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The race to the bottom

Written By: - Date published: 11:45 am, October 11th, 2012 - 21 comments
Categories: class war, national, wages - Tags: ,

National has given up whatever “ambition” it ever had for a high-skills high-wage economy. Last year Bill English took to describing our low wages as a competitive advantage (and a fact of life), John Key backed him up. So now we have youth rates, undercutting the “minimum” (yeah right) wage. Here’s what the Nats would have you believe:

Starting-out wage will put young people in work

Labour Minister Kate Wilkinson has today confirmed the introduction of a new starting-out wage that will help provide young New Zealanders with more opportunities to get into the workforce. …

“The new starting-out wage will create demand for young people by giving employers a real incentive to take them on,” Ms Wilkinson says. …

“These opportunities are vital if we are to address long-term benefit dependence, as 90 per cent of 16- and 17-year-olds who leave school and drift are likely to end up on benefits when they turn 18,” Ms Wilkinson says.

”The Government’s 90-day-trial periods are also helping employers provide job opportunities for thousands of workers. The starting-out wage is another initiative to help more young people into jobs,” Ms Wilkinson says.

Here’s Labour in reply:

Low Wage Future No Future At All

National’s plan to pay young Kiwis low wages will just see them saving up their $10 an hour for a plane ticket to Australia, says Labour Leader David Shearer.

“Under National’s watch, 65,158 young Kiwis aged between 18-30 have headed to Australia looking for better jobs and opportunities – 21,733 this year alone. Paying lower wages will just drive more of them offshore. …

“John Key is resigned to New Zealand being second best. He’s content with our country being a place of low wages and less opportunity, where people are leaving in droves for jobs overseas and where we are falling behind the rest of the world. …

“Paying young workers less just shows how bankrupt of ideas the Government is when it comes to tackling unemployment and creating secure, decent jobs.

And The Greens:

National offers young workers a hefty pay cut

The National Government thinks the way forward for New Zealand is to give young workers a pay cut, Green Party Co-leader Metiria Turei said today. …

“National’s proposal to reintroduce pay rates for young workers is simply another mechanism to deliver cheaper labour to employers and is discriminatory,” said Mrs Turei.

“Rather than offering young people a bright future, through skills and training, youth rates are about undercutting all workers’ wages by ripping off young workers. …

“This policy is an incentive for bad employers to hire and fire young workers and is likely to see real wages for young workers drop significantly,” Mrs Turei said.

The combination of youth rates and 90 day “fire at will” legislation certainly creates the opportunity for employers to churn through young staff – an infinite pool of cheap labour – as Danyl at Dimpost pointed out.

Amongst the compliant MSM coverage of youth rates, today’s anonymous editorial in The Herald contained some unusually thoughtful comments:

Young people are particularly vulnerable to unemployment in times like the present. When the world economy is beset by problems and business everywhere is wary of taking on more commitments, older people cling to the jobs they have and vacancies are taken by applicants with a solid work record.

The result can be seen in queues of keen young people for the most menial of jobs and, worse, in discouraged youth hanging about with not much to do. …

A minimum wage is a powerful economic regulation. It is also a convenient one for small employers in industries well supplied with applicants for every job. It saves them the trouble of negotiating a rate for their staff, individually or collectively, and protects them from having that element of their costs undercut by competitors.

It builds into the economy an incentive to work rather than subsist on an unemployment benefit and it protects those who, for reasons of pride, identity, dedication or sheer enjoyment of a job, might work for even less than the benefit. The statutory minimum wage is an important and sensitive subject for all these reasons. Governments should not raise it unless the economy is growing and business can afford it, nor should they do anything to undermine it.

Despite these interesting observations the anonymous scribe never the less concludes:

If a temporary saving for employers can get the unskilled young taken on, they will get a chance to show their aptitude and know that after six months they have a right to a rise. It is a sensible step, approved at last year’s election. Let’s hope it works.


We should certainly be creating more training and more jobs for young people, more jobs in general. No argument there. But we should be doing though innovation and sustainable growth, by moving forwards. Youth rates (even if they worked) are the wrong tool because they have built in to them an acceptance of economic failure. They accept that we should go backwards in our quest for a high-skill high-wage economy. They are based on the same “logic” as the Nats’ argument that low wages are a competitive advantage, and they deserve exactly the same chilly reception. In the real world low wages are driving Kiwis to Australia in record numbers. Lowering them further will just hasten our race to the bottom.

Update: Read Sue Bradford’s powerful response to youth wages here

21 comments on “The race to the bottom ”

  1. vto 1

    A cheeky someone from Greens or Labour or elsewhere should propose a Slave Wage Rate at a rate something above the current minimum wage.

    May help to highlight the situation.

  2. Enough is Enough 2

    I agree with you Anthony.

    Does the comment from Labour which states:

    “Paying young workers less just shows how bankrupt of ideas the Government is when it comes to tackling unemployment and creating secure, decent jobs.”

    mean that they are abandoning their 2008 policy where they introduced the the ‘new entrants wage’?

    Lets hope they have learned that an hours work is worth an hours wage. Age should never be an issue.

    • Lanthanide 2.1

      Labour’s policy was 3 months or 200 hours work, whichever came sooner.

      National’s seems to be 6 months, and BTW if you’re 18 or 19 on the unemployment benefit then you too.

      I actually think a middle ground between these would have been better:
      – 3 months or 200 hours work, whichever came later
      – Extended to 18-20 year olds that had been on the unemployment benefit for 12+ months

      • Enough is Enough 2.1.1

        Labour’s policy doesn’t reconcile with their current statement though. Correct me if I am wrong on that point. I hope I am.

        I don’t think there is a middle ground. You either believe all workers should get paid the same rate for the same work, or you don’t.

        Both the ‘middle ground’ and the National policy discriminate against a class of workers.

        • Lanthanide

          If indeed a youth with no prior work experience is doing the same job, to the same standards, as someone with 5 years experience, then indeed they should be paid the same.

          I suggest that that doesn’t happen very often.

          Obviously after a period of up-skilling / settling in to the job they should get the same wage. That’s what Labour’s policy recognised. My suggestions are clearly harsher than Labour’s, but not nearly as harsh as National’s.

          • Colonial Viper

            If indeed a youth with no prior work experience is doing the same job, to the same standards, as someone with 5 years experience, then indeed they should be paid the same.

            Explain why a cleaner, restaurant worker or labourer with 5 years worth of work experience and a reliable work track record is still being paid the minimum wage. Tens of thousands of them around in the country.

            • Lanthanide

              I’m not sure what that has to do with my point.

              IMO if you have been working for a period in a job and show you are solidly dependable then you are worth more than $13.50/hr to your employer, so you should be getting paid more.

              I’d say a cleaner in a hospital with 5+ years experience (for example) should probably be getting on the order of $17-18/hr in today’s money, more if they have any sort of supervisory position over other employees or responsibilities above just ‘cleaning’.

              This of course comes back to the cleaning companies not charging sufficiently for their services.

              • Kotahi Tāne Huna

                Nope, it comes back to Parliament’s refusal to act to make sure that people aren’t being treated like dirt. It comes back to the Employment Contracts Act and Labour’s failure to reverse it. It comes back to the Mother of all budgets.

                Sure, it would be nice if companies didn’t behave this way, and they hurt themselves by doing so, but I think it would be better if they were simply given a choice: treat your workers with respect or close down.

                PS: when a company is dysunctional enough to be incapable of paying its debts, an official assignee is appointed. No reason why this shouldn’t apply to scumbags as well as bankrupts.

                • Enough is Enough

                  I agree Kotahi,

                  The fact Labour governed through a time when the country went through a property and borrowing led boom, hid the fact they were weak when it came to Employment reforms.

                  Like many things Labour did, the ERA was simply a softening of the ECA. It took off the sharp edges but didn’t go anywhere near far enough to restore the balance in the employment relationship. Union memebership never really recovered from the gutting those National fuckwits gave it.

                  They always take the ‘middle ground’. Fuck the middle ground. Promote policies that benefit the workers the cosnstituency and the name you represent.

                • Te Reo Putake

                  While I agree the outcomes of the ERA are often poor, it is a million miles away from the ECA practically and philosophically. The ECA assumed a level playing field and workers supposedly had equal bargaining power with their employers. It also reduced unions to the status of ‘bargaining agents’, willfully refusing to recognise our ILO commitments to fair collective bargaining.
                  The ERA replaced that libertarian bosses charter with a genuine attempt to level the playing field with an insistence on good faith behaviour, union recognition and the ability for unions to pursue large collectives. However, good faith only works if both sides are committed to it and if there are serious sanctions to penalise bad faith behaviour. That’s missing from the ERA. And while CEA’s and multi employer collectives are allowed, they are not actively encouraged. But even so, the Nats intend removing what little advantage workers had in that area too. 
                  So the ERA is a major improvement on the ECA in lots of ways, but its still piss weak. The Shearer government will be beefing it up substantially. Thanks, Darien, thanks, Greens!

                • Lanthanide

                  I don’t think it’s up to the government to “fix” everything that is broken with legislation.

                  Of course this issue also affects the government itself, particularly for low-paid jobs such as cleaners who operate in hospitals, schools and any other number of government offices and buildings throughout the country.

                  Ultimately I think a lot of NZ’s problems simply come down to the population density. There are fewer people living in NZ than there are in the Bay Area of California, but NZ is many times larger. We’ve got a huge road network and massive amounts of lightly used infrastructure that sucks up cash.

                  • Kotahi Tāne Huna

                    Lanth: I don’t think it’s up to the government to “fix” everything that is broken with legislation.

                    But is it too much to ask that they prioritise the things that are manifestly dysfunctional?

                    TRP: …but it’s still piss weak. The Shearer government will be beefing it up substantially.

                    Well indeed. I should bloody well think so! 🙂

                    I think if and when said beefing up occurs, the economic boost resulting from better wages will be one of the final nails in the “neo-liberal” fantasy’s coffin.

                    The National Party will not notice, however, and will continue to insist that water is dry.

              • Draco T Bastard

                This of course comes back to the cleaning companies not charging sufficiently for their services.

                They charge sufficiently – it’s just that the only people who benefit from the work done is the directors and shareholders.

            • Murray Olsen

              Exactly CV. If people without the experience deserve less, why don’t those with the experience deserve more? Nothing is stopping these parasitical employers from paying more to their long term workers.

        • Colonial Viper

          Please be fair. Labour’s policy is definitely a bit lighter shade of blue than National’s.

  3. aerobubble 3

    The market is king, the market has spoken, the high dollar, high house prices, low quality homes, low wage job offerings, all point to young skilled people leaving NZ. Clearly and simply, the high dollar is an incentive to cash up and jump the ditch in the great exodus. Why National isn’t listening to the market, is much like the way Key found out about a new mega rich individual moving into his electorate, after the shit hit the fan.

    Self-exporting exodus incentive from high dollar.
    Whose going to pay the taxes for the boomer super retirement?

  4. Clashman 4

    Funny how when the debate over the puchasing age for alcohol was going on we were told how when your’e 18 you can vote, die for your country, have a family and be working etc so how can we deny these “adults” the right to have a drink at the end of a days work…..just don’t expect to be paid properly

  5. Bill 5

    How many 16 -19 year old’s are employed by the likes of McD, BK, Subway etc? Because I really see why these companies need, essentially, a 30% saving on their wage bills – poor and hard done by corporate bastards that they are.

  6. Jokerman 6

    freakin discrimination.
    imagine “adjustments” to wages and salaries of people as they aged and became less mobile or able to

    (Gregor’s only wish was to do all he could to help his family forget the disaster which had put them into a state of desperation…Whenever he heard them mention the need to earn money he felt full of shame and grief)

  7. AsleepWhileWalking 7

    I’m encouraging my kids to run their own business. This wage crap is gonna help me out. And hey, it would be really great if they could exploit…sorry… help their schoolmates out with a lower starting wage so they get experience.

    Gotta learn them young that they have a choice and electing NOT TO ENTER THE LABOUR MARKET and begin what could be a lifelong practice of submitting to unfair labour laws in the first place is perfectly legit and supported by me even if it means living at home, on a benefit while in the start up phase and doing the bare minimum to retain a baseline income. Go my babies, go!

    • Lanthanide 7.1

      You can already pay people aged 16-17 the $10.60 rate or whatever it is, for 200 hours or 3 months, whichever is the shorter, under existing legislation.

      I do question your ability, or seriousness, in setting up this business, if you didn’t even know the above.

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