Can’t get prosperity by decree

The Employers and Manufacturers Association says the minimum wage increases announced by the government could “bring the economy to a grinding halt”.

Employers and Manufacturers Association (EMA) chief executive Kim Campbell said the initial increase was not much more than what a National-led Government would have implemented.

However, he saw the $20-an-hour target as too high and it meant New Zealand would have among the highest minimum wages in the world.

“The first step was well signalled… and it’s not very responsible signalling it so well in advance because it sets up inflationary expectations,” he said.

“You can already see a reflection of that in our exchange rate, which has gone down because overseas they can sees that New Zealand’s costs are going up.

A drop in the exchange rate will make our exports less expensive overseas but it will add to the cost of imports including clothes, fertilizer, fuel, machinery, medicine and vehicles.

“Exporters are going to do a bit better but you’d have to do the sums to see how they land but it will all turn into an inflationary spiral which is a really good way to bring the economy to a grinding halt.”

Campbell said businesses would be worried by what the cost increases would mean for them. . . 

Businesses have got used to gradual increases in the minimum wage and have factored them into their planning.

But getting to $20 by 2021 is too much too fast for many.

We had dinner out on Tuesday evening.

The business owner, unprompted, told me she was very worried about the new government. “People already say dining out is expensive, but if we have to pay too much more for wages we will have no choice but to increase prices.”

That’s how the inflation spiral starts – with wage increases which aren’t related to productivity increases or other cost decreases.

And that’s what drives business owners to look at ways to reduce staff numbers, including more mechanisation.

Robots are expensive now, but improvements in technology and increases in production will bring prices down.

You can’t get prosperity by decree and attempts to reduce or eliminate poverty by imposing unrealistic rises in wages will threaten business sustainability and job security.

2 Responses to Can’t get prosperity by decree

  1. adamsmith1922 says:

    But in Jacinda land u can. Her equivalent of Trump Executive Orders

  2. adamsmith1922 says:

    Reblogged this on The Inquiring Mind and commented:
    Good post. Problem is that our new leader thinks saying something makes it so.

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