Another rise in minimum wage

Many of you will know that I used to be an employer, and I prided myself on the fact that we always paid good wages. We would employ students to do scanning and filing, and they were paid above minimum wage. $15 per hour was the going rate. The real benefit to the young people involved was the office experience that they gained. Some of the students went on to university, and some went into administrative roles, always helped by the office experience that they had gained working for us. It was a win-win situation, and I am proud of those people who used us as a stepping stone to good careers.

At $17.70, there would be no value in those roles. There comes a point at which the cost outweighs the benefit, and I would not be employing these people if I were still in business today.

That is a shame for a lot of young people who are crying out for someone to invest in them and give them a bit of a start.

Stuff reports: quote.

New Zealand workers on the minimum wage are set for a significant pay rise.

The Government has announced it will increase the minimum wage to $17.70 an?hour on April 1, with further increases to take it to $20 by?2021.

Workplace Relations and Safety Minister Iain Lees-Galloway said the 2019 increase would mean an extra $48 a week before tax for minimum-wage workers.

“The Government is determined to improve the wellbeing and living standards of all New Zealanders as we build a productive, sustainable and inclusive economy,”?Lees-Galloway said. end quote.

The thing is that inflation is still below 2%, and has been for years. So these minimum wage increases are going to cause problems for small businesses, which is where so many low wage earners are employed. Some will just absorb the cost. Some will have to pass on the cost. But if inflation is only 2% how can a business justify increasing prices? quote.

In October 2017, the Government?promised to raise the minimum wage to $20?within four years as part of its coalition agreement with NZ First.

Prime Minister Jacinda Ardern said the move had long been flagged by the Government.

“This is just?steps along the path. It’s important to acknowledge that at the moment we have very low unemployment at the moment and this will benefit over 200,000 New Zealanders.” end quote.

A? large number of businesses are going to be asking questions. I used to work with a lot of cafe owners. They do it hard. Their profits are often not fantastic, and they work hard for everything they get. What now for them?

The answer is that, over time, a lot of the lower level jobs will disappear. It will become a decision for small business owners to invest in technology or close down. Technology is tempting, as machines don’t have to be paid four weeks holiday every year. I worked with a joinery company that got rid of its employees and invested in fantastic machinery, which is programmed for precision cutting. They have never looked back. Machines don’t have sick days, and if needed, can work at 10.00 at night as well.

Iain Lees-Galloway says he is proud that we pay people well in New Zealand, but we need to pay what the job is worth. Minimum wage rates are now getting to a point where that value is going to be questioned in some sectors. I do not begrudge anyone a decent pay packet, and I absolutely hate that there are people guilty of slavery here in New Zealand, but the value has to cut both ways. I would suggest that paying $17.70 an hour for people with no skills may be too much for some. As this government intends that the minimum wage will be $20 in 2021? (if they are still in government) we also need to remember at the same time that the Reserve Bank is looking at cutting interest rates further because it expects inflation to fall.

If inflation is still falling, how can we justify increasing the minimum wage year after year? Won’t this just skew a lot of economic factors, and cause higher inflation in the long run?