1 February 2016

Substantial minimum wage rise needed to boost spending

In the run-up to the annual minimum wage announcement, a union representing low paid workers is calling for a substantial increase to help boost spending and guard against deflation.

“A 25 cent or 50 cent increase won’t cut the mustard for working people and their families,” says Robert Reid, General Secretary of FIRST Union.

“And nor will it help lift the economy.”

“New Zealand is in a unique situation: we can substantially increase the minimum wage to both boost spending in the economy (as the Reserve Bank has called for) and reduce inequality.”

“In our submission to the Minimum Wage Review in October 2015 we called for a minimum wage that’s at least two-thirds of the average wage, or $19.46.”

“The government can implement this in three stages: $16.50 this year; $18.46 in 2017; and up to the anticipated level of the average wage in 2018 of $20.65,” explains Reid.

“But since submissions last October the spectre of deflation continues to grow. Governments and Reserve Banks both here and across the world are searching for ways to restart their economies and lift inflation into their target bands.”

“A significant increase to the minimum wage ticks all boxes,” says Reid.

“When inflation is at or near the top of the band the government and the Reserve Bank have called for wage restraint because they say it’s inflationary. With inflation now at 0.1% and enforced restraint on low wages over the last decade, the Government has an opportunity to “revive two birds with one policy” by increasing the minimum wage by at least $1.75 to $16.50 per hour on 1 April this year.”

ENDS

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