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.