Tuesday, January 19, 2010

ZenTiger Minimim Wage Rise - Wrong Demand

There is some chatter about raising the minimum wage from $12.50 per hour to $15.00 per hour.

Recall recent wins for workers: an increase from 3 to 4 weeks annual leave on top of 12 public holidays. Minimum super contribution from employers of 2%. Abolition of the youth rate.

Is this latest request sensible? Well, I think we have been presented the wrong question.

Instead of demanding the minimum wage go up, demand the government not tax the first $25K. Sure, they might have to budget and reduce expenditure down to essential items, but every other wage earner faces issues like that.

It would do a lot more for the economy, and all tax levels benefit.

And rather than insisting the minimum wage be indexed to the average wage (to make automatic rises of the minimum wage, insist the tax thresholds are indexed.

Employers, workers – everyone wins.

7 comment(s):

PM of NZ said...

ZT, I saw your comment over at my place the other day. I wondered how much such a move might cost.

A person on $25K pays $4370 tax. Total cost to NZ $4.4M for 100,000 on minimum wage. A cheap fix ($5M out of $60Bn) and happy workers.

A $2.50/hr 20% increase on minimum wage costs $5200 pa (2080 hrs worked). A more expensive fix, costing business profit directly, something we can ill afford post recession.

ZenTiger said...

Good point.

Although I was also thinking that we make the tax threshold apply to ALL workers.

To fund it we could try something extremely radical: Reduce Government Spending.

KG said...

Reduce government spending?
NotPC has a list:
# Cindy Kiro's Office for the Children's Commissioner
# Peter Dunne's Families Commission
# Paula Rebstock's Commerce Commission
# David Lange's Ministry for Women's Affairs
# Jim Anderton's Ministry of Economic Development
# The Ministry of Youth Development
# Asia New Zealand Foundation
# The Ministry of Pacific Island Affairs
# The Ministry for Maori Affairs
# The Race Relations Conciliator
# Alcohol Advisory Council of New Zealand
# Action on Smoking Hysteria
# Electricity Commission
# Energy Efficiency & Conservation Authority
# The National Advisory Council on the Employment of Women
# The Department of Labour

I probably missed a few, but that'd be a good start.

PM of NZ said...

OK, we know 100K receive the minimum wage. How many actual workers are there? Not dole bludgers or other recipients of my hard earnt taxes.

1M tax payers each not paying $5K of tax on the bottom $25K will cost $5Bn. 2M taxpayers? $10Bn. No wonder the thieves at the gummint are reluctant to cut their income stream.

So, as KG via Not PC suggests and what any right thinking household budgeter would do, cut the expenses. Savagely. Make the income exceed the outgoings.

ZenTiger said...

He obviously does cut and paste year on year. Kiro has moved on from the Children's Commission.

Still, given Ministry of Social Development has something like 17,000 staff, yes there must be a few agencies that can be pruned, trimmed and pared back.

KG said...

I was in a hurry Zen. ;-) But the point remains that we're paying for a massively bloated bureaucracy and any government which fails to prune it isn't governing honestly.

ZenTiger said...

Indeed, and what a difference changing the question from "make employers pay more" to "ask the government to take less"

Key's all very keen to make the tax system "fairer" and I suspect this is code for introducing new (additional) taxes. There will be a few adjustments to make it seem "reasonable" and then they all go creeping up again.

We are being distracted with wage rises, when the government is burning $250 million a week.

Spend less, take less.

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