Dialogue: Ouch! It's painful being in business

By GARTH GEORGE

For most of my lifetime there have been two sorts of people in New Zealand known for their whinging - the unions and the farmers. But in recent years, and particularly since the election of this Government, their place has been taken by businessmen or, more accurately, those who represent that ill-defined thing called just "business".

And, quite frankly, the whinging of business, which seems to be building to a crescendo in this an election year, makes the cockies and unionists of old look like the most cheerful of optimists.

Nothing illustrates that better than the lead story in the Business Herald on Monday, headed "Ouch ... the load is hurting".

It tells us, in all seriousness, that policies of the Labour-Alliance Government will have "loaded an extra $26,000 in costs on a medium-sized business during its three-year term in power".

Gee whiz, what a burden! The story tells us that this shows "the insidious effect of Government policies on business".

This $26,000 is a figure dreamed up in an exercise in which various increased costs are attributed by a hypothetical accountancy service to a hypothetical medium-sized New Zealand business over the Government's three-year term. We are told that the business operates in the service sector from a premises with a capital value of $500,000, has an annual turnover of $4 million and an operating surplus (I presume that means profit) of $174,000.

This hypothetical company employs a staff of 20 with a wage and salary cost of $725,248. The owner, we are told, draws $100,000 and the manager $70,000, which means the other 18 on the staff average roughly $30,000 each.

The first thing we realise from these figures is that the $26,000 in extra costs over three years, some of which are also hypothetical, represents 0.21 per cent of a turnover of $12 million or 3.5 per cent of the three-year operating surplus of $528,000, which I assume goes to the owner on top of his $300,000 in salary.

So what are the costs that make up this dreadful load that business is hypothetically carrying? Mostly they are things that the business should have been paying for all along but which it hasn't been because of the uncontrolled profiteering that ran riot for 15 years until Labour applied the brakes soon after it was elected.

For instance, we are told that the five days paid leave for union members to take part in employment relations training under the Employment Relations Act might cost as much as $1320, which is 0.0011 per cent of turnover. Add a half day for the manager to undertake an ERA course, priced at $382, and the cost of ERA provision rises to a staggering 0.0014 per cent of turnover.

Under the Act unions can negotiate more robustly and the cost of that to the business is put at $2460, another 0.02 per cent of turnover.

Then there's the new health and safety regulations proposed under the Employment Act which, our hypothetical accountancy service tells our hypothetical business, could cost it $2000 for extra training of staff, another 0.0166 per cent of turnover.

On top of that, under the new OSH laws the business might face increased risk and be up for fines, so it is advised to set aside a whole 1 per cent of its wage bill, or $7252, against those contingencies. And another $314 so an employee representative can be trained in the new law which brings it up to 1.03 per cent.

(I'm sure all the relatives and friends of the dozens of workers who have died on unsafe and badly supervised jobs in the past 20 years or so will feel a great deal of sympathy for the poor businesses that have to carry these burdensome costs.) Increased holiday pay hypothetically adds another 1 per cent to the wage bill and increases in the minimum wage (a massive 30c an hour to $8) adds $2703, or 0.37 per cent. And in case one of his staff gets pregnant, he had better plan on it costing $500.

(Isn't it a tragedy for business that the Government is prepared once again to ensure that workers are fairly treated after years of their being screwed blind?) There are other things, too, which will surely make the poor, hypothetical, cost-conscious owner go grey before his time - rates, resource consent fees, assorted ACC charges, fuel rises and fringe benefit tax.

And so it goes on. There is not one mention of careful cost management, increasing efficiency, aggressive marketing or, more likely, increased prices - any of which could wipe out the $26,000 in a matter of months. No mention, either, that like all the rest of us business must learn to live within its means. Increasing costs are a fact of real life for all of us.

Anyway, I'm glad I'm just a salary-earner. I couldn't stand the misery of being a businessman.

* garth_george@nzherald.co.nz