Minimum wage nonsense

I love it when journalists think that their crappy interpretation of an OIAed email from Treasury gives them a scoop that overturns basic economics. Here's Patrick Gower:

Everyone knows it’s got bloody hard to live on the minimum wage - even John Key admits that. His defence is that a rise from $13 to $15 an hour will cost jobs.

Key has used this defence in a televised debate, and he's used it to workers on the shop floor at McDonald's as seen in my story last night. But what Key doesn't want to admit, is that this claim is not the full picture and may just be fear-mongering - a rise may not cost jobs at all.

That's what Treasury says in this advice from March 2010 obtained by 3 News under the Official Information Act.

SEE THE TREASURY EMAIL THAT SAYS A MINIMUM WAGE RISE WON'T COST JOBS

Yes, that's right - the Treasury.

The Treasury are the big guns - Government's quasi-independent economic advisers.

And the Treasury says the "claim" (yes Treasury calls it a "claim") a minimum wage rise may cost jobs - "has not been true in the past".

Ok, so Gower's claiming that Treasury says a minimum wage increase from $13 to $15 will have no employment effect.

Go read the Treasury email and you'll find Treasury's Tony Burton wondering about the rise in youth unemployment through 2010. What "has not been true in the past"? That changes in the youth minimum wage hitting 18 & 19 year olds a decade ago resulted in increased youth unemployment - the Hyslop and Stillman study found no effects. The period of study saw some of the lowest adult unemployment on record in New Zealand, so it's not exactly the kind of period in which we'd expect strong disemployment effects. Burton then wonders about other things that might have affected youth unemployment rates through 2010.

But it's insane to extrapolate from anything in that Treasury email to claim that Treasury supports an increase in the minimum wage from $13 to $15. I hope that somebody at Treasury steps up to make that clear.

Gower tries to frame this as a scrap between Treasury and the Ministry of Labour over estimates of the disemployment effects of minimum wages.

So the Department of Labour report actually mentions about 6000 forecast new jobs that might not happen under a theory that the Treasury doesn't believe.

But absolutely nothing in the OIAed email from a single Treasury analyst speaks to the Ministry of Labour's estimates. Nothing.

Brash's assessment of Gower seems about right.

TVHE comments as well, but as usual, is too kind. Update: It gets worse. See here for Treasury's very clear opinion in the 2010 minimum wage review that raising the minimum wage from $12.75 to $13 was a bad idea.