KEY POINTS:
Michael Cullen demanded this week that employers must increase wages. We have an extraordinary situation where we have full employment yet our wages are among the lowest in the developed world.
Employers tell me that they can't get staff and can't retain their experienced staff, with the best
and the brightest moving overseas to earn more money.
Profits are way up and business has been so successful here that the Reserve Bank has to keep jacking up the interest rates to slow the economy. The World Bank continues to commend our government for its pro-business policies and rates us number one on Earth when it comes to supporting business.
Therefore it must be galling to the Government that the chiefs of certain employer groups keep demanding that the Government create an even more pro-business environment. I suspect this has more to do with politics than business.
Taxpayers pour hundreds of millions of dollars into supporting economic development for businesses and subsidising business profitability. You can almost understand Cullen's frustration when employers, at the same time as receiving millions of dollars in taxpayer support, demand tax cuts as a solution to skilled workers' exodus to other countries.
Even if we gave workers a $50 weekly tax cut, their wages would still be well behind Australia's. The problem is New Zealand employers have been getting away with paying less than workers can live on for years.
Until now, government initiatives have arguably let low-paying employers off the hook and have institutionalised a poverty trap. For example, rent subsidies paid to low-income workers make no difference because rents have increased in response to soaring house prices. Although the heralded family support is a welcome relief to low-paid parents, it helps sheet in low-paid wages. This comes about because any increase in wages a parent may get is then deducted from their family support, neutralising any benefit.
Employers have used this contradiction to persuade their workers that paying them more money is pointless. Some employers deftly avoid their miserliness by claiming that the solution is to give everyone a tax cut instead of a wage increase. If they think that they will stop the migration of our best and brightest because they get a small tax break, they're self-deluded or dishonest.
Cullen is bang on when he says the problem is that employers need to pay a bigger wage to their employees, and lift their game in terms of management skills and productivity. The reason business productivity in this country is low is not because of the workers. Rather it's because of low-skilled management and greed by many owners. The problem is many businesses do not put their profits back into plant and equipment but take it out of the business as profit. Many then claim that skill training needed for their employees should be paid by the government. This is a hypocritical position. While calling for tax cuts they are demanding taxpayers subsidise their productivity and training needs to retain employees.
Last year, companies had their corporate tax reduced from 33 per cent to 30 per cent. The argument raised by business was that this tax cut was needed so that companies could reinvest their profits back into research and pay their workers more. Of course, none of this happened. Many employers have been creaming it for so long that it is impossible for them to change their habits.
New Zealand workers, according to numerous reports, have the most flexible terms of employment and hours of work in the world. We have the highest percentage of people working more than 50 hours a week than any other developed country. Few households can survive on the income of one breadwinner. We have an increasing social dysfunction in our society as many parents are required to spend too much time away from their families because of work demands.
Cullen has said that he will set out tax cuts over three years, starting after the election. The ploy is that if we want those tax cuts, we'll have to return the Labour Party to power.
What we have now is a society where inequity has cemented in. A third of New Zealanders are never going to be able to afford their own home; the average wage earned by the average New Zealander cannot even pay for the basic necessities of life. The minuscule tax breaks that will trickle down to workers next year won't change a thing whether Labour or National is in power.
What we have had in New Zealand is decades of a free-market economy based on the attitude of screwing your workforce for as much as you can get out of them. In many cases, record profits have been shifted overseas. Many skilled New Zealanders are leaving the country to find better jobs in the first world. New Zealand compensates this by stealing skilled workers from third world countries.
We have become a basket case and it's a disgrace. The Finance Minister begging employers to pay a decent wage won't work.