SUBMISSION BY THE NEW ZEALAND CHAMBERS OF COMMERCE ON THE MINIMUM WAGE REVIEW 2015

Transcription

1 1 SUBMISSION BY THE NEW ZEALAND CHAMBERS OF COMMERCE ON THE MINIMUM WAGE REVIEW 2015 Intrductin 1. The New Zealand Chambers f Cmmerce welcmes the pprtunity t make a submissin n the Minimum Wage Review The New Zealand Chambers f Cmmerce (Inc), NZCCI, is an umbrella rganisatin serving the interests f 29 Chambers f Cmmerce natinwide. These, in turn, represent mre than 24,000 businesses arund the cuntry. While many f ur members are in the SME categry, ur membership includes mst f the largest crpratins in New Zealand. 3. Address fr service is: Michael Barnett, Chairman, Management Cmmittee, NZ Chambers f Cmmerce, mbarnett@chamber.c.nz, r phne: Backgrund & Scpe 4. NZCCI nte that in 2012 Cabinet adpted a cyclical apprach fr the annual review f the minimum wage with a cmprehensive review every furth year. 5. This year s review will be the first cmprehensive review under the new apprach. It will fcus n inflatin, wage grwth and unemplyment (as in previus years), but als cnsider additinal factrs, including: Whether changes in the minimum wage have kept up with labur prductivity Effects f minimum wage increases n factrs such as scial assistance received, business grwth, hurs wrked by emplyees, and wrkers that are earning at a rate slightly higher than the minimum wage. Infrmatin sught includes: What impacts are likely frm a mderate increase in the minimum wage rates n Chamber member businesses? Taking all factrs in t accunt, what des the Chamber cnsider is an apprpriate setting fr the 2016 adult minimum wage? What prprtin f wrkers is directly affected by the minimum wage? Hw lng d peple tend t remain n the minimum wage? What factrs affect the length f time smene is paid the minimum wage?

2 2 Flw n impacts - Are wages f peple earning abve the minimum wage increased as a result f minimum wage increases? What effect has increases t the minimum wage had n business grwth, and hurs wrked by wrkers? 6. NZCCI undertk a survey f Chamber members t help infrm ur respnse n the infrmatin sught. The detailed findings are summarised belw. Need fr stry-telling t clarify the difference between the minimum and living wage 7. NZCCI ntes that the minimum wage is part f the Gvernment s general respnsibility t ensure scially acceptable emplyment standards that are prescribed and enfrceable. Additinally, there are frmal internatinal cmmitments that establish an explicit bligatin n the Gvernment (e.g. as a member state f the ILO Minimum Wage-Fixing Machinery Cnventin) t ensure an adequate minimum wage. 8. By cntrast, the living wage is highly subjective and is based n what husehlds must pay in rder t meet basic needs while living in a particular area r regin. We nte that there are several public plicy cncerns ver the accuracy f the living wage currently in use and questins as t whether it will achieve what it is intended t d. With a living wage, the amunt may be higher in sme areas, such as a large city (like Auckland), while a lwer wage wuld allw that same standard f living in a different area such as a rural twn. Gvernments d nt set living wages. 9. While bth terms are used t describe certain aspects f wages and salaries as they relate t the benefits extended t emplyees, sme cnfusin abut what is meant by each term ccurs, and did s in sme f the respnses t ur survey (see belw). 10. The pint in respect f this submissin is t suggest t Gvernment that it needs t be very clear abut what the difference is between the terms minimum wage and living wage. In its cmmunicatins in respect f the 2015 Minimum Wage Review we submit that Gvernment shuld NOT let it becme mre than what was intended when the minimum wage setting bjective was set; namely: t set a wage flr that balances the prtectin f the lwest paid with emplyment impacts, in the cntext f current and frecast labur market and ecnmic cnditins and scial impacts. Chamber Survey 11. The NZCCI submissin is infrmed by the findings f a survey we cnducted by amng Chamber members. There was an even distributin amng the 390 respnses acrss key sectrs f manufacturing, retail and prfessinal services. 12. Arund 70% f respnses were frm businesses with between 1-and-20 emplyees. 13. A majr finding was that ver 50% f respndents indicated that they d nt have anyne n the minimum wage. Other main findings

3 3 14. Other findings f the survey were: Mst f thse wh jin a business n the minimum wage stay n that rate fr between 6 and 12 mnths many are shrt temprary cntracts, students, apprenticeships. Fr permanent emplyees starting n a minimum wage, in mst cases, wrk attitude and feedback frm staff are the main factrs that affect the length f time smene stays n the minimum wage. In respect f the impact the annual increase in the minimum wage has n the business, 56% f respndents indicated it affects pay relativities. There was a lesser respnse but an even spread f pinin in respect f ther factrs such as impact n hurs wrked, reduces prductivity, makes recruitment harder and csts jbs. In respect f whether businesses undertake a flw-n adjustment f wage rates f ther wrkers as a result f minimum wage increases, there was an even 50:50 split between thse that d make an adjustment and thse that dn t. Hwever, f the just under 50% f respndents that d make a flw-n adjustment, 60% indicated that they adjust the wages f all wage earners, while 40% indicated they adjust the pay f nly wrkers earning just abve the minimum wage. 15. In tw areas, the view f respndents was mre clear cut: On staff training, arund 75% f respndents indicated that they encurage staff n minimum r lw wages t undertake training. In mst cases training was part f the firm s incentives t upskill and increase prductivity and grwth. There was als strng supprt fr Gvernment giving greater emphasis t linking training allwances t thse n the minimum wage entitlement. On what an apprpriate minimum wage setting wuld be fr 2016, mst mentined was between $15 and $15.50 an hur. That is, an increase f between 25c and 75c an hur n the current adult minimum wage f $14.75 an hur. A number f respndents als recmmended linking the minimum wage t the Cnsumer Price Index (CPI), and lcking it in at a level that is (and remains) higher than welfare related assistance, such as jb seeker supprt ). Additinal bservatins 16. NZCCI acknwledges that Gvernment is required under sectin 5 f the Minimum Wage Act 1983 t annually review the minimum wages rates by 31 December each year. 17. Hwever, the actual number f peple n the minimum wage is relatively small, and which ur survey cnfirms. Minimum wages are being paid t apprximately 62,700 wrkers, making up apprximately 2.7% f all emplyees (ttal f 2,346,000). 18. That is, NZCCI strngly recmmends that Gvernment nt make the minimum wage review int smething ther than what it is intended t be (as set ut in paragraph 10 abve). The review s task is NOT t try and determine what an apprpriate living wage might be.

4 4 19. Secnd, NZCCI has sme sympathy with bench marking the minimum wage t the CPI, as a number f survey respndents suggested. But it is nt a straight frward matter. 20. Certainly, we agree that the minimum wage level shuld be higher (and a better incentive t take up emplyment) than a benefit, and the differential with benefits shuld be maintained. 21. Hwever, we nte that New Zealand has a mderately high minimum wage fifth highest in the OECD. 22. Further, we have a cncern with the evidence frm the survey suggesting that many businesses emplying peple n the minimum wage make an adjustment fr all wage earners when the minimum wage rate is increased. That is, the minimum wage increase becmes a prxy fr a wage increase fr everyne regardless f prductivity fr relativity alne. That is nt a gd utcme, we submit; especially as last year s increase fr example meant business had t increase wage csts by apprximately $60 millin alne fr the 115,100peple wh were n less than the increase ($14.25-$14.75). 23. Setting the minimum wage is always a balancing act. As an example, we wuld submit that the 2015 year increase was mre than a mderate increase at 3.5 percent, when unemplyment remained high at 5.4 per cent, CPI increase was 1 percent, and wage increase was 2.3 per cent. 24. In summary, NZCCI is strngly f the view that there needs t be a balance maintained t ensure the increase in the minimum wage desn t fuel a demand fr wage increases acrss the bard, but at the same time delivers n its (statutry) respnsibility t prtect the real incmes f lw-paid frm emplyment impacts. 25. The incentive fr smene t have a jb n the minimum wage rather than remain n a benefit is ne factr t balance. T ensure the increase in the minimum wage is affrdable t the ecnmy and desn t becme a prxy wage increase acrss the bard is anther factr t balance. 26. In ur view, getting the balance right is nt simple abut the numbers. It is als abut the stry telling. As we have suggested abve, it is als abut, perhaps mre imprtantly, ensuring that the stry yu wrap arund the minimum wage increase annuncement makes very clear what its purpse is, and als what its purpse is nt. 27. T restate, the stry telling by Gvernment needs t clearly differentiate between the minimum wage what it is and why it is required and the living wage cncept (what it relates t, its subjectivity and why it is nt the rle f Gvernment t set living wages). 28. NZCCI is available t assist in this messaging. CONCLUDING COMMENT 29. Our submissin n the Minimum Wage Review 2015 is put frward in the psitive spirit f achieving measurable imprvement t reslve New Zealand s prductivity cncerns.

5 5 30. We trust they will help infrm the review t reach an apprpriate decisin. If yu wuld like t further discuss please cntact Michael Barnett directly by r n Michael Barnett Chairman, Management Cmmittee NZ Chambers f Cmmerce mbarnett@chamber.c.nz 6 Octber 2015