to Australia in the year or 2006 and 2007 due to the fact they are better off living in Australia.
The standard of living increases in Australia because it is a developed country and has many benefits to it. When the gross income is higher in Australia, the tax rate decreases which help the family tax gain the power of purchasing with greater ease in being wealthy. (“New Zealanders far better off moving to Australia,” 2007) According to the information by Taskforce, The Australian income is 35% higher than New Zealand, which gives a gap of $64000 for a family of four (Butler, 2010). Political Issues in New Zealand There is always a debate in the government whether a minimum wages should be increased or not.
This always involves the government due to the taxes that everyone pays. Recently a Minister of Labour Kate Wilkinson increased the minimum wage from $12. 50 to $12. 75 with a consumer price index. Also the new training entrants had an increase in their minimum wages from $10. 00 to $10. 20. (“Minimum Wage Increased to $12. 75,” 2010). The national party wanted to help increase the wages because they think it will protect many jobs and having a fair wage will make everyone equal. The most the government could do is increase the wages with a little inflation.
The officials recently stated the average wage was increased to $13. 10 which includes at least 400 or more jobs. The labour officials suggested that the Green party and Maori should increase the wages to $15. 00 because it would offer a lot more employment to many other employees. They could have a wide range of job opportunities. (“Unions slate ‘miserly’ minimum wage rise,” 2010). When the councils of Trade Union national secretary were asked how they felt about the increase in wages, she said “we will never be able to catch up with the Australians” (“Unions slate ‘miserly’ minimum wage rise,” 2010).
She meant it in a good way because Australia has more population and way more job opportunities. The minimum wage is much better than in New Zealand. The New Zealand chief executive called Phil O’ Reilly is part of the government and he thinks that the increase of wage is “quite reasonable”. He stated that the government should not forget the limit of increasing the minimum wage has it is part of the policy on annual basis. Regarding the business, the rise of minimum wage could put employee off by taking unskilled workers. (“Unions slate ‘miserly’ minimum wage rise,” 2010).
A member of the Maori party called Pita Sharples said that $15. 00 is an “absolute minimum”. She believes that it can provide a relief along with a promise of a great future ahead. Since the unemployment rate is very high in New Zealand it makes the Maoris’ earn less than a median wage. (Minimum wage rise hits sour note with Maori Party,” 2010). There are many people that support or are against the increase in minimum wages due to various reasons. It should always be a help to New Zealanders because if you increase the minimum wage it helps the living standard better.
It also helps the economy of the country and people should not have a fear of losing jobs, instead they should feel secured of their jobs and that they are also getting a fair wage. The wage gap between Australia and New Zealand can be narrowed, so that it makes the migration less. Conclusion As other countries have done, the minimum wage has been decided upon the wants of workers, cost of living, common levels of wages, Economic situation, Capability of enterprises to pay, Employment & Productivity. Poor household benefits more than rich households in the rise of minimum wage.
Increase in minimum wages can also increase the number of unemployment since it directly affects the profitability of the company. Recommendation The minimum wage needs to set up so that it does not harm the progress of the country. Since it has lots of implications on the employee and employer. It should be set in a way so that both the group are well benefited. Inflation of the market needs to be controlled as it plays a major role in the deciding the minimum wages of the particular company
References •Department of labour (2010). Minimum Wage Review 01-04-2010. Retrieved from http://www. ers. dol. govt. nz/pay/pdfs/minimum-wage-review-2010 •International Labour Organisation, (2006). Minimum wages policy 2006. Retrieved from http://www. ilo. org/public/english/protection/condtrav/pdf/infosheets/w-1. pdf •Minimum Wage Rate as of 1 April (2010) http://www. ers. dol. govt. nz. html retrieved from http://www. ers. dol. govt. nz/pay/minimum. html •Minimum Wage Increased to $12. 75 (27-01-2010) http://www. beehive. govt. nzr retrieved from http://www. beehive. govt. z/release/minimum+wage+increased+1250+0 •Minimum wage rise hits sour note with Maori Party (28-01-2010) http://www. odt. co. nz/news/politics/90893/minimum-wage-rise-hits-sour-note-with-maori-party •New Zealand to bridge the wage gap between Australia, NZ (22-07-2009) retrieved from http://www. radioaustralia. net. au/pacbeat/stories/200907/s2633533. htm •Regulatory Impact Statement- Minimum Wage Review (01-04-2009) http://www. dol. govt. nz retrieved from http://www. dol. govt. nz/publications/general/ris-min-wage-2010/minimum_04. asp