Gordon Campbell’s pretty scathing of Key’s nine day fortnight scheme in his latest article at Scoop, describing the announcement as a sign workers will have to bear the brunt of the recession.
Plainly, workers are going to be the first people over the side of the lifeboat during this recession. The main policy idea to emerge from the recent jobs summit turns out to be a recipe to cut wages, since the training aspect of the initial idea has now been scrapped
He’s also done the sums on how big a pay cut it might mean.
How big a cut in income and conditions is this ? Well, work it out on the basis of a typical eight working day and an 80 hour working fortnight. This would drop back to a 72 hour fortnight, which is a 10% cut in hours. Eight hours lost would entitle that worker to four hours of subsidy at $12.50 an hour, or $50 before tax. So the scheme in its entirety would typically deliver something like a 10% drop in wages, for which the government would offer $50 before tax, in compensation.
How much is that in lost spending power? Lets assume the worker is on the average wage of $25 an hour. Losing eight hours pay a fortnight would mean a $100 a week drop in wages, offset by $25 a week from the subsidy – which comes to a net $75 a week loss in income, every week.
And there’s no guarantee it’ll save the job, or that incomes will rebound when the government subsidy dries up six months later.
Since a struggling firm can only be eligible for the scheme for six months, there seems nothing to stop employers from cutting wages by 10 % for the first six months, and then sacking the person afterwards. In other words, the job saving â€˜promise’ that sweetens the wage cut could turn out to be a fairly transient one. After all, no one is expecting this recession to be over in six months.
Key’s committed even less to this scheme than his cycleway, and even at best estimates it’s picked to save between 2-3% of the jobs that will be lost as a result of the recession.
The Government says protecting jobs is its number one priority during the recession. Why then is it willing to spend $330 million to cut the top tax rate to 37 cents but only $20 million to save jobs ?