The prospect of a wage freeze for MPs and higher-paid public servants politicians was welcomed as a splendid exemplar in many quarters. But there is much hand-wringing from the Left at the prospect of the minimum wage being frozen – the Green Party’s Sue Bradford wails it’s the last thing our economy needs, (although the realisation of the significant rise in unemployment forecast by some economists surely would be much worse). A decision on the minimum wage is overdue. Announcements under the Clark Govt were made before Christmas. The Cabinet is tipped to tackle the issue next Monday and to hold the rate (at $12/hour for adults). Hence a Labour Dept recommendation for a 50c/ hour increase would apparently be rejected in favour of the Business NZ argument for the rate to be held, because companies struggling to break even will lay off workers if they are lumbered with increasing costs which don’t boost sales. Low-paid workers would be better off with a tax cut instead. The unions counter a higher minimum wage would help boost spending, and a rise is needed to keep workers from flocking to Aust.

Keeping People Employed. NZ’s 100,000 or so minimum wage workers work mainly in four sectors: retail, textile and apparel, accommodation, cafes and restaurants, and agriculture, forestry, and fishing. The Clark Govt increased the adult minimum wage by 71% (while wages generally increased 40%), but it had robust economic conditions in its favour including almost full employment. Conditions have deteriorated: an NZIER survey reinforced forecasts of a sharp rise in unemployment, showing nearly a third of firms expect to lay off staff in the next six months. TradeMe Jobs fulltime listings fell around 15% in the second half of 2008 while numbers of applicants per vacancy surged 32%. Cabinet’s pre-occupation next week will be with keeping people in work.

Higher Wages Needed. Business lobbies always rail against raising minimum wages, arguing the need to preserve profitability and curb inflation. If we had strong effectively policed labour laws to prevent the abuse of workers, there might be a case for scrapping the minimum wage, but we don’t. Where to fix the minimum rate, therefore, is the issue – it’s always too high for bosses and never high enough for workers. But NZ must remain determined to build a high-wage economy, and while a minimum wage is not the best place to start, it’s one wage a Govt can set.

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