As you know, things are tough in the job market at the moment.
The firm figures won’t be out until later this month but unemployment has grown by probably well over 50,000 so far this year. The number of the dole has shot from 37,000 in March to 50,000 now and is growing at 1200 a week. That’s not only a loss of income for the people losing jobs, it creates a drag on the wages of those who still have work – competition between workers for fewer jobs means they’ll take lower pay.
Add to that the miserly minimum wage increase earlier this year that amounted to a couple of cents an hour after inflation and the decision not to budget for public sector wage increases (including for medical professionals and teachers who between them make up over 10% of the workforce). Top it off with Key’s government’s complete failure to come up with any sizeable policy that will keep people in work.
That’s a lot of downward pressure on wages. Treasury expects real wages per hour to grow just 0.7% this year, fall 0.7% the next year, then stall at 0.0% at 0.1% in 2011 and 2012.
That’s not a recipe for closing the wage gap with Australia (remember that? Key doesn’t talk about it so much anymore) It’s a recipe for a low wage economy, and that’s very bad news for our economic outlook. When labour is cheap and plentiful employers don’t bother to invest in capital. It becomes cheaper just to hire someone than buy tools and machinary that make workers more productive. If you’ve ever been to a developing country and seen the sheer number of men employed in jobs that in New Zealand would be done by one person with a machine, you know what I’m getting at.
That’s not a route we want to go down if we want to be a more productive, wealthier society. The challenge, then, to government is to keep wages growing, not falling. To do that, it has to create jobs. This is an area where Key must provide leadership. Only government has deep enough pockets, and the direct economic incentive (each person going from the average wage to the dole costs the government $20,000 a year), to undertake the kind of job creation and protection schemes needed.
It’s not too late to start, even if it’s pretty damn late, for the Key government to really do something meaningful (no more Jobs Summits) to protect Kiwis’ jobs and wages.