Debate rages over minimum wage rise to match living costs

Yvette McCullough
Wellington, November 24, 2020

Workplace Relations & Safety Minister Michael Wood with Willie Jackson (now Maori Development Minister) RNZ Picture by Dom Thomas

Workplace Relations & Safety Minister Michael Wood is not ruling out lifting the minimum wage in line with the living wage, saying that good businesses should not be scared about workers being paid a fair wage. 

A new report from the Helen Clark Foundation and the New Zealand Institute of Economic Research is calling for the increase to boost productivity and create a more inclusive economy.

The opposition says that the Report is misguided and piling more costs on businesses will lead to job losses.

Opportunity to invest

NZIER Deputy Chief Executive Todd Krieble said that in the wake of Covid-19, the government should take advantage of the chance to push the reset button.

“We will not be able to rely on migration, at least not for a while. We have incredibly cheap borrowing at the moment. This is really the first time in our history that we have such an alignment. It is an opportunity to invest in our people and be more inclusive with growth,” he said.

He said that lifting the minimum wage to the level of the living wage of $22.10 would boost productivity and encourage investment from employers in skills, either technical or soft skills.

The government increased the minimum wage three times last term, moving from $15.75 to $18.90. During the election, Labour promised to raise it to $20 next year.

Mr Wood said that he would take stock and decide the next course of action.

Matching living wage

He was not ruling out matching the living wage.

“Well-remunerated workers live better lives, are able to meet their basic needs better and there are very strong arguments to say that is better in terms of workplace maintenance, building a skilled and productive workforce, those are compelling arguments,” he said.

Mr Wood said that he would consider the full range of factors before taking a decision.

National Party opposes

Todd McClay, National Party Small Business Spokesperson

National Party Small Business Spokesperson Todd McClay said that the Report was misguided and that it would lead to increased costs to consumers and more job losses.

“The business community needs policies to help them grow the economy and create jobs, not greater costs that will slow the job market down. I think that the suggestion from the [Helen Clark] Foundation will have the opposite effect,” he said.

Business New Zealand Chief Executive Kirk Hope said that the advice of the Ministry of Business, Innovation and Employment to the government was that a living wage would reduce the number of available jobs by 30,000.

He said that young people would be the most affected.

“The demographic of those people that lose their jobs are disproportionately young people, 18 to 24, because they are often the lowest skilled people. Covid-19 had already caused 11,000 vulnerable job losses. I would back employers and us as a country to make the right sorts of investments that would lift productivity. There is a dynamism that has been introduced into the economy already, so let us get it working in the right direction,” Mr Hope said.

Minister not convinced

Mr Wood said that the evidence seem in New Zealand is that governments led by the Labour Party, which have sustained increases in the minimum wage, are also governments that have seen sustained decreases in unemployment.

“So, we cannot always buy the argument that a decent minimum wage for workers has to be at the expense of jobs,” he said.

Mr McClay said that the government should not even be contemplating piling more costs onto businesses at a time when they were already struggling.

“What he should be doing is looking for ways to create more jobs and to be working with the business community. He should signal to the business community that he backs them,” he said.

Mr Wood said that was exactly what he was doing, and that he did not think good businesses should be scared about workers being paid a fair wage.

He promised to work through the process collaboratively, consulting with workers and businesses before making any decisions.

Mixed reactions

Some business owners said that increasing the wage to liveable wage will lead to redundancies.

Some said that they would be happy to pay more for experienced staff but having to pay a higher wage for someone fresh out of high school without any work experience was not sustainable.

Complete First-Aid Supplies owner Shelley Meredith said that her business had struggled to pick up after the Covid-19 lockdown. She was now moving her office to work from home and putting her supplies and stock into storage.

“If they put up the minimum wage, we might have to look at dropping one of our staff. I may have to move my office to my home,” she said.

Quick Stop Tyres and Mechanical owner Sarkaw Abdullazada said that he pays his staff above the minimum wage but increasing it any further would put extra pressure on his business.

He said if the government wanted to increase the wage to a liveable wage, they should provide some subsidy. Without any help, he would potentially have to cut down some of the jobs to keep his store if the suggestion were implemented.

Lynfield Chainsaws & Mowers Manager Glen Lurman said that he supported a wage increase because that would help young people start their own life, without having to rely on their parents.

Yvette McCullough is a Political Reporter at Radio New Zealand. The above story has been published under a Special Agreement with www.rnz.co.nz

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