Key can't get basics right | The Jackal

3 Sep 2013

Key can't get basics right

Yesterday, Stuff reported:

Mr Key was critical of calls from Labour Party leadership candidates for a living wage of $18.40 to be introduced for all government employees.

He said Labour "clearly had no understanding of economics".

The policy would cost the government $2.5 billion dollars and lead to 26,000 people losing their jobs.

Clearly it's a back of the envelope calculation that is of course wrong! What else do you expect from a merchant banker who used to work for Merrill Lynch, one of the companies responsible for causing the financial crisis the world is still struggling to recover from?

Instead of it costing $2.5 billion to pay government employees $18.40 per hour, that's the cost the Ministry of Business Innovation and Employment claim it would cost ALL employers to pay ALL low waged workers in New Zealand a living wage.

Here's the relevant NZ Herald report from April 2013:

The ministry's policy manager Cherie Engelbrecht and general manager of labour environment Kirstie Hewlett compiled the report, which showed there are 84,000 people on minimum wage and a further 221,000 low wage workers being paid between $13.50 and $15 an hour.

[...]

The ministry said increasing the minimum wage to $18.44 would constrain employment growth by 25,000 jobs, increase annual wage costs by $2.6 billion and increase inflation by 1.27 per cent.

You might have noticed that paying all workers a living wage won't lead to 26,000 job losses, it will instead perhaps constrain employment growth by 25,000.

To put the PM's brain fart into context, there's around 40,000 government employees paid below $18.40 per hour while there are approximately 740,000 people in private employment in New Zealand paid below the living wage. Key has overinflated his argument by 1750%.

Confusing these two groups of people to try and show Robertson and Cunliffe's policy is unaffordable is dishonest! But what else is new?