What Use Are Businesses That Don’t Pay Workers A Living Wage?

So the minimum wage is to increase by about $1 an hour each year to 2021. That’s approximately $2080 a year for a full time worker. Not exactly winning Lotto. It’s hard to see how anyone could object to that. Yet already there are claims that it will lead to job losses and worse.

There is absolutely no evidence that wage rises lead to job losses. It’s a fair bet that most of those doing the complaining are well able to pay workers a decent wage, but choose not to do so in order to make bigger profits for their owners and shareholders. They are also the first to sanction huge increases for their CEOs, claiming they need to offer high salaries to attract the best person for the job. Oddly this logic does not extend to the rest of their employees, who actually do the work that makes their profits. They don’t seem to understand that a CEO is only as good as his workers.

The proposed minimum wage increases, though a good start, are still well short of the living wage. The living wage is already $20.20 per hour, and with inflation running at just under 2%, will probably be around $22.00 per hour, at least, by 2021. This is what we should be worrying about.

What use are businesses that don’t pay workers a living wage? Our taxes have to be used to subsidize these businesses by providing extra money to make sure that workers have a roof over their heads and food in the cupboards. Our tax take is reduced because low paid workers can pay only minimal taxes themselves. This despite their employers making full use of the services provided by the state – infrastructure like roads, free education and health care, and our justice system. And the poor payers make it difficult for similar businesses that are prepared to pay workers a living wage to compete. The final insult is that many of these businesses are overseas-owned, take their profits overseas, and pay only minimal taxes in New Zealand.

Make no mistake, businesses that pay their workers poorly cost us. Rather than expecting workers to subsidize businesses, the government needs to turn the situation around. It needs to look at businesses on a case by case basis, and subsidize them directly if they are in genuine financial trouble and it is in the public interest that they continue to operate. Especially if they are new enterprises that could help mitigate the effects of climate change or help us to minimize our waste. Each business should have to prove that their business is of benefit to the community and explain why they need help to pay workers properly. That way we have transparency and public accountability for government money spent on subsidies. However, if the government gets involved there should be strict limits on wages for top employees – a 1:12 ratio where no employee makes more in a month than the lowest-paid employee gets paid in a year, is a good place to start.

So, thank you to the incoming government for making moves to increase the minimum wage. The only regret is that New Zealand First did not prevail on this issue and have the minimum wage increased to $20 right away. Despite the naysayers, New Zealand has everything to gain and nothing to lose by all workers earning a living wage. Imagine all the extra money coming into the local economy and the government coffers via increased tax revenue, which would allow it to improve the incomes of those most in need. Imagine the effects for everyone with reduced inequality and making poverty history.

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