The agenda for lower wages

The National Party’s pre-election employment relations policy was notably silent on the issue of the minimum wage. That made some of us who remembered the infamous “nil” minimum wage increases in the 1990s very suspicious.

Over the last couple of days we have seen Sue Bradford at frogblog and Steve Pierson at The Standard speculating, presumably on the basis of some inside information, that the Department of Labour is recommending an increase in the minimum wage of as little as 50c an hour, but that Labour Minister Kate Wilkinson is going even further in recommending to Cabinet a “nil” minimum wage increase.

Then, right on cue, Business New Zealand chimes in this morning with a call for Government to freeze the minimum wage at its current dollar figure.

As Sue Bradford says:

To freeze the minimum wage now is a recipe for further cuts to spending, deeper poverty for the hundreds of thousands of workers and their families directly impacted, and an intensified recessionary spiral.

And it is not just those who sit right on the minimum wage that are affected – it is also all the huge numbers of workers whose low rate of pay, often between the $12 and $15 mark – is determined by the minimum wage rate.

So it seems National may have learned nothing from their disastrous employment relations policies of the 1990s, and that, despite John Key’s talk about reducing the wage gap between Australia and New Zealand, we might be in for another stumble towards an even lower wage economy.

That would be consistent with the other employment relations policies that National have announced or implemented. Just before Christmas we saw them rush their Fire at Will Bill through Parliament under urgency with no Select Committee hearing or opportunity for public submissions. The best way to increase wages is to encourage collective bargaining, but this Bill will do just the opposite. Employers with fewer that 20 employees will be able to dismiss employees for any reason after the start of march. That includes the ability to dismiss employees who join a union. New employees are likely to be coerced into bargaining individually for fear of losing their jobs, which usually means just accepting whatever the employer offers.

And worse is yet to come. Another plank to National’s employment relations policy is this:

Restore workers’ rights to bargain collectively without having to belong to a union.

This is the Employment Contracts Act revisited in all but name – effectively allowing employers to undermine collective bargaining by bargaining separately with a small group of vulnerable non-unionised workers, striking a low wage deal with them, then telling the union they can take it or leave it and locking out the non-unionised workers if they don’t take it.

Maybe John Key wasn’t misquoted after all when he was reported to have told a Kerikeri business audience in late 2007 that he “would love to see wages drop”!

[EDIT: Just picked up on a new post from Steve Pierson at The Standard re Business NZ’s proposal to assist low income workers through tax cuts rather than increasing the minimum wage: He makes some good arguments why this is a silly idea]:

1) tax cuts for minimum wage workers have just been cancelled by National/ACT
2) tax revenue pays for the social wage – healthcare, education etc; tax cuts mean cutting the social wage, or higher debt paid for in the future. If you have to spend your tax cut paying for services that used to be paid for from tax revenue, you’re not any better off.
3) You can’t cut tax year after year to counter inflation, you run out of tax.
4) The tax cuts you would need to make up for not adjusting the minimum wage are massive. You would need to reduce them by 20% to make up for not doing the 50 cent adjustment. That’s even larger than the tax cuts National/ACT cancelled.
5) Finally, if you’re going to cut tax for minimum wage workers you’re going to cut them for all taxpayers, including the very wealthy, at enormous cost (unless you put in a counter-veiling tax rise – yeah right). If the purpose of the minimum wage is to ensure a decent income for workers, then tax cuts are an incredibility inefficient way of doing that.

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One thought on “The agenda for lower wages

  1. Two questions for National:
    1. How does this reduce the wage gap between us and Australia (like you said), and
    2. How does keeping wages low stimulate the economy? You can’t spend it if you don’t have it.

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