Minimum Wage Amendment Bill

I raise a point of order, Mr Speaker. I think, given that we have quite a significant presence in the gallery, who are currently departing, it is very difficult to hear what is going on. Perhaps we could have a brief pause in parliamentary proceedings before we begin the next bill.

I think the member’s point is not unreasonable. There is a lot of noise as visitors leave the gallery and as members not involved in the next debate leave the Chamber. I would ask members leaving the Chamber to please do so reasonably briskly, so that we can get on with members’ order of the day No. 5.

I move, That the Minimum Wage Amendment Bill be now read a first time. If it becomes apparent during the debate that scales have fallen from sufficient National members’ eyes and the Minimum Wage Amendment Bill has the necessary support, I will nominate the Transport and Industrial Relations Committee to consider the bill. I want to start by telling the story of a woman I met recently. We will call her Wendy. Wendy is up at 4 a.m. and off to her first cleaning job. She works two jobs. She is home at 6 p.m. and tuckered out. Wendy does not smoke and she does not drink. Wendy cannot afford luxuries, and for her that now includes heating her house. She recently suffered a broken leg on the job, and receiving 80 percent of her wage whilst off work meant she could not meet her rent. This proud woman, who has successfully raised six kids, mostly on her own, had to rely on assistance from a family member for help. The story does not stop there. Wendy still has one kid at home—a teenager with hollow legs. Feeding her family comes first, but, as a diabetic, her health is suffering in the long term. Her doctor tells her she should eat a more balanced diet. She knows what that is, but can no longer afford the ingredients. White bread is cheaper than brown bread. Wendy is on the minimum wage and has worked all her life. Restrictions on adult and community training mean she cannot afford to retrain. She fears she will one day have to reside in a boarding house.

A minimum wage of $15 an hour will mean $60 a week for our lowest-paid workers over a 40-hour week. A minimum wage of $15 an hour will mean extra earnings of $427 million a year for our lowest-paid workers. Most of that money will be spent on essentials—food, clothing, and health care—and will go straight back into the economy. It is well documented that those living on or below the breadline spend their money on essentials. By contrast, the very top earners are more likely to spend extra earnings on overseas trips and other things that are of no direct benefit to our economy. The minimum wage has to be one that families can live on, that rewards hard work, and that helps stem the flow of thousands of people to Australia, where wages are much higher. Statistics on departure to Australia are familiar to us. Roughly 1,000 a week currently and 1,030 from Dunedin alone last year left permanently to live in Australia.

This Government has the worst economic record of any Government in the last 50 years. Reports in recent days show that inequalities in New Zealand are the worst they have ever been. The rich are getting richer, and the poor are getting poorer. Those in the middle are feeling the squeeze, too, as the median wage recently dropped 3 percent. People are feeling the pinch after the 2010 tax switch. Inequalities are growing since that tax package, which increased GST and gave the biggest tax cuts to those who were already wealthy. These growing inequalities begin to be addressed by my bill. Māori, Pacific people, women, youth, and part-time workers are more likely to benefit from an increase in the minimum wage.

Even if the National Party believes that unemployed people are bad and do not want to work—a view I do not share—it should agree with conservative economists who argue that good wages are exactly the incentives required to get people into work. Minimum wage increases have lagged behind productivity increases over recent decades. For the health of our communities, they need to increase in a sustainable fashion. If Government future ambitions for growth are to be realised, the fruits of that growth need to be shared. My bill helps to ensure that that is the case.

Public uncertainty about the effects of the minimum wage increase mirrors general uncertainty amongst economists and other experts. For many economists—I learnt this through my time at Treasury—a direct link between a minimum wage and employment changes is the Holy Grail, and we can expect a Nobel Prize for whoever explains it properly first. Some say a high minimum wage will cost jobs. At some point that is undoubtedly true. If we increase the minimum wage to $30 an hour, some employers will struggle to cope. But the relationship between minimum wage and unemployment is not clear cut. It is best illustrated with an example. Of the 9 years between 1990 and 1999, the National Government increased the minimum wage by a total of 70c in 9 years. Unemployment ranged between 6 percent and 11 percent. By contrast, when Labour was last in Government the minimum wage was increased by $5 over 9 years. Unemployment plummeted to amongst the lowest levels in the OECD.

Australia’s higher minimum wage has proven a boon for attracting ambitious young Kiwis. Its minimum wage equates to nearly NZ$20. No wonder 40 percent of a record 158,000 New Zealanders who have left for Australia under the Key Government were aged between 18 and 30. Young talent knows that it will get paid better in Australia. Australia has, of course, benefited from a minerals boom, but to attribute all its success to that would be a mistake. An aggressive savings policy means that A$1 trillion in investment capital is constantly searching for a home. Australia has also valued its labour market. People are attracted to Australia for the higher wages. The fact that their top earners pay much more tax than New Zealanders does not enter the debate. People are attracted to Australia for those higher wages. In fact, top New Zealand taxpayers have one of the lowest tax wedges in the OECD—and that is those who actually pay tax. If we do not distribute the proceeds of our economy fairly, we will continue to hollow out our workforce as young folk head across the Tasman. They are calling it “Generation Oz”.

What about the effect on business? We know that a modest change like the one proposed will likely have no effect on unemployment. The Department of Labour reached the same conclusions when it studied minimum wage increases under this Government. This is perhaps a surprise to many, but a sober assessment of the facts will also suggest that many small and medium sized enterprises will actually be advantaged by a minimum wage rise. That is because many small businesses already pay above the minimum wage. They know how hard it is for their employees to make ends meet on the minimum wage, they value their employees, and they believe in them. Often these small to medium sized enterprises struggle to compete against other larger firms that appeal to the lowest common denominator. The National Party, if it opposes this bill, will not be the friend of small business.

Inequality has grown dramatically in New Zealand over the last three decades. The last Labour Government began to address this imbalance by ensuring 25 percent real growth—real growth—in the economy, and made sure that it was shared more fairly. Working for Families saw over 100,000 kids brought out of poverty. Income-related rents and better primary health care attacked drivers of poverty, but much more needs to be done. When over half of a minimum wage earner’s income is spent putting a healthy meal on the table for family every night, it is not possible to pay rent, buy school uniforms, meet incidental expenses, and heat the house. We taxpayers effectively subsidise low wages through the health system. All of us contribute moneys that are spent treating the preventable diseases of poverty. It is not good for our social fabric to have kids with empty stomachs, developing respiratory illnesses, rheumatic fever, and other illnesses through living in damp, cold houses, and it is not good for our economy either.

Unfortunately, the Government has put our country in reverse. Our economy is going backwards; only population growth props up numbers in our stagnant economy. GDP per capita has dropped; real wages are lower than when National took over. Kiwis are leaving permanently for Australia at the rate of 1,000 per week. Sadly, the Government’s 2010 tax package has ensured that the fruits of our economy are shared even less fairly than they were before. For the vast majority, any personal benefit of the 2010 tax package was quickly swallowed up in GST increases, inflation, and sundry others like increased prescription charges.

Poverty, illness, and underachievement will not be addressed until we ensure that the conditions are right for all Kiwis to succeed. We need to start by ensuring every New Zealander can afford food, clothing, and shelter for themselves and any family they support. A $15 minimum wage brings us closer to achieving this.

Thank you very much for the chance to speak on this bill, the Minimum Wage Amendment Bill. I would just like to acknowledge Labour MP David Clark for his speech in regard to this bill. I have known this member since he joined Parliament. He is a good member of this Parliament, a good representative of his area, and a good Labour MP. But on this bill I am afraid that we have to agree to disagree, because I think there are some fundamental economic and policy differences that you will see between the main political parties as this debate emerges.

I think the first thing I want to do is just acknowledge many of the points that were made in that speech. I do not think anybody disagrees with the issues around opportunities for our young people, especially for children growing up in environments that are difficult. We want those children to have food on the table, we want them to have shoes on their feet, and we want them to be able to enjoy the aspects of New Zealand life. But to do that, we have to earn our way in the world. It is not a matter of our legislating in this House for what we consider to be a minimum wage, in the sense of increasing it to a level that will actually achieve that purpose. The real way to achieve that purpose is by delivering a strong economy that grows wages, that grows opportunities, and that grows business, so that people get rewards for their hard work and can deliver services to, and meet the needs of, their families. So we do not disagree with the ideals, but we do disagree with how we will achieve that. That is one thing that I think is important.

When we look at some of the points that were made in that speech, it is important to look at what he actually talked about. David Clark talked about how people were feeling the pinch at the moment. Well, there is a world recession going on. The world is in trouble financially. This is not a time when we are making hay around the world.

💬 Dr David Clark: How’s Australia? How about our trading partners?

Mr Clark now talks about Australia. Well, go have a look at its mining sector, the golden part of the Australian economy; it is in trouble. Go have a look at its domestic economy, which is in even bigger trouble. You hear the Opposition talk about Australia having minimum wages, and saying that is what differs and why New Zealanders go there. The New Zealanders going to Australia are not going for the minimum wages. They are qualified New Zealanders who are going into higher-paid jobs in the mining sector and things like that. They are not going for the minimum wage, like the Labour Party said.

The other thing is that people are feeling the pinch because of the world recession, and New Zealand has that complicated by the rebuild of Christchurch. We need to look after our economy—growing it—because that is the real answer for our people going forward.

I look at the thing that was talked about of the relationship between the minimum wage and unemployment. Mr Clark said that it was not clear-cut. So how, then, can the Labour Party say that if it increases the minimum wage there will be no effect on unemployment? The real risk is that there will be an effect on unemployment, and the official advice that we have received is that this could lead to up to 5,500 jobs being lost.

💬 Hon Member: How many?

5,500 jobs. That is 5,500 families that do not have the income to provide for their children, that do not have the ability to provide the food on the table, and that do not have the ability to provide the shoes on those children’s feet. And that is what would come if this Labour bill went through.

💬 Metiria Turei: That is wrong! Wrong! Wrong!

This is the Green Party saying it is wrong. Well, that is the Green Party, which has about as much idea of economic policy as—

The ASSISTANT SPEAKER (H V Ross Robertson): Order! I am sorry to interrupt the member. Members on the cross benches should be aware that it is convention not to interject, because it has an effect on the microphone of the member who is speaking.

Mr Clark talked about growing inequalities, and said that this bill is a way of avoiding growing inequalities. He talked about groups that were perceived as being disadvantaged in the community. And there are groups that are highly represented in those lower-income statistics. But those lower-income groups will be the exact ones to be hurt by this bill, because they will not be enjoying a wage of $15 an hour, as Mr Clark perceives; they will potentially be losing their jobs. That will then put them in a situation where they do not have the ability to even deliver the services to their families that they do now. So the disadvantaged whom Mr Clark talks about will actually be more disadvantaged under this bill, because this bill hurts those people. It hurts those people, because it puts them at greater risk. Those people are more likely to lose their jobs if the minimum wage increases. That is the reality of commerce.

This is all about some kind of redistribution of income by the Labour Party. Mr Clark spoke many times during his speech about the need to redistribute income. Parliament should not redistribute income through the setting of costs on business. That does not redistribute income. If anything, it makes it hard to operate a business. When it is hard to operate a business, that means it is difficult to employ people, and that means it is difficult to pay higher wages to people. Redistribution happens through our tax system; it does not happen through the way that we manage the costs of a business. If we want to go and redistribute the income of businesses by looking at their cost structures rather than their profits, then that is a totally different method of accounting from the one that has been employed in the past, and it has not been employed in the past because it will hurt businesses and will, therefore, hurt the most vulnerable people, who have been talked about by the Opposition.

This bill is not good for the people whom the Labour Party purports to represent. It is not good for the people whom it says that this bill will look after. In fact, this bill hurts those very people at the bottom of the heap. It hurts those people on low incomes, it hurts those people who are marginalised, it hurts the vulnerable, and it hurts those who are struggling to get decent wages and a decent life ahead.

Then what do you say? What do you do? What is the answer, if this bill is not the answer? And there is an answer. There is clear economic policy out there that tells you how to raise wages and therefore deliver for your communities. It is through the provision of good education, it is through the provision of infrastructure, it is through the provision of the good and best rules for businesses to operate, it is through the provision of opportunities for business to expand and export, and it is through ambition and hard work. That comes through a tax system that incentivises education, hard work, and ambition. Those things are the things that the National Party is promoting.

The National Party is delivering in education. The National Party is delivering in infrastructure. The National Party is delivering a good environment for businesses to operate in. The National Party is delivering low interest rates for businesses to go and invest in capital equipment. The National Party is making this economy the best it can be in these very difficult times. The National Party is actually providing the environment to look after those most vulnerable people. That is what we are doing in Government. The Opposition will not do that. It purports to have an answer, but it will do the opposite of that. It will hurt those people most at risk. That is why the National Party cannot support this bill. It is bad economics, it is bad for our people, and it is especially bad for those people whom this bill purports to help. Thank you.

Debate interrupted.