Labour doesn’t understand business

Labour said it’s worried about jobs which will disappear but is complaining the increase in the minimum wage isn’t high enough.

The minimum wage is just that, the minimum. It’s a floor not a ceiling.

Any business which can afford to pay its workers more than that can and many will.

But not all work is worth more than that and imposing higher costs on businesses without lowering other costs or increasing returns will put other jobs and whole businesses at risk.

It will also increase the move to replacing people with machines which is supposedly one of Labour’s big worries.

In another example of Labour’s lamentable lack of understanding of business principles, the party wants to force forests to sell logs to local mills.

Forest owners responded:

Forest owners say they are keen to sell their logs to local mills, so long as the terms of sale match those from export markets.

Forest Owners Association chief executive David Rhodes says there have been cases where local mills have been unwilling to do this.

“It’s not just about price. It’s also about the payment risk, the length of the contract and the quality of the logs on offer. Many modern mills have tight specifications for log supply. Logs that don’t meet those specifications are usually exported. This will always be the case,” he says.

Responding to a call from Labour Party MP Stuart Nash that “foreign forest owners” should be forced to sell logs to local mills, Mr Rhodes says owners of forests – foreign, corporate, private companies, iwi, partnerships or individuals — look for terms and conditions that give them the best overall returns.

“In many cases they get only one chance to do this, having spent 27 years growing their trees. This is crucial – forestry is not a one-way bet. Just ask those forest owners, particularly in Northland, who are not replanting after harvest, because log prices are not high enough to justify re-investment.”

Mr Rhodes says it is unfair to single out overseas owners of large plantations as the reason for mill failures.

“It may appeal to the emotions, but does not advance public understanding one iota. Overseas owned forestry companies are among the leaders of the industry. They make significant investments in jobs, worker safety and the environment.”


He says forest owners understand the importance of New Zealand having a viable wood processing industry and are partners in the Wood Council which is committed to having more value added to logs in NZ.

“We are talk regularly with politicians from the various political parties about policies that will assist the forest and wood processing industries remain vibrant, viable industries providing employment in the regions. Mr Nash’s proposed policy is not one of them.”

Forestry is a risky business with a long time between planting and payment.

Forest owners aren’t charities. They’re businesses and need good returns to if they’re going to continue in business and employing their own staff.

6 Responses to Labour doesn’t understand business

  1. Dave Kennedy says:

    New Zealand weathered the GFC better than most countries and we have relatively low unemployment levels. The wealthiest 10% of new Zealanders have seen their wealth increase by more than 10% a year for more than 4 years now. The Prime Minister had a $13,000 increase in pay and CEOs have received increases recently that have been in the 100s of thousands.

    Keeping wages low is good for increasing dividends and the wealth at the top, but when increases in productivity are not shared it just causes greater inequality (we have the fastest growing inequality in the OECD) and continues to marginalise our poorest.

    The number of jobs that is claimed will be lost if we move to a living wage is not based on evidence.

    One of the big problems is our shift to a third world economy that is dominated by exporting raw commodities. The biggest area of job vacancies is for unskilled or low skilled labour, this is not a healthy economy and the lack of discretionary income for many families is destroying our domestic economy too.

    Continually pushing for wages to be kept below a living wage also causes a huge expense for the state as the budget for Working for Families and the Accommodation supplement just increases dramatically every year. Corporate welfare is also a huge expense.


  2. Paranormal says:

    Keep up that politics of envy DK. It’s bound to work for you one day, perhaps.

    The reality is quite different. As the price of entry level jobs increases, it makes capital investment more cost effective to replace those entry level jobs. The self ordering technology at McDonalds throughout Europe (and now here I would assume) is a good example.

    The key thing here is they are “entry level” jobs at a minimum wage. Individuals can increase their wages once in employment easier than when they’re not.


  3. Dave Kennedy says:

    Paranormal, although it doesn’t apply to me I do think there will be many New Zealanders working 50-60 hours a week and can barely feed their kids or pay the rent who are wondering why the PM (who already worth $50 million) should be getting a 13,500 pay increase and they are lucky to get a few cents an hour. I am sure they don’t understand why CEOs can get 1/4 of a million extra in one increase.

    I think it is more bewilderment than envy when workers contribute to increased productivity and profit and yet they are not allowed to share the results of their efforts.

    Perhaps you can explain why 1000s of New Zealanders who are skilled and experienced and work hard are still paid entry level wages and some even less? I would love to hear your justification.


  4. Paranormal says:

    The reason you don’t understand is because you have little or no commercial understanding. In simple terms those that add value to a business are rewarded accordingly.

    I do agree with you around politicians pay however. if we paid them much less so that only the already wealthy could afford to enter parliament, we would clean out a lot of dross (admittedly on both sides of the house). The main benefit is it would mean there were far less on the left bitterly clinging on to an income they would not justify in the real world.


  5. TraceyS says:

    From Dave’s RadioNZ link:

    “The Council of Trade Unions lawyer, Jeff Sissons, says today’s decision is in line with two others – the IHC sleepover ruling and the equal pay ruling.”

    I don’t disagree with the Court’s decisions – quite the contrary – but it is naive to think that there wouldn’t have been consequences for jobs.

    There is no doubt that these decisions hurt employers and there would have been a tightening in the overall work hours available in response.


  6. TraceyS says:

    Paranormal: you would have to reduce the pay dramatically to stop the gravy-trainers. Otherwise the outcome would be to lower the quality of aspirants at the bottom end. Effectively you would cut out the middle and have people who can afford to work for the love of it on one hand, and those who think that a very humble salary is an absolute fortune on the other. It would actually reduce diversity.


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