Kate Wilkinson would have got a report in October with options for a November Cabinet paper on lifting the minimum wage. In government Labour just about always made a decision before Christmas and there was always an increase effective from 1 April.
Each increase pushed up a relatively small but increasing group directly but a much bigger group indirectly.
I think it is time for the government to commit to $15 an hour from either 1 April this year, or 1 April next year at the latest.
There are a big stack of equity arguements in favour of the change. And it could be a good boost to the increasingly fragile recovery.
Business NZ would squeal. But most employers know that lifting wage rates encourages investement in capital equipment and training to make their labour force more productive. It is all part of the movement to a high skill, high wage economy.
Update Herald poll shows 61% of Kiwis support lifting minimum wage to $15. Women more than men. Challenge to Key who doesn’t like any policy that puts public offside.
And how many business do you think can afford this? Sure big companies can but what about small to medium sized ones…
If they’re small it’ll only mean a few extra bucks.
It gets passed on to customers. That lifts inflation. Lifting inflation erodes the value of the NZ government’s debt.
Along with the minimum wage should go increased government spending and tax cuts and lower interest rates.
Which yields:
1. better wages
2. lower currency
3. better access to housing
4. more exports (employing those people on the min wage)
National won’t figure this out, though.
Their idea of action is setting up a committee to think about it for 3 years, and then when the election rolls around, they can say that they are almost at a decision, and please reelect us so we can decide.
Um Andrew you have a typo, I’m sure you meant to type labour, you know setting up a committee and then waiting
Something like 90% of small businesses employ 5 or fewer employees. If, for example, they had 5 employees on minimum wage, the wage bill would go up $26,000 per year. ACC levies would also go up because they are based on a percentage of wages.
Of course, most do not have all their employees on minimum wage. But a 20% rise in the minimum wage is also going to mean a rise for those on higher pay, to maintain pay hierarchies.
What it is likely to mean is that small businesses reduce the number of employees they hire.
Doesn’t inflation take away the price rise by making stuff more expensive?
I like the idea of $15 minimum wage.
Is there any evidence at all to suggest that a rise in the minimum wage increases unemployment? That doesn’t seem to make any sense at all. Businesses don’t hire people because they have spare money, they hire because they need people doing work and most business (especially small businesses) hire as few people as possible to do it. When was the last time anyone got fired because their wage was too high?
The real problem is what Andrew Straw mentioned – if there are additional costs in a business the owners will increase their prices to ensure they continue milking it. Increased prices generally leads to increased inflation, which is problematic. What do we do about that? Interest rates is the weapon against inflation in a monetarist system…
Will a rise of the minimum wage of roughly $2.50/hour caused increases in wages across the board of the same percentage? Is there any proof of this? And what about Australia – isn’t their minimum wage around $18?
Is there any socially economic reason for $15/hr or $30k p.a. or will this enable a family to be above the poverty line of 60% of an average wage?
With WFF and other assistance does this allow a family to survive on a livable wage?
At what level indexed or based on does the min wage hit an acceptable level or is there no value that you have in mind or is it already above such levels?
Do you or anyone within your party become aware of what is a livable wage?
I have never seen anything regarding the min wage to answer any of these questions.
It is worth considering that for a 2-wage family with both on the minimum wage, any increase in the wage is doubled. A $2.5 rise in the minimum will increase that person’s wage by $4875, and $9,750 for the family.
That ain’t peanuts.
$29,250 x 2 = $58,500
This isn’t necessarily for a family. This could also be true for roommates.
Inflation is rough for anyone whose wage does not increase and whose expenses don’t fall. Reducing interest rates helps a lot of people reduce expenses. That’s like an across-the-board tax cut if you are borrowing anything.
When a government is hoarding resources to balance the budget, there is not much your can squeeze from that stone.
Another way to achieve this is to provide additional tax credits and tax cuts to achieve $4875 per person making that low salary. By doing this through the government, the cost is spread much wider, and doesn’t burden the individual businesses.
Sam, I have an example for you; any person who can not produce $15.00 per hour of benefit for a business. Additionally any position that is not worth forking out $15.00 per hour in order to be filled. These are the increases in unemployment that a higher minimum wage creates.
The living wage campaign is looking for $15 immediately and then a fixed minimum wage of 66% of the average wage which would be $16something at the moment I think. Australia’s min wage is at around $17.50 in NZ dollars I think.
I fully support an increased minimum wage. Theoretically businesses which pay minimum wage should be serving low-end customers and thus should face increased demand with people having more money.
I don’t think $15 an hour is enough but it is a start. The worry is that food prices will continue to rise. If they do then a minimum wage increase won’t be enough.
Cutting taxes on minimum wage earners and giving them tax credits might work better. Less burden on individual businesses.
To Andrew Straw.
Until recently someone warning $500 a week (minimum wage) was taxed in the order of 20%, before GST.
Moving the minimum wage up is a disincentive to small businesses who are struggling in these deflationary times. It is sensible then to me, to do two things which will directly benefit the lesser paid of which you have acknowledged:
1.
Increase GST to 15%. (yes regressive, but wait)
2.
REMOVE all GST on raw foods, with additional exemptions for all breads, all dairy and sausages.
This is no extra burden on businesses, everything will remain the same. The farmers, the works/bakers/cheesmakers will pass it on in the same manner as currently; the only difference will be that the retailers will claim it back on these items.
3.
Give tax exemptions – not rebates – exemptions to ALL citizens on the first X thousand of earnings.
Surely to god, as citizens (however much we earn), we are allowed to subsist in our own country without levy?
We TAX the freaking dole! What lunacy have we allowed to be perpetrated just by being supine and apathetic! We are the laughing stock of all sane people.
Then we TAX the recipients of Working for Families. Same insanity!
First we tax the earner, then give it to the IRD, who take their cut; then they give it to the Treasury, who take their cut; who then give it to SWINZ, who take their cut before what little is left is the RETURNED to the poor sod who needs it. It has then to be topped up with monies form elsewhere. What utter, abject lunacy.
Don’t tax in the first place, then allow the employer to transfer amounts from his PAYE payments as appropriate. If this is still insufficient, then the employer is refunded any extra by the IRD.
I realise that this is dangerously like the system that Douglas was intending to institute before the “cuppa”, but that does not invalidate the idea. Play the ball, not the man.
Sam.
You are correct to an extent – businesses don’t hire people unnecessarily but each hire reduces productivity unless there is greater production. However when wages become too high for menial work then machines are purchased, removing even that narrow spectrum of earning capacity.
Currently we are in a deflationary period with severe competition for all our manufactures and produce. Producers and retailer simply cannot just recover costs anymore. In the days of full protection this was so – it no longer applies.
Australia is not a good example. As well as $18.00 an hour (I take your word this is so), they also have things called RDOs (Rostered Days Off), where they are paid for a day off in every ten; then there is the 17 1/2% Holiday Loading, paid, apparently, because workers always spend more when on holiday. So your $18.00 = $720 a week and becomes $846 when you go on holiday.
Of course the entire system is subsidised by cheaply digging up Australia and shipping it to China, Europe etc. I suspect that few of their industries could compete otherwise, against $200 a month for industrial workers in China, and even less in India. Also, as in teh USA, much of teh production is consumed internally, with little need to export. But do you really want another 15 million people living in NZ?
Is there any evidence at all to suggest that a rise in the minimum wage increases unemployment? That doesn’t seem to make any sense at all. Businesses don’t hire people because they have spare money, they hire because they need people doing work and most business (especially small businesses) hire as few people as possible to do it. When was the last time anyone got fired because their wage was too high?
My teenage son’s job disappeared the last time the minimum wage jumped up. I can think of two low-skilled people at my place of work whose jobs are marginal. If minimum wage goes up, my employers will be better off replacing those two with one higher skilled person. There are also the businesses who outsource to foreign jurisdictions because the labour is cheaper. I’m not suggesting there should be no minimum wage, but the more expensive we make it for business, the more outsourcing there will be.
Raising the Minimum Wage DOES NOT increase unemployment, it reduces the number of newly available jobs in the market. To increase unemployment in New Zealand singularly through and increase to the base rate Minimum Wage would mean having to move it to over $23 an hour right now without any increments and keeping all things constant.
It’s a right wing myth that unemployment increases which is why Wilkinson will never actually say those words, she will say it cuts jobs meaning it cuts the number of new jobs. If that were the case, the 9 consecutive increases by Labour in its three terms of government would not have coincided with decreasing and stablised low rates of unemployment, nor would it have coincided with significant increases to the number of unemployed under National’s previous 3 terms where in it’s entire 9 years it lifted the minimum wage by less than a dollar.
Raising the minimum wage forces employers to a) pay attention ot the value of their staff and b) to the value of investment in innovation and improved productivity.
Cutting taxes isn’t the answer either… this country has a wage problem not a tax problem and one way or another, it needs to be addressed.
Higher wages can also lead to lower turnover. This has happened at the company I work for (roughly 1500 employees) where the turnover has drastically reduced in the six years I’ve worked for the company. Our pay increases have been in excess of inflation. I’m sure employers would prefer to be focussing on other aspects of their business rather than replacing staff all the time.
I should clarify I am referring to STAFF turnover.
@Kaine
wage problem v. tax problem = false choice
The problem is an overall income deficiency. Why would someone care if their increase comes as a result of a lower PAYE or a wage increase? If the result is the same amount in-hand… I see the fact that low-income people actually pay tax now as an opportunity. If it were like some other countries where low wage earners pay no tax, there would be no room to cut!
I don’t see why tax credits would be a problem. That is exactly what WFF is.
If the government runs a little deficit from topping up min wage earners with tax cuts and credits, well, government can do things about that that business owners can’t. It could tax emails, or rude behavior (referring to France’s new law).
It could cut the WFF loophole rich people are exploiting. Lots of things one can do.
Post #1 Jan18
I love the people on here who blithley go “If they’re small it’ll only mean a few extra bucks.” or “It gets passed on to customers.” like its no big deal…
cutting tax doesn’t solve the problem that New Zealand is a low wage economy with no capital base hence its reliance and dependence on overseas markets. THe spiral just keeps getting worse.
Wages have to go up in New Zealand, savings have to increase and THEN you can look at taxes. At the moment, a working family with a low income and one or two children has a zero tax obligation anyway and depending on the tax credits they can claim, they may be in a net positive position.
So… to make WFF work, to get to a position where we actually don’t rely on such things, the minimum wage has to be pushed up. We know salary drag doesn’t work but pushing the salary does… it creates pressure to refine production and improve productivity, it increases our ability to save and draw on domestic capital, it drives innovation out of stale industry and forces an economy to shift gear into higher value added production.
Simply cutting tax won’t work in isolation. I also don’t know how cllsing the WFF Loophole does to drive wages up. (I actually disagree with the post you’re referring to, but this isn’t the thread)..
See update re Herald poll. Reflects comments I have been receiving.
@Rob Carr (9:00pm) : Why should employers who pay the minimum wage be serving low end customers? Does it cost more to sweep the yard of a Rolls Royce dealership than a Ford or Lada one?
Trevor I am unsurprised that yet another opportunity for a Politician to comment on what is a livable wage in NZ goes by. For me unless we have some idea of such basic premise how can we know what a wage should be. Someone in a leadership role of a Labour party should know this, otherwise how do we know that the tax, welfare, min wage etc are appropiate and working together in harmony
PM rules out $15 wage this year
http://tvnz.co.nz/politics-news/pm-rules-15-wage-year-3331714
[...] Mallard also blogs his support: Kate Wilkinson would have got a report in October with options for a November Cabinet paper on [...]
Raising the minimum wage wouldn’t increase unemployment because low income earners would have more disposable income so they would spend more causing sales and profits to increase. An increase in sales would mean that businesses would hire more people as there is more work. Intially there may be a increase in unemployment but it would be followed realitivly quickly by greater increases in employment.
There would obviously be cost push and demand pull inflation. The RB would need to increase the OCR. The problem with that though is that it would drive the NZ$ up. The only solution to this problem, I think, is quantitive easing. Japan has been doing it for years….
Trevor: So, as Labour’s employment spokesperson, how about sticking up a bill on this?
low income earners would have more disposable income so they would spend more causing sales and profits to increase
Implicitly you’re making an assumption that low-income workers who have this extra cash will be spending it exclusively on items that are made by the companies they work for… which is highly unlikely.
There would obviously be cost push and demand pull inflation.
I agree that there’s a possible inflation/OCR/interest-rate implication here. But, I personally see it as being a second-round response to wage bargaining from those earning higher wages to begin with, who will have seen their ‘margin’ over the minimum wage eroded.
Two things – One – Trevor, if you have never employed anyone or run a business how do you consider yourself suitable comment on this debate, as an ex unionist clearly you do not share objectivity on this matter? – I would have thought the ideal politician is one that pragmatically weighs up the costs and benefits rather than makes grandiose statements with nothing to back them up.
Two – You would be judged a bit more pragmatic if you would not cite the Herald pole..
I’m more surprised that Trevor holds any polling done by the Herald in such high regard!
The pole supports Trevors view so that’s ok, but if labour are polling low now it doesn’t mean anything.. is that right?
It really is dissapointing that so many politician get worked up about their particular views that they won’t hear any downside.. that IS how children behave… At least JK can say “Sorry I was wrong that is a good idea, now lets get on with work”
Sorry might have gone a bit off topic..
Everyone seems to cite polls that support their point of view and rubbish those which don’t. It’s just the way it is.
You’d hope for better from the professional politicians, but unfortunately they’re often the worst.
Getting votes doesn’t a “professional” make..
Dang, why are you guys trashing Trevor so much. I’m sure with his experience that he knows plenty about the minimum wage and government policies on that subject.
People often quote a dogma that higher minimum wages increase inflation. Is that really true? Certainly if you consider the money supply, that doesn’t increase just because wages are higher. The flow of money changes. Inflation means those purchasing from those companies employing min wage workers will have less in hand. And yes, the people making that wage might not buy the product/service they are working to offer.
It is something of a flat tax in the end, with the benefit of that tax going to the bottom. The higher your income is, the lower the percentage of income and impact this has on your purchasing power. Someone on a fixed income will feel the increased minimum the most.
That’s why I am hesitant about min wage increases, even though I am all for increasing the income of the lowest.
That’s why I am for tax credits and cuts. Doing it that way allows the government to make the impact progressive. It can take the taxes to make up for the cuts and credits from rich people.
A minimum wage hits everyone equally due to the price changes. Instead, I would prefer the impact to hit wealthy people more.
AND, if the impact is more on wealthy people, they will work harder to use their remaining wealth to create more wealth so they end up where they started.
Post #2 Jan18
“The pole supports Trevors view so that’s ok, but if labour are polling low now it doesn’t mean anything.. is that right?” – If the pole says people want a higher minimum wage then that does support Trevor’s argument. The poles for the party are different in that this isn’t election year so there’s no cause for alarm.
I don’t think it’s childish to have a firm position on something.
A position that is generated based on feeling rather than fact and then having no room to sway is childish..
There is no credibility at all for that pole…
Why is there no credibility in that pole? Isn’t it a fact that the minimum wage is low and hard to live off? Surely it has to come up as the costing of living is going up.
I meant poll
I’m pleased you meant poll spud
And to those making comments above isn’t it great there is a co-incidence between the position Kiwis are taking and the principled position.
And furthermore the idea that someone’s opinion is discounted because they hold public office or paid employment just shows the arrogance of the right.
“Challenge to Key who doesn’t like any policy that puts public offside.”
S59, anyone?
Trevor as you are available any thoughts on what is a livable wage?
Yes to $15 ph, but reintroduce a youth rate @ $12.50 to allow kids to develop a work ethic and job skills.
All a flat $15 will do is ensure that less youth will be employed, why would you employ a youth when you can get a mature adult for the same money.
I/s @12.08 – possibly – got a couple of others in the pipeline.
Hereodotus @ 3.38 Sorry in an out of computer this afternoon. No I don’t have a good fix on what is a livable wage.
Trevor- perhaps that would be a great basis of another post, get someone within the Labour research dept to place some effort into working out a range to live on in NZ nad how this has changed(I would guess become more difficult) from different points in the past. From that you could link welfare, tax, min wage and I think surprise many people on how much it really does cost to live. Without telling you what to do (And I do have a tendacy like most males to hang dominately one way more than the other… to the right !! haha) base a holistic strategy with such reseach to support any assertions, it may evan raise a few eyebrows within your own caucus. If nothing more it would shut me up on one of my pet topics.
It costs $4875 gross per year to raise the minimum wage $2.50 per hour.
Before the change, such a person made $24,500.
Their taxes break down as follows:
12.5% x $14,000 = $1,750
21.5% x $10,500 = $2,257.50
Removing all those taxes would yield $4,007.50
That is 82% of what one would get from a minimum wage increase.
BUT, that $4,875 will also be taxed at 21.5%, meaning $1,048 will disappear as PAYE. You are actually *worse* off getting the minimum wage increase than you are removing the taxes for people making minimum wage.
The $2.50 is a 20% increase. The tax bracket in which it occurs is 21.5%.
Again:
Remove taxes: $4.007.50 benefit
Increase wage $2.50: $3,827.00 benefit
Changing the law to get rid of the taxes but not apply it to people making more is easy. The IRD online form simply applies a credit to those making the minimum wage. That credit could phase out as the wage increases.
Once those taxes are gone, you can “increase minimum income” by increasing the tax credit.
One big effect of this is being nationally organised. Instant national union of all people on the minimum wage. The employer is Parliament.
Per the reasoning of Herodotus, above, Parliament could index increases in this credit and make them rise a bit faster than inflation.
Post #2 Jan 18
Sorry, Trev. Missed one of my earlier (VERY early) posts. Trying to be diligent. Really!
Andrew… you realise that is a first hit impact of $401million just in the first tranche?
If you removed the tax burdan, and could do it, on just the 100,000 or so New Zealanders earning the minimum wage… for each year the economy grows to include higher numbers of unskilled and low wage earners, you increase the lost revenue to the Crown.
Remembering many are already tax neutral now…
If you could do it on just the 100,000, how do you exclude those paying tax in the lower thresholds but who earn say 60k or more? How much does that cost? How is that not a preferrential tax system?
I like the idea but this doesn’t compell business, who creates jobs, to invest into productivity and increase earnings… simple logic that an increase in earnings is an increase in economic activity and growing economies/Economies.
So then – where do we cut to save the $400million in the first year? That’s about two-thirds of the Ministry of justice or 2000 people… put them out of work and where do they work? in companies which have the chance to employ more highly skilled people on lower wages who may then potentially qualify for Working For Families tax credits… where does that leave those in existing low wage jobs? out of work … entitled to a beneifit, so you’ve massively increased the number of people requiring state support and drawing on the tax pool… extrapolate that out and you have a spiral debt scenario.
Ok, it’s not pure economics… but tax cuts don’t work. Wage rates in New Zealand are unreasonably low in the private and public sectors… we need to generate more income, improve productivity, and enable our banks to draw on domestic capital… tax cuts are more expensive to more people.
@Kaine, Errr the reason why under Labour we didn’t get mass scale unemployment when they raised the min wage may have had something to do with the economy being in a different hemisphere than it is today – when much of the world is in recession.
Going by all this fanfare on Red Alert about putting it up to $15 an hour, what about making it a cool $20 an hour? Surely this would be a grand gesture of goodwill to all workers?