As we reported on Monday, the Cabinet is set to review the minimum wage. The Labour Department recommended maintaining its purchasing power by increasing the mw from $12 an hour to $12.50. Labour Minister Kate Wilkinson will propose keeping it at $12, a cut in the real value of the mw (many expect there will be a token increase but not enough to counter inflation).
Now, Business New Zealand has come out against any change. They argue the Government should let the minimum wage to be eaten by inflation and there should be tax cuts instead.
Any idiot can see raising tax cuts is just a way for Biz NZ to justify cutting wages in real terms, allowing business owners to protect their profits while the poorest workers bear the cost of the downturn. Tax cuts are no substitute for minimum wage increases for five reasons:
1) tax cuts for minimum wage workers have just been cancelled by National/ACT
2) tax revenue pays for the social wage healthcare, education etc; tax cuts mean cutting the social wage, or higher debt paid for in the future. If you have to spend your tax cut paying for services that used to be paid for from tax revenue, you’re not any better off.
3) You can’t cut tax year after year to counter inflation, you run out of tax.
4) The tax cuts you would need to make up for not adjusting the minimum wage are massive. You would need to reduce them by 20% to make up for not doing the 50 cent adjustment. That’s even larger than the tax cuts National/ACT cancelled.
5) Finally, if you’re going to cut tax for minimum wage workers you’re going to cut them for all taxpayers, including the very wealthy, at enormous cost (unless you put in a counter-veiling tax rise yeah right). If the purpose of the minimum wage is to ensure a decent income for workers, then tax cuts are an incredibility inefficient way of doing that.
Biz NZ knows all that, of course, but they just don’t want businesses to have to pay a fair wage.