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The Minimum Wage: New Zealand

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The Minimum Wage

Introduction

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The minimum wage level is a debate on which submissions to the New Zealand Government are made annually. This essay looks at the policies of two organisations, Business New Zealand (BNZ) and New Zealand Council of Trade Unions (NZCTU), that were submitted for the 2009 year. A comparison between the two organisations shows similarities and differences of opinion in relation to the minimum wage rate. Also, this essay covers the benefits to New Zealand workers as well as how user friendly each of the organisations’ websites were to use.

The BNZ Policy

BNZ made a submission to the New Zealand Government in September 2008 regarding the review of the minimum wage for the 2009 year. BNZ recommends that “there are no further increases in either the youth or adult minimum wage rate in the next 12 months” (BusinessNZ, 2008, p. 2). BNZ believes that an increase in the minimum wage will only result in a rise in unemployment, which will have a negative impact on employment now that the economy is facing a recession.

Increased costs, such as the minimum wage, that are not offset by productivity typically flow through to either increased prices, cost cutting or job losses (TVNZ, 2009a). For example, a recent news article by New Zealand Herald claim that McDonalds have been adversely affected by increased costs, such as paper and food, on top of the minimum wage rate. McDonalds suggest they will need to review their expansion plans for the future as well as the possibility of increasing the price of consumer goods (NZHerald.co.nz, 2009). BNZ suggest, by keeping the minimum wage at its current rate, that this would give employers time to absorb the effects created by an economic downturn.

Another recommendation made by BNZ was that “the Government should focus on increased access to training and employment opportunities, particularly for young people” (BusinessNZ, 2008, p. 2). An increase in the minimum wage denies many youth workers the opportunity to gain relevant skills and work experience (TVNZ, 2009a). BNZ state that the key ingredients to sustainable increases in income come directly from greater productivity (BusinessNZ, 2008). This is generated by achieving desired levels of productivity and growth and not by increasing the minimum wage. BNZ believes that productivity is not boosted by an increase in the minimum wage. This is because wages of low-skilled employees become higher than the value they can add to the organisation (BusinessNZ, 2005). By focussing on increased access to training schemes and employment opportunities to promote and achieve higher productivity BNZ suggest this would ultimately enhance a worker’s productive capacity and earning potential (BusinessNZ, 2008).

In addition, BNZ also made a submission that the Government should “seriously consider tax cuts rather than increases in the minimum wage rates as a more effective way of increasing wages for relatively low paid workers” (BusinessNZ, 2008, p. 7). By reducing the amount of tax payable New Zealanders will have more money in their pocket. BNZ believe that with the extra money not used for tax New Zealanders would be given an opportunity to save and invest into their future. Essentially, they would be able to repay debts, save for a deposit on a house or invest money toward retirement savings. Therefore, reducing taxes would be a more effective way of ensuring a “highly productive and high wage economy” (BusinessNZ, 2008, p. 6). Overall, a reduction in tax would not increase the wage costs for businesses who are likely to be adversely affected by such increases. This in turn would lower the likelihood of staff redundancies or a position being withdrawn or restructured.

The NZCTU Policy

NZCTU also made a submission to the New Zealand Government in October 2008 regarding the review of the minimum wage rate for the 2009 year. NZCTU covers many issues in regards to the minimum wage rate, however, for the purposes of this essay and word count, only a limited number of key issues are discussed. The NZCTU’s main policy seeks “an increase in the minimum wage to two-thirds of the average or median wage rate” (CTU, 2009, p. 3). Currently this equates to $16.30 per hour (CTU, 2009). NZCTU believe that this will improve the economy and in turn will lead to a decrease in unemployment figures. For example, in 9 years the Labour led Government increased the adult minimum wage by 71 percent and in 2008 New Zealand achieved its lowest unemployment rate in the western world (CTU, 2008). In relation to this, the recession currently facing New Zealand did not arise as a result of minimum wage increases, NZCTU point out that it has been caused by credit issues internationally. By raising the minimum wage, accompanied by low unemployment rates, spending is increased, which in turn benefits local businesses and assists the overall economy (CTU, 2008).

A growing concern for NZCTU is that low wages have adverse effects on productivity levels. They state that “low pay worsens the performance of labour” (CTU, 2009, p. 17). Investing in staff and increasing their skills is discouraged as employers seek to maintain low levels of pay. This results in a high level of staff turnover, which impacts negatively on the efficient performance of an organisation and overall labour productivity.

NZCTU also argue that cutting tax for low paid workers is not the answer (CTU, 2008). NZCTU believe that a cut in the lowest tax rate would go unnoticed as low paid workers need every ounce of income for the bare necessities and material comfort (Stuff.co.nz, 2009; The Standard, 2009). Also, a tax cut could result in user pays in the health and education sectors (The Standard, 2009). Low income workers rely on social services such as reduced doctors fees or subsidies for childhood education and tax cuts would only undermine this option (CTU, 2008). Overall, a tax cut will not relieve the difficulties that workers face to make ends meet.

Comparing the two policies

BNZ and NZCTU have differing opinions regarding the minimum wage rate. The one view that both organisations support is that they believe there should be a minimum wage, however, they cannot agree on what the level should be. BNZ and NZCTU may work together on many other aspects but the minimum wage is one area in which they tend to have more disagreements than agreements. On the one hand, BNZ claim that a rise in the minimum wage does not increase productivity because workers do not produce more. Instead wages become higher than the value they can add to an organisation. On the other hand, NZCTU state that low pay discourages employers to invest in skills to retain staff and increase productivity levels. In another comparison, BNZ say that tax cuts will put more money into the pockets of New Zealanders. However, NZCTU believe that the amount of money gained from a tax cut is negligible. The extra money would be sacrificed for everyday necessities. Moreover, BNZ argue that rises in the minimum wage only increases unemployment. NZCTU counteract this by stating that the economy will improve with increased spending (TVNZ, 2009b). Unfortunately, in reality, providing evidence for such claims from either party appears equivocal.

Benefit to NZ Workers

BNZ creates a façade that their policies benefit New Zealand workers. In reality, NZCTU have pointed out that it is unlikely that a person earning the minimum wage would be able to save any extra money created by a tax cut. There is also no evidence to guarantee that tax cuts would, in fact, be passed on from the employer to the employee. I agree that low paid workers rely on good quality social services such as hospitals and schools and tax cuts would only deny them of such a benefit. Also, putting a freeze on the minimum wage actually lowers living standards for lower wage earners at a time when the cost of living is still rising. NZCTU are willing to fight for the rights of New Zealand workers. They believe that the lowest paid workers should be entitled to receive a pay increase equal to everyone else. Therefore, in my opinion, NZCTU’s policies and viewpoints appear more realistic and have the most to offer New Zealand workers.

Ease of Use

NZCTU’s website is in a clear format that is easy to read. All the necessary sections are listed on the left hand side of the page as well as a search engine if I wanted to be more specific about what I was searching for. The website appears professional and shows real life pictures of how New Zealanders are the most important aspect of their organisation.

In contrast, BNZ’s website is difficult to read and almost impossible to find what I am looking for without initially using the search engine provided. They have tried to use flashy sections to grab my attention, however, I only find them distracting and annoying. BNZ’s website does not initially appear professional but a conglomerate of information. They state that their organisation is “the voice of business” (BusinessNZ, 2009). However, they neglect to mention that behind that voice there are real people. Come to think of it, I cannot find anywhere that mentions that BNZ benefits New Zealanders, just their businesses.

Conclusion

This essay focussed on policies submitted to the New Zealand Government in regards to the minimum wage level for the 2009 year by BNZ and NZCTU. It was found that BNZ believe that raising the minimum wage would lead to a rise in unemployment, that it is bad for the economy and training schemes would be necessary to boost productivity and that the real answer to these issues would be to cut taxes for lower paid workers. In contrast, NZCTU believe that an increase in the minimum wage would improve the economy and it would not lead to higher unemployment  and cutting taxes is not the answer for low paid workers. Both organisations’ claims are significant and cover a wide range of issues, however, in relative terms to this assignment I believe that NZCTU appears to have more to offer New Zealand workers. After reviewing each of the organisations’ websites, NZCTU is more user friendly.

References

BusinessNZ. (2005, December 21). Minimum wage law not the way to growth. Retrieved April            15, 2009, from http://www.businessnz.org.nz/doc/986/Minimumwagelawnotthewaytogrowth

BusinessNZ. (2008, September 26). Minimum wage. Retrieved April 13, 2009, from             http://www.businessnz.org.nz/search?terms=minimum+wage&Submit=Search

BusinessNZ. (2009, April 07). Business NZ – the voice of business. Retrieved April 07, 2009, from             http://www.businessnz.org.nz/aboutus

CTU. (2008, September 01). CTU economic bulletin no. 94. Retrieved April 06, 2009, from             http://union.org.nz/policy/economicbulletin94

CTU. (2009, March 12). CTU submission on the 2008 review of the minimum wage. Retrieved             April 13, 2009, from http://union.org.nz/policy/ctu-submission-on-the-2008-review-of-the- minimum-wage

NZHerald.co.nz. (2009, February 11). Fast-food giant hit by minimum wage rise. Retrieved April         14, 2009, from http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10556103

Stuff.co.nz. (2009, February 02). Minimum wage delay ‘foreboding’. Retrieved April 15, 2009, from             http://www.stuff.co.nz/business/1388613

The Standard. (2009, January 28). Biz NZ opposes minimum wage increase.  Retrieved April  7,           2009, from http://www.thestandard.org.nz/biz-nz-opposes-minimum-wage-increase/

TVNZ. (2009, February 03). Concern from businesses over minimum wages. Retrieved April  06,          2009, from http://tvnz.co.nz/business-news/concern-businesses-over-minimum-wages-           2461156/video

TVNZ. (2009, February 09). Labour lobbies for $13 minimum wage. Retrieved April 08, 2009, from http://tvnz.co.nz/business-news/labour-lobbies-13-minimum-wage-2468157

 

Cite this The Minimum Wage: New Zealand

The Minimum Wage: New Zealand. (2017, Jan 06). Retrieved from https://graduateway.com/the-minimum-wage-new-zealand/

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