As part of catching up with what has been happening in New Zealand I am reading what I can find from New Zealand economists. In doing so I wandered onto this piece by Shamubeel Eaqub of Sense Partners.
Firms are finding it hard to recruit, as the pool of qualified job seekers who are not already employed is so small. … (But) Wages haven’t risen in tandem. Wages have been increasing in some sectors like construction, but have been stagnant in others. … One explanation for this may be a lack of competition in a local labour market.
The increase is from a low level and evidence from the US on minimum wages suggest such increases don’t cost jobs, but improve the incomes for the working poor.
So there are two claims embedded in this that I want to think about a bit here: Competition through monopsony and the efficacy of a higher minimum wage in the NZ context.
Is there suggestive signs of monopsony in NZ’s labour market (Tl;dr is YES and NO), does this imply minimum wages could increase employment (Tl;dr is YES if monopsony holds), does this suggest higher minimum wages would increase, or at least not reduce, employment (Tl;dr is probably NO at current levels). Although we will be going through a bit more than this in what has turned into a long post. Let’s do this.