Minimum Wages and Employment

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Minimum Wages and Employment

• Phil Lewis

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Do We Need More Jobs ?

• Is unemployment a problem?
• Who are the unemployed?
• How do we create more jobs?

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10

8

6

4

2

0

65

70

75

80

85

90

9
5

2000
0


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Labour Utilisation, per cent
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Welfare Recipients (000)
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Growth in employment per cent, per year
81-01 90-00 98-03 Full time males
0.6 0.3 1.2 Full time females 2.4
1.4 2.0 Part time males 11.1 6.7
4.8 Part time females 5.9 3.0 3.2 All
full time 1.1 0.7 1.5 All part
time 7.0 3.9 3.7
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Casual Employment, per cent
1985 1994 1997 2000
2002 2003
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Change in Average Skill Levels, 1991-2001, per
cent
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Contribution to Skills Change, 1991-2001, per
cent
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The Labour Market
Wage
Supply
MarketWage
Demand
Employment
Full Employment
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The Labour Market
Wage
Supply
Minimum Wage
Demand
Unemployment
Employment
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Minimum Wages and Employment, percentage change,
1994-2004

• Wages Real Wages Employment
• Award 40.2 7.7 29.9

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What is Marginal Productivity Theory?

• Firms hire workers if the extra revenue exceeds
  the cost of hiring
• Diminishing returns

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Distribution of Jobs
no of workers
wage
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Distribution of Jobs
no of workers
wage
wm
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Employment Effects

• Truncation
• Substitution
• Leakage
• Output

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Unemployment Rate by Education, per cent
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Long Term Unemployed and Education, per cent
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Duration of Unemployment by Age
15-19 20-24 25-34 35-44
45-54 55
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Relative Wages and Employment, percentage change,
1994-2004

• Wages Real Wages Employment
• Award 40.2 7.7 29.9
• All 53.8 18.2 22.4
• Difference -13.6 -10.5 7.5

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Social Security Payments, per week
Single Adult 242.30 with 1 child 394.92
pensioner 279.80   Couple 396.20 with 2
children 560.94 pensioner 432.70   Minimum
Wage 467.40
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Policy Implications

• Education training
• Social policy
• Labour market programs
• Social security
• Taxation
• Minimum wages

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The Labour Market
Wage
Effective Supply
W1
W2
Demand
Employment
E1
E2