CTU says something I agree with… What’s happening here?

The New Zealand Council of Trade Unions put out a press release on Tuesday saying that the minimum wage should be raised now rather than later.

This has to be the first time I have ever agreed with something Helen Kelly has released. It’s not ideal, but the minimum wage does need to rise in order to boost the economy, simply because New Zealand businesses are looking at the short term margins rather than long term prosperity.

I know of companies, who shall remain nameless, that have hired someone from another country to come to New Zealand and work for the minimum wage doing a skilled job. A New Zealander would not do the job for less than $25/hour. So paying the minimum wage to this person is obviously a huge cost cut. In the short term their books look good. However, in the long term, that’s a New Zealander who doesn’t have work. The money that person would have spent doesn’t get spent. Other companies end up in financial difficulty. The clients of the business paying minimum wage lose clients because they’ve filed for bankruptcy. The business paying minimum wage loses clients because their clients have lost clients causing them to shut down. Then the company has no work, so they have to make people redundant. So those made redundant don’t spend. And so the cycle continues.

However, if these companies were to raise wages, we get the opposite effect. Give a New Zealander a payrise, they either spend or save that money. If it is spent, that goes through the economy causing prosperity. If it’s saved, that creates funds for investment, which also boosts the economy.

So, as business owners clearly don’t understand basic economics, the Government needs to step in. Raising the minimum wage will cause the positive effects that wouldn’t have otherwise happened.

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About Daniel Farrell

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Posted on July 24, 2011, in New Zealand Politics and tagged , , . Bookmark the permalink. Leave a comment.

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