Well the New Zealand government has just raised the minimum wage to from $17.70 to $18.90, right in the middle of the economically devastating level-4 Covid-19 shut down. But more on that later...
Raising the minimum wage looks like you're doing god's work, until you look at how markets work.
Firstly, if you're on a minimum wage and you are employed, then that means your employer is on-selling your labour for a couple of dollars more than the minimum wage. Of course, if he doesn't profit from you, he would not employ you. So take this scenario...
If your employer can employ you for $17 an hour, and on-sell your productivity for say $27 an hour, then he's doing well and making good money from you. But for how long? Others will want to move into town and compete to get some of that high-profit cheap-labour booty for themselves. So naturally, your employer soon has to compete with other employers to hold onto you. Soon, you're working for the other guy for $22 an hour, as the other guy compromised some profit to win you over and staff his business. (In time, all businesses working in competitive environments are forced to operate on tight margins).
My point? If you're employed on a minimum wage of say $17 an hour, then even without creating legal minimums you would, in good time, have been employed for $17 an hour (at least). The natural market minimum would dictate your wage, regardless.
So what do minimum wages really do?
They stop people who are say slow, disabled, low-skilled (or whatever) from selling their labour for maybe $10 an hour, for if their productivity could only justify $10 an hour to a given employer. In turn they are forced into unemployment.
So why is it that we have introduced such a foolish system of legal minimum wages, in New Zealand? Especially considering that, historically, very prosperous nations like Germany have never introduced them nor seen the need for them?
The answer of course is votes. Most people will only see the promise of wage inflation and that's as far as they will look. Milton Friedman, possibly the most internationally celebrated economist from the last century, has a good explanation as well (see the 3 minute video below).
It's noteworthy that the New Zealand Labour party is part-owned and controlled by New Zealand unions. Minimum wage laws function as a protectionist system to protect some union members from lower-paid competition, that could in turn threaten to drive down the union members' wages. Though ultimately, as I previously showed, minimum wage laws can only do that in the short term. The final result is a lose-lose for everyone. But alas, perception is politics.
In politics, what you know means nothing - what people believe means everything.
A minimum wage hike is the last thing New Zealand needs right now. We need to collapse the minimum wage, to ensure that our economy gets back to work as soon as possible, to recover from this massive debt (and recession) that the covid-19 shut-down will (and has) induced.
Further, a minimum wage makes no sense in New Zealand in any circumstance, due to the nations highly comprehensive welfare system. All we're doing is killing opportunity, especially within the regions where the market minimum falls way below the legislated minimum, in turn guaranteeing high unemployment within those low-production areas.
-Oh, there's another black twist to it. The vast majority of minimum wage earners are renters. New Zealand has a severe housing shortage, so this minimum wage increase will be handed over to the landlords in practice, as the across-the-board wage increase empowers landlords to competitivity raise rents. Hence it's not even a temporary handout to the most needy - it's a handout to landlords. Again, perception is politics. So our politicians do it anyway.
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