NZ First's Winston Peters eyes minimum wage increase to $20 an hour from $15.75 over three years

With recent opinion polls suggesting Winston Peters will be king or queen maker after the September 23 election, the NZ First leader has announced that his party wants to increase the minimum wage to $20 an hour.

This would be done over three years, Peters said in a speech in Tauranga, and NZ First would also introduce a tax package for employers and businesses to negate their increased costs.

Interestingly Peters' speech refers to his party's confidence and supply agreement with the last Labour government between 2005 and 2008 that saw the minimum wage increased by $3 an hour.

"We insisted that the minimum wage go from $9 per hour to $12 progressively by 2008. That is the biggest rise ever in the shortest time ever in this country’s history," Peters said.

Does this suggest that Peters may be leaning towards backing a Labour Party reinvigorated under new leader Jacinda Ardern? On the surface his minimum wage policy may sound more palatable to Labour than National. But Peters will no doubt keep us guessing up to, and probably beyond September 23.

The minimum wage is currently $15.75 an hour. In June then-Labour leader Andrew Little said Labour wanted to increase it to $16.50 an hour. The Greens want to increase it to $17.75 next year.

The minimum wage was increased by 50 cents to $15.75 an hour from April 1. Announcing this in January, Workplace Relations and Safety Minister Michael Woodhouse said the increase would benefit about 119,500 workers and increase wages by $65 million a year. Woodhouse also pointed out there had been annual increases to the minimum wage since 2009.

Here's more from Peters' speech below.

Increasing minimum wage

New Zealand First will build our economy from the bottom up, creating opportunities for New Zealanders, boosting our economy and increasing productivity.

Our goal is to increase the minimum wage to $20 over three years. Drastically increasing the minimum wage will increase productivity and stimulate the economy.

New Zealand First’s record on fair wages in this country is a proud one. In 2005 we campaigned to address the then low minimum wage under the Labour government.

As part of our confidence and supply agreement with Labour in 2005 following the election we insisted that the minimum wage go from $9 per hour to $12 progressively by 2008. That is the biggest rise ever in the shortest time ever in this country’s history.

We know that without a change in tax for Employers and Businesses that can’t happen.

Employers - Business tax package

Accordingly, we will: - introduce a tax package for New Zealand Employers and Businesses to negate the increased cost to employers and businesses of paying fair wages.

Removing GST on basic food

New Zealand First will lower the family food bill by removing GST on basic essential food. By lowering the cost of the household food basket we will bring much needed relief to thousands of low income New Zealanders.

GST would come off all basic food items – not restaurant and takeaway meals. This is a bold policy which goes to the heart of inequality that is undermining our society.

There are estimated to be 212,000 children in poverty in New Zealand. In April this year the Salvation Army said 20 per cent of New Zealand children were living in a household that regularly goes without essentials such as adequate food, clothing or heating. That’s one in every five children in New Zealand.

The cost of removing GST on basic essential food is somewhere  between $600 million and $700 million. And for those armchair critics who have long forgotten, or have never known “struggle street”, who don’t know what basic or essential food is - I recommend they ask their grandmother.

Clampdown on Tax Evasion Behind closed doors the National government has been heavied by giant multinational bully boys over a proposed tax clampdown and our government buckled like wimps. Multinationals are evading paying tax in New Zealand of between $7 billion to $10 billion a year. It’s a rort.

They’re getting away with it and the government is letting them. A shady outfit from the United States no-one has heard of, the Digital Economy Group, pressured the New Zealand government and won. The so-called crusher Revenue Minister Judith Collins was crushed. Finance Minister Steven Joyce, huddled behind his desk and waved a white flag.

The giant multi-nationals want to paralyse the OECD. They’re now doing the same to the National government. And they’re succeeding.

Given the Labour Party’s already announced policy on taxing multinational corporations to raise $200 million, it seems that like the National government they have already caved in even without having discussions with the secretive international group. New Zealand First would clamp down on these giants who cheat us.

We are going to clamp down on tax evasion. Multination corporations will be required to pay fair tax in New Zealand. For example Tegel, with its $614 million turnover pays only .38 percent of tax (profit was $34.2 million). This will end under New Zealand First.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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65 Comments

why not $100/h? consumer pays anyway

up
10

Why have a minimum wage, why ban slavery, why have minimum standards of safety for employers, why have a society.

Why is it necessary to trot out this mundane argument every time minimum wage is discussed. Minimum wage is a useful setting that can be optimised. If we increase it and nothing happens isn't that a good thing? If we increase it and we lose jobs we can reduce it again. It's not some untouchable holy figure.

How can they raise it so much , when inflation is almost zero? People just won't employ as many people, or will expect to get far more production out of the person within that hour.

What a magical year an election year is.

A crazy game where you must raise excitement through ever more outrageous promises (to a jaded electorate), whilst balancing the probability of how likely is it you will be have to actually do any of the stuff promised.

Roll up, roll up for the big wages auction:

National - actually had to do it - $15.75
Labour - might actually have to do it - $16.50
Greens - thought they had a good chance when the policy was released - $17.75
NZ First - King maker with an out - $20.00

I think we can see form this that the Greens got seriously trumped in the first round and NZ First can always say they are gutted (of course) but their partner shot them down on it in the negotiation - but they got some other policies agreed to.

It is difficult to find the right balance for what the minimum wage should be. You don't want it too low, as you want people to be able to live to a certain standard when they work. And you don't want it too high, as that will disincentivise employers from hiring staff.
Reportedly, the current minimum wage is not enough to meet that certain standard (hence the calls for a living wage). On the other side, it seems that the economy is strong and unemployment low.
That would support a raise to the minimum wage.
A further incentive to support the cost to employers in the form of reduced tax would support the idea further. I would like to see the details of this tax package.
In terms of the effect on the government's books, this reduces tax revenue on one hand, but should reduce the benefit bill on the other side, especially the WFF bill, which is essentially just a benefit to employers.

"On the other side, it seems that the economy is strong and unemployment low. That would support a raise to the minimum wage."
That shows some interesting understanding of labor economics...

Surely if our economy was performing well with genuinely low unemployment/underemployment/real unemployment, we should expect to see upward pressure on wages with minimum wage constraints being less binding. The should be no incentive for raising or lowering the minimum (to a certain extent) to increase overall welfare.

If this isn't the case, it indicates lies or structural issues in the market.

Way to selectively quote half of the statement Nymad. That shows an interesting understanding of reading (not for the first time).

I don't see how that matters whether I quote it in isolation or not.
You put forward a reason for raising the minimum wage. It was not a sound reason.

Should I have quoted the whole passage for you and pointed out the flaw in your proposition, instead (achieving the same thing, but with much more quoted text)?

You missed the point about why I said that would support a raise in the minimum wage. By quoting only the half that talks about low unemployment, you make it sound as if that one point was my entire reason for saying "That would support a raise to the minimum wage."
Read it again. If you are worried about quoting too much, try not doing it at all if it is misleading.

Okay then.
"Reportedly, the current minimum wage is not enough to meet that certain standard (hence the calls for a living wage). On the other side, it seems that the economy is strong and unemployment low.
That would support a raise to the minimum wage."

Which is it that supports a raise in the minimum wage?
The former of latter sentence?
Both together don't support the increase in a minimum wage. The latter doesn't support an increase in minimum wage.
So, you write a statement that is either wrong in logic or grammatically. Either way you are in the wrong, so don't try and chastise me for bad reading skills if you structured the statement poorly.

Yes. Both sentences together. It follows logically. Well done super reader. So the next thing is, when you disagree with someone, you would normally present an argument as to why, rather than just say I am wrong. One step at a time though nymad.

Like I said, one of those assertions of yours might support an increase in minimum wage. Both of them together don't.
If you don't know the reasons, read my first comment. For further reading, any elementary labour economics textbook should help.

A well performing economy and low unemployment are not incentives to increase minimum wage. You have missed the point.
My reference to low unemployment relates to the effect on employment of raising the minimum wage too high. Again, going back to my first comment, it is a balancing act between ensuring a liveable wage, and not having a large effect on employment.
This is called logic nymad. Take your time.

?

Minimum wage is about spreading the wealth. An economy may be doing great based on GDP growth and unemployment figures but that does not mean the wealth generated by that economy is being allocated fairly. I appreciate "fairly" is a subjective term but if a party wants to state "we think $20 hour is fair" then that is both their and the voter's prerogative.

Your implication that as there is low unemployment wages need to increase in order for employers to attract and retain staff is based on an assumption that all employees have transferable skills that can be used across multiple jobs. The sad fact is some people only have skills to do mundane jobs that will never attract a premium and for which there is an abundant supply of willing plebs. It is for these people that the minimum wage is necessary.

In order for that to occur, we would need to increase inflation quite a bit to pay for the lower wage people getting higher wages. But that would then mean interest rate rises to control inflation. It is a balancing act.

That wasn't my implication at all. The reason I brought up low unemployment is because of the effect that raising the minimum wage has on employment.
In any case, I disagree that setting a minimum wage is to do with spreading the wealth. It is to do with the govt not subsidising employers via a benefit system.

This policy announcement will only be meaningful if / when the details of the employer tax reductions are specified. Until that - just another pie in the sky from Winston.

A 27% increase in the Minimum Wage to $20 would flow on to a 27% increase in wages across the economy! It's not 'just' the bottom tier that would get the rise. Anyone currently on $19, for instance, would not settle for 'just' $20 but would want $24....and so on. It could be an expensive exercise, Winston!

Hmmm.... I would like to see proof of that. Did the same thing happen every other time the minimum wage increased? If so, this would just lead to general inflation.
Maybe you could research what happens to median income when the minimum wage is raised. That would surely be your proof?

It did for CEOs etc!

Again, rubbish.
CEO pay only increases on the basis of performance (and inflation).
It is not pure causation from an nominal increase in minimum wage.

I really dont think you can relate CEO pay to anything remotely economic. Otherworldly is closer in some instances.

Not all of the costs of products are built on top of minimum wage labour costs.
https://thinkprogress.org/this-is-how-much-a-big-mac-would-cost-if-the-m...

"Hmmm.... I would like to see proof of that. Did the same thing happen every other time the minimum wage increased? If so, this would just lead to general inflation."

NO - and that's why everyone is relatively poorer now.

Its a catch 22.

If you lift Minimum wage, without lifting everyone else, then eventually the bottom catches up with everyone. Which seems to be what is currently happening.

Conversely if you lift minimum wage, and lift everyone else, then in theory it leads to inflation and nothing changes (relatively speaking) for anyone.

Rubbish.
You only have to look at general wage inflation vis-a-vis minimum wage inflation to see that this isn't the case.

We have a very real issue in NZ whereby whenever the minimum wage is raised, the real wages of (relatively) higher productivity workers is relatively lowered.

Check out the NZ Herald, apparently $15.75 x 1.21 equals $20.00:
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1190...

I guess we should blame the education system.

Bahahaha.
Maybe they're making the increase sound a bit softer, to push a Winston agenda?
Surely that's what it is.

.

Gareth I do believe you are right. Makes perfect sense as Winston had a far more comfortable time, and which he would consider as being productive, in coalition with Labour than the ill fated one with Bolger's government.
Because of that & perhaps too that Labour will be an inexperienced team ( Annette king where are you) he perceives more openings for his influence. And some of his one offs are not too bad either, for instance personally the wooden stadium for ChCh resonates. Can it be done? Ask Sir Robert Jones then.

This increase in minimum wage will be an opportunity for landlords to increase rent. So might be a shot in the arm for the property market.

"GST would come off all basic food items – not restaurant and takeaway meals."

Here comes silly complexity:
.. what about a chicken the supermarket cooked ready to eat?
.. what say I purchase a bottle of prepackaged tomato sauce from the fish & chip place?

Imagine the increase in paperwork for your GST return if you sell 'mixed GST' goods.

I wonder who will police it.

The thing I would be most curious about would be how competition in that space would react.

i.e. setting up shop as a supermarket selling only basic goods.
- 13% lower sale prices
- No 'mixed' good compliance costs

But, given the rort in the FMCG market I suppose Progressive and Foodstuffs could absorb that.

Ah, but what constitutes "basic" is a political football. I can see the fake Stuff outrage articles now attacking the government because liquid panadol if deemed a "luxury" good etc etc etc.

In Australia there was outrage because women's sanitary pads were "basic" but tampons not.

If you can the fruit - is that a luxury? What say the canned fruit is locally grown but the "fresh" is flown from overseas. How can the government look at itself in the mirror whilst subsidising foreigners fruit in competition against our local grower heroes?

An endless weeping sore of bad press for every government.

According to Winston, our grandmothers decides what is GST free. That sounds nice and simple then.

Not your grandmother, she was a really sensible lady
The decision was made by some crazed ideologists while the world looked on and said" you are world leaders, we would never do it"
We gave them knighthoods, we still do

I think they would simply divide it up by type of business. Supermarkets, dairies etc no gst on food. Restaurants , takeaways , pubs tax on food . The real problem would be differentating food form non food items in Supermarkets etc. But England manages to do it .

I think we should ask for help from the Australian Tax Office, they seem to know...
GST applies to all food and beverages consumed on the premises that supplied them, and to hot food supplied as take-away.

So the bakery inside the supermarket is a basic good, but if they take the same roll and put anything in it it's a luxury good?

What about if they bake sausage rolls. Clearly if they freeze them in packs that's basic food, but if they heat those same rolls ... well, sheer luxury.

Endles silliness and entertainment awaits, oh wait, entertainment is clearly a luxury so they'll have to tax that at a higher rate.

It's the worlds stupididst policy isn't it. May as well just give an equivalent tax cut and save all the bureaucracy

Wouldn't it be far cheaper and easier, just to introduce a third player to the supermarket market? That would then create some real competition, and drive down prices. WIll also mean that suprmarkets won't increase their margins when GST is removed. Having exclusions on GST is complex and costly and creates all sorts of loopholes and grey areas of what is a basic food item.

Nice ideas Rob but I must say in my experience business is very rarely 'easy'.

A lot of the problems with NZers paying too much though, especially with building materials and food, is apparently due to a lack of competition. NZ governments are all about an ambulance at the bottom of the cliff approach rather than fixing the core problems. So governments will give out grants etc, to people in order to cover the shortfall, which makes the government look good. But they don't fix what is actually causing the high prices.

I agree with you. But a government cannot legislate competition, they can only construct market conditions to encourage it. In our very small market that is not as easy as an election promise.

If I were to agitate for the kind of change you propose, I would look for funding possibilities from farmers co-operative structures. It seems to me one obvious way to improve the lot of farmers is for them to have a large part of their distribution channel instead of large Australian companies owning it.

But that takes capital and Kiwi's are not noted savers, so it is hard to find the required funding onshore. Possibly the land value of farms might provide enough security to start something.

Kiwi bank worked a treat. I remember paying fees on every transaction until then. Why not kiwimarket? Got to work out cheaper than the GST cuts. We know most other countries can sell milk for half the price as our supermarkets.

I would be interested in details of the business tax package. But , how do they negate a $ 4 a n hour rise. $ 160 a week . Do they offer it to any business employing people , or only to businesses paying between $ 15 and $ 20 who will now have to pay more?. Not saying it is a bad idea, but again very complex to work out . I always thought the best way for the government to help lower paid workers would be a tax free threshold of $ 10 k or more. Green party policy by the way .

A higher tax free threshold is a good idea ; shame the Greens bundled it with all the other rubbish.

Based on the reaction to National's raising of the bottom 2 tax thresholds. I am going to say that a 10k tax free threshold is a tax cut for your rich mates bacause it reduces the tax bill of everyone making over $10,000 by $1050 but only reduces the tax on those making $5,000 by half as much!

Here's another pearler: "Drastically increasing the minimum wage will increase productivity"

So NZ First has the best supply side policies for reforming local government and driving down land costs but also live in a certain fantasy land where they feel you can legislate wealth without creating it.

I guess that's why they call it swings and roundabouts.

Indeed , and I feel that this sort of wild statements is what makes me suspect any credibility of what Winston is up to .. as if he is talking to a bunch of idiots .... \how is increasing min wage will "drastically" increase productivity??
It seems that he is more interested in dishing out a lolly scramble than actually improving lives - he could change the lower tax bracket and that will be much better and simpler for everyone .... Not sure what he will achieve by the GST on food change -- complicated and hard to administer solutions ... Going after corporates .. Well , good luck, just don't come up with excuses if you fail mate !! ... buckle up people , we are for another Wine Box saga ...
The question is , if they win and form a coalition L/NZF, will Winston be there in the next term? and if he wasn't will we change the clock back ?

In last weeks Top Ten we had a link to this pro immigration puff piece in the (political section - say no more) NY Times: https://www.nytimes.com/2017/08/03/us/politics/legal-immigration-jobs-ec...
The 1960's Mexican tomato pickers were replaced by mechanical harvesters when the US government closed the immigrant labour scheme down. The Times angle was that was a bad thing, and it probably was for the immigrant/seasonal workers but what actually happened was a large increase in productivity and a likely downward pressure on tomato prices. The American workers were building and operating harvesters on high wages instead of back breaking labour out on the fields.
Reducing the supply and or raising the price of labour incentivises productivity gains - in India they're still building roads with human hard labour.
Bill English was bragging about our low wages (sign of success?) a few years ago, Combined that with his party's high immigration policy and there's little wonder we've had zero per work hour productivity gains these past five years.
Perhaps Winny's on to something?

So you are a business woman who has a major contract to provide aged care services. To start the business you had to guarantee the rent and car leases, and bank overdraft with your own home, so if the business goes under you will lose your home and likely be declared personally bankrupt. You are one year into the contract which is fixed for three years and can only increase by CPI for the next two years. About half your workers are on the minimum wage.

Then the government increase the minimum wage 27%. After the increase your business only just breaks even trading each month.

Do you:

(a). Sack enough workers to maintain the same overall wage bill, or

(b). Reduce hours to each client across the board by the age increase amount, or

(c). Shut down the business because to remove the risk to your house, or

(d). Keep trading for no income for two years in the hope you can renegotiate the contract in two years time?

B, then C if all fails ....but certainly B to start with .... every business has a critical Mass beyond which it starts going down.

Option c. Then let the next lowest bidder for the contract have a crack at it, because clearly the business woman had a very marginal business that relied on low wage workers as opposed to a better business.
She could rightly be a pissed off that the minimum wage rose so quickly, but she certainly should have factored wage rises in.

you forgot

e) give yourself a pay cut

They're proposing increasing the minimum wage over 3 years, so you wouldn't have a 27% increase in a single year.

Be careful pushing wages up like Ozzie to warrant high house prices because you'll shot yourself in the butt and price yourself out of exports, I'm for fair wages but low housing mortgages and being competitive with exports is better, and thing a tuff now,

That's one way to get the young to vote, a carrot

So we got Winnie getting the old and young vote, jacinda with the nice smile getting the votes in between, and bills team of old farts puffing smoke

Any attempt at raising the minimum wage will need to be done in concert with sorting out the foreign student scam and media manipulation by politicians and large business interests. The Indian student / ex student mafia running most of the petrol stations and comments by businesses/ PMs (and associated billshitters) re kiwis failing drug tests need to be seen for what they are.

If businesses can't afford to employ kiwis their model is kaput and they need to shut down. It is called evolution.

PS Based on young Toddy's example it is now time that MPs be drug and alcohol tested. Shame.

Winston will lean towards...Winston, whoever cuts him the sweetest deal

Quoting: "We insisted that the minimum wage go from $9 per hour to $12 progressively in 2008"

That's a 75% minimum wage increase in 10 years (15.75 - 9 / 9) to today's wages
Or a 20$/hour wage would be an eye watering 122% minimum wage increase over the $9/hour.

How can people say there is wage stagnation in NZ ?

We share a common labour market with Australia, their minimum wage is NZ$20/hour (and less tax) against our $15.75. No wonder there are over half a million of us over there; is that a good thing? Should we try and do something about it or let our young people drift over there and replace them with desperate third world labour as has been Nat government policy.
Perhaps Australia will make the decision for us but the large wage imbalance in our common market is far from ideal and probably not sustainable.

Good point DG

Australia is a far far better option for Kiwis under 40 even in its current economic state anyone who tries to tell you life is better in NZ is kidding themselves