Employers are taxpayers

May 25, 2011

A media release from the Wellington People’s Centre is headlined: A minimum wage rise puts costs onto employers not taxpayers:

“Recent discussions about Labour’s plans to increase the minimum wage seem to have missed an important point” Says Kay Brereton of the Wellington People’s Centre.

Currently taxpayers subsidise employers paying the minimum wage through the Working for Families Tax Credit package. Increasing the minimum wage would put the costs onto the employers who are benefiting from the labour of their employees.

Isn’t it interesting that she doesn’t understand that employers are taxpayers? Not only do they pay tax, they have to absorb the cost of collecting it on behalf of the IRD as well as collecting other money such as ACC levies, fines and payments for children of broken relationships on behalf of other government departments.

The Minimum Family Tax credit ensures that sole parents working a minimum of 20 hours per week, and couples with children working a minimum of 30 hours per week receive net pay of $408 per week.

This equates to $20.40 per hour after tax for sole parents and $13.60 per hour after tax for couples, which means taxpayers are subsidising this employment to levels well above the current minimum wage.

She has a point there but draws the wrong conclusion.

Labour’s tax-churn welfare for working people helped to disguise the parlous state of the economy from 2005.

They had raised taxes, increased the costs of employing people by adding a fourth week’s holiday and introduced other employer-unfriendly policies which at best did nothing to increase productivity and at worst hampered it.

Their tax and spend policies fuelled inflation and unsustainable consumption disguising the fact we were in recession.

Turning this around won’t be achieved by increasing the price of labour. The solution will come from policies which reduce costs and encourage sustainable growth.

Splitting to double benefit doesn’t add up

August 8, 2010

Another sign that something’s rotten in the welfare state: couples are splitting to get extra benefit.

A community leader in New Zealand’s “DPB capital” of Kawerau says 70 per cent of those claiming the benefit in the town have partners “round the back door”.

Kay Brereton of the Beneficiary Advocacy Federation said couples who might be getting $200 below their living costs on the $324 weekly couple unemployment benefit were being tempted to split.

One could then get $278 on the domestic purposes benefit (DPB) and the other could get $194 on the single dole – a total of $472, and almost $150 extra a week.

“In the current financial reality, more and more couples will be looking to maximise their income,” Ms Brereton said.

People living separately and claiming two benefits would get more than if they lived together. That’s because their outgoings on rent, food, power and other basic costs would be lower for one household than two.” But they’d spend more too because their outgoings on rent, food, power and other basic costs would be higher for two households than one.

Couples who deliberately arrange their affairs by living apart to maximise benefit payments are committing fraud. But as Lindsay Mitchell says: Forget  illegal. What about immoral?

Her post DPB – same story, different decade is also pertinent as is Deborah Coddington’s column time to wake up to reality of child-bashing shame.

The benefit which was designed to give temporary help to women and children leave hopeless relationships,  still does for some. But it’s a trap for others and is one of the factors in our appalling record of child abuse.

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