Gordon Campbell on the Greens proposal to gradually lift the minimum wage September 3rd, 2014 Heading into the election home stretch, voters have a clear choice about the best way to help low and middle income New Zealanders. They can do so by gradually lifting the minimum wage (as the Greens propose ) or by a small tax cut, as the government seems about to announce. The minimum wage boost – by 75 cents an hour to $15 in December, and then by gradual annual increments to $18 an hour by 2017 – that the Greens are talking about is just one part of a packet of employment measures that would include scrapping youth rates and the 90 day trial period, introducing a redundancy package of four weeks, offsetting any abatement effect of the policy package for those receiving Working For Families, and finally… ditching the exception made by the government (during the Hobbit negotiations) for workers in the screen industry, which denies them normal workplace safeguards and entitlements. The Greens minimum wage package is estimated to cost $1.1 billion, although the resulting increase in spending power will see much of that recouped via taxation, both directly and by GST. As the Greens policy document puts it: Increasing the minimum wage will cost $1.1 billion over three years, owing to higher Government staffing costs, especially in the health sector. However, that will be offset by increased tax revenue from wages of $1.9 billion over three years. Predictably, the nay-sayers are claiming this will cost jobs, a plaint repeated by Prime Minister John Key in his Press debate last night with David Cunliffe. Hmmm. If, as Key claims, Treasury has done research that shows major job losses would result from gradual increases in the minimum wage, then this amazing information would be world news – because the vast weight of academic research around the world ever since the groundbreaking David Card/Alan Krueger work in the US fast food industry 20 years ago, is that it would do no such thing. The most recent comprehensive summary of the minimum wage literature by the US Center for Economic and Policy Research is tellingly entitled “Why Does the Minimum Wage Have No Discernible Effect on Employment? “ It is easy reading, and available here. In fact, the Greens should ‘fess up. Doesn’t the logic of their minimum wage policy go all the way back to that crazed socialist nincompoop Henry Ford? A century ago, the Jazz Age equivalents of John Key and Business NZ’s Phil O’Reilly were shaking their heads and saying that Ford was going to destroy capitalism with his harebrained idea of paying his workers a decent wage: It’s been exactly 100 years since automaker Henry Ford announced one of the most famous business decisions of all time, cited to this day as an example of the economic benefits of boosting workers’ wages. In short, Ford decided to more than double the pay for his assembly-line workers. The impact of his strategy generally is characterized in terms of benevolent leadership and shrewd salesmanship. Ford employees were suddenly able to afford the vehicles they produced, which expanded the market. The “modest” tax cut being proposed by National is a quite different kettle of fish. Nearly 500,000 workers stand to benefit from a gradual minimum wage hike – many of them working for peanuts as carers and cleaners in our rest homes and hospitals. For a single person on the minimum wage, the Greens calculate the increase will amount to $125 a week, or $6,400 more, annually, in the pocket. In recent weeks, the differing messages from Key and Finance Minister on the wisdom and size of tax cuts for low to middle income workers – Key upbeat, English warning in not so many words that only something less than $20 a week would be affordable – have yet to resolve into one single, coherent message. The announcement on the policy is being delayed until next week, possibly to give the government something to distract attention from the long promised September 15 announcement by Kim Dotcom. The cynicism of the exercise is breathtaking. Clearly, all the talk from English for the past three years about the need to tighten our belts and accept cutbacks in public services has had precious little to do with prudent fiscal management. In reality, the public has been paying to subsidise (a) a wafer thin Budget surplus and (b) a wafer thin round of tax cuts, to hold out as an election bribe just before people head into the polls.
Posted on: Wed, 03 Sep 2014 05:58:31 +0000
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