I was asked a good question at a rather lively Riverton meeting regarding the lifting of the minimum wage to $15. The questioner was an owner of a small business who was concerned that such an increase was unaffordable to them. I attempted to explain the issues around maintaining a low wage economy but I felt that I hadn't got my messages across clearly enough in the time that I had. Here is a second attempt at doing so in another forum, letters to the editor:
I was asked a question on Tuesday night regarding the affordability of raising the minimum wage for small businesses. It was an important issue and needed a more detailed answer than I was able to provide on the night.
New Zealand’s economy isn’t as dire as we are given to believe as most of our large companies have seen a 20% average increase in profits over the last year. Our productivity has increased by about 59% since 1989 yet real wages have only increased by 16%. Many businesses are achieving good profits on the backs of low wage earners who have not been rewarded for their increased productivity.
We now have a large sector of our society called the working poor because those on the lowest wages cannot survive independently on their incomes. If wages have to be topped up by benefits we are effectively subsidising the wages of many workers for the benefit of the employer and this isn’t sustainable.
In giving tax cuts to the already wealthy and not lifting New Zealand’s median income (currently only $27,000) it has restricted spending in our domestic economy while boosting expenditure on out sourced luxury items. Last year almost $500 million was spent on Bentley cars and Rolls Royce have decided there is now a big enough market for luxury cars in New Zealand to establish a local dealer.
Our wealthiest 1% of income earners earn the same total amount as our poorest 60% but they will still only buy 1% of every day consumables. If we want a healthy domestic economy we must lift the spending power of the struggling 60%.
If the minimum wage was lifted to $15 an hour there will be more money in the pockets of ordinary New Zealanders and everyone will benefit.
New evidence has come to light that Key's warnings of a negative impact from wage increases is not supported by Treasury.