This morning on Sunrise, John Key said “wage inflation” is a problem causing inflation and needs to be reduced. Wage inflation is a businessman’s way of saying pay increases. John Key opposes Kiwis getting the pay increases they need to cover the rising cost of living.
This fits with his statement that “we would love to see wages drop“. He wants businesses to be able to pay their workers less in real terms by letting inflation eat into wages and cover part of the workers’ loss by cutting their tax (which is why he only ever talks about raising ‘after-tax incomes‘).
We’ve said it before, tax cuts aren’t a substitute for wage increases: National can’t afford the large tax cuts it’s promising; even if it could do large one-off cuts, it can’t cut tax enough year on year to make up for a lack of pay increases; cutting the social wage to cover tax cuts would make most people worse off because they would have to buy things that were once free public services; and, if you borrow to cover cuts, debt rapidly blows out to astronomic levels. Moreover, the families most in need pay little tax. From October 1, a 2 child family earning less than $50K pays no income tax, thanks to Working for Families. A 1 child family will pay no tax below $42K. You can’t make up for lost pay rises with tax cuts for low income people, there’s simply not enough tax to cut.
Key also said Working for Families can boost incomes for low income families. Oh dear. The in-work payment doesn’t go to beneficiaries and the tax credits can’t raise your net income further once you’re paying no net tax.
While workers are feeling the brunt of inflation, Key says they shouldn’t get pay rises and offers a Clayton’s solution in tax cuts. Meanwhile, businesses get lower labour costs. Profits before people, it’s the National way.