Higher minimum wage pledge queried

Winston Peters.
Winston Peters.
Otago and Southland business leaders are calling for more detail from New Zealand First leader Winston Peters on his promise to lift the minimum wage.

In a speech yesterday, Mr Peters said the goal was to increase the minimum wage to $20 over three years.

"Drastically increasing the minimum wage will increase productivity and stimulate the economy."

Otago-Southland Employers Association chief executive Virginia Nicholls said Mr Peters was offering a 21% increase in the minimum wage along with a promise to offset the cost to business by reducing the corporate tax rate.

"But Mr Peters has not specified the amount by which he will reduce corporate tax. Business can’t comment on whether the minimum wage promise is workable until we know by how much he will cut corporate tax."

The current minimum wage was $15.75 an hour, 53% of the average hourly rate, she said.

Otago Chamber of Commerce chief executive Dougal McGowan said evidence had shown when the minimum wage rose, it had a "considerable effect" on business sustainability.

The living wage had also been shown to have a detrimental effect on workers. A North Island city council had adopted the  living wage, re-advertising jobs with the new,  higher pay rate, he said.

Lower-paid workers  lost their jobs when more qualified people  applied for the living wage jobs being advertised, he said.

"I hope Mr Peters decides to consult with industry about the details behind his claims."

Mrs Nicholls said the vast majority of businesses already paid above the minimum wage.

Boosting  the minimum rate raised the possibility  small businesses would not be able to pay. And the minimum wage rises pushed up other wages through relativity — without any improvement in productivity.

Many businesses would rather see income tax rates reduced.  The tax rate (currently 10.5% to 15.5%) on those earning the minimum wage could be cut  or  thresholds could be changed so low-paid workers could keep more of what they earned, she said.

"We’d also prefer to see more spent on training and education to help those on minimum wages get skills and earn more. But there is a fair understanding among small business about the need to safeguard the incomes of lower-skilled people."

New Zealand had a high minimum wage compared with other countries. It was among the highest in the OECD for the minimum wage as a percentage of the average wage.

Mr Peters said NZ First had a proud record on fair wages in New Zealand.

In 2005, it campaigned to address the then low minimum wage under the Labour government. As part of the confidence and supply agreement with Labour in 2005, NZ First insisted the minimum wage rise  from $9 per hour to $12 progressively by 2008.

"This is the biggest rise ever in the shortest time ever in this country’s history. We know that  without a change in tax for employers and businesses that can’t happen."

NZ First would introduce a tax package for New Zealand employers and businesses to negate the increased cost to employers and businesses of paying fair wages, he said.

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