Finance Minister Grant Robertson on the Government's decision to increase minimum wage during coronavirus lockdown.
Opinion by Liam Dann
Liam Dann, Business Editor at Large for New Zealand’s Herald, works as a writer, columnist, radio commentator and as a presenter and producer of videos and podcasts.
The world has changed radically since the rise was proposed.
Employers are now struggling desperately to cut costs just to stay afloat. In many cases that means redundancies and wage cuts.
However Council of Trade Unions President Richard Wagstaff also makes a compelling case for fairness at a time when many of our lowest-paid workers are on the front lines fighting the spread of the Covid-19 virus or working to keep vital services like food supply up and running.
"Within our society the people who are often paid the minimum wage are those working in roles such as supermarket workers, cleaners, rubbish collectors," he said. "These people have always done essential work to keep our society going. Covid-19 has shown us all what necessary work these people do, how essential their roles are."
Ultimately the Government's commitment to sticking with the minimum wage rise must come with a renewed commitment to keeping firms afloat.
That will mean expanding the wage subsidy programme in the days ahead.
Without that, minimum wage rises may be irrelevant as unemployment rates soar, pushing down wages across the board.
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Finance Minister Grant Robertson said today he expects unemployment to rise sharply.
He said it was not possible to give accurate projections or forecasts but unemployment will be more than 6.7 per cent – the jobless number after the global financial crisis.
Treasury has said the percentage could reach double digits - a view shared by most bank economists.
The Government will argue that, like increases to benefit rates, increases to the minimum wage are stimulatory.
They are right.
We potentially face a period of deflation in the economy as demand falls sharply.
We've already seen petrol prices slump to near 20-year lows but no one is benefiting, because no one is buying.
Consumer spending is taking a massive hit and will continue to be soft for some time as people react to increased job insecurity.
Those at the lower end of the economic spectrum are more likely to spend any money they receive and that will have a stimulatory effect - however small that might be in the grand scheme.
But if more regulatory demands on business mean more people out of work it will be a moot point.
As we pass April 1 the debate about whether to delay the change - or not - is now also moot.
Businesses are still likely to be facing tough economic times in nine months as they face higher debt and a much-changed economic landscape - although we must hope the world will be in recovery mode.
That tough outlook means possible plans for further minimum wage rises in coming years will be harder to implement.
On that basis the Government - through a political lens - probably saw today's rise as a case of now or never.
