Would freezing minimum wages help recovery ?

I’ve just responded to a poll of economists, run by The Conversation and The Economic Society of Australia on this question. Here’s my response

No There has been extensive debate on the effects of minimum wages on labor demand. Over the last 25 years, the general conclusion has been that these effects are relatively small.

However, these questions are irrelevant in the current context. The pace of economic recovery will be determined entirely by macroeconomic conditions, including fiscal and monetary policy, continued success in suppressing the pandemic, developments overseas and consumer confidence. In this context, an increase in minimum wages will have a modest positive effect in bolstering demand.

In the longer term, the costs of the pandemic will have to be shared across the community. The crisis has shown that the work of lower-paid people is vital and undervalued, while much (not all) highly recompensed activity turns out to be of marginal importance in a crisis. Those on higher incomes should bear all or most of the cost of recovery.

Results of the poll should be out next week, I think

2 thoughts on “Would freezing minimum wages help recovery ?

  1. Nice to see NSW Labor having the tiniest iota of conviction yesterday and disallowing the moves to freeze *public sector* pay rises. (That’s how low the bar is for Labor now, after their federal colleagues voted for the massively regressive tax cuts last year; if it had been a federal vote yesterday, Albanese would have intoned solemnly how the freeze completely violated everything that Labor has ever believed in and betrays the innate Australian sense of the fair go, and then voted against disallowing it nonetheless).

    Setting aside whether it makes financial sense, is fair, or would actually fly with the public (obviously no, also obviously no, and…maybe?) — what’s striking is that the NSW government *thought* they could get away with effectively cutting the pay of nurses and teachers, in the wake of the last couple of months. Plus ca change

  2. Results of the poll should be out next week, I think

    What purpose is supposed to be served by such a poll? On the face of it, it seems like a bad idea to me, but I suppose there could be something I’m missing.

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