Wages and the real world

In an ideal world New Zealanders, particularly the lowest paid, would earn more money.

There would be more to spend, too, on hospitals and schools and other worthy services.

But legislating for higher wages - as Labour says it would if it became the next government - is counter- productive.

That is because basic economics means money has to be earned. Printing money, in effect what the United States has been doing of late, or forcing businesses to pay staff more cannot lead, long term, to either more jobs or higher wages.

The bottom line is New Zealand and New Zealand businesses, in a highly competitive world, have to be profitable. It is they and, particularly the taxes paid by the staff they employ, that earn the money to support public servants, benefits and public services.

This fundamental truth has been fudged in the West for years, and we are all beginning to pay the price. Greece exemplifies the fool's paradise.

Inefficiencies and dislocation from economic rules have placed that nation on the brink of defaulting on its debts. In essence, what applies to individuals applies to nations. Everybody and every country has to earn their living.

Thus, the productive sector must be fostered rather than hindered, a matter most obvious in export businesses.

If they are uncompetitive they disappear because no-one buys their products. Likewise, competition in many domestic industries spurs a tough struggle for survival. All these businesses cannot afford profligacy or higher costs and must be effective and efficient.

It is all very well for Government, local government and state-supported organisations to be wasteful or to choose to pay "fairer" higher wages, but they are sheltered from the ultimate pressures of the marketplace.

Of course, that is not to also say there are not poor employers who do abuse or exploit staff, and systems and protections must be in place to ensure reasonable recompense and conditions.

And surely most of us feel unease at the reported salaries - some of which soar into the many millions of dollars a year - of some private enterprise CEOs and associated mandarins.

Labour's work and wages policy released this week, however, is likely only to undermine labour-market flexibility and therefore competitiveness.

Labour would increase the minimum wage to $15 an hour and abolish the 90-day trial period. It would have all holidays - not just most - that sometimes fall on a weekend transferred to Mondays and introduce statutory rights to redundancy and change pay equity legislation.

Every item, in its own way, will add costs to business which will, inevitably, mean higher prices to everyone.

The biggest policy changes would be in the so-called "industry standard agreements". These have the potential to change the industrial landscape. Some - on both the right and the left - see them as moving this country back towards the system of national awards that was a feature of the 1970s and 1980s.

Minimum conditions could be applied across industries after negotiations between employers and unions, with a workplace commission being established to deal with standards agreements.

Those who remember those days, and those who look to the power of the unions in Australia where the system has similarities, will not be surprised Business New Zealand has reacted with alacrity.

It argues national award-type systems would make it impossible for enterprises to respond with flexibility to business opportunities or threats and make businesses less competitive. They would also be unaffordable for small enterprises in small towns.

New Zealand itself is a small country a long way from many markets, and to compete it and its businesses have to be smart, nimble and flexible. That is the only way New Zealand will be able to pay its way in a global world.

It is the only way, too, that better wages will be able to be sustained as successful businesses compete for labour. While a decent level of staff rights must underpin employment relationships, the reality is the world does not owe New Zealand a living.

If we are to maintain our productive tax base - and therefore the resources for good public education, good public hospitals and reasonable benefits for those in need - then everything possible must be done to enable businesses to prosper.



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