February 18, 2020

New Zealand’s National Party to potentially scrap planned minimum wage increases

New Zealand’s National Party to potentially scrap planned minimum wage increases

If it wins this year’s election, the New Zealand National Party, shortened to National, is considering scrapping the government’s plans to increase the minimum wage. The party’s finance spokesman Paul Goldsmith has announced that National is considering putting a stop on the minimum wage rise, which the government has progressively been increasing. The initial promise was for it to reach $20 an hour by April 2021. In a statement, Goldsmith said that the party is “focused on making it easier for average wage earners, New Zealanders who are working hard every day and struggling to get ahead.”

IZA World of Labor author David Neumark has looked at the correlation between minimum wages and job creation. In his article he notes that: “The potential benefits of higher minimum wages come from the higher wages for affected workers, some of whom are in poor or low-income families. The potential downside is that a higher minimum wage may discourage firms from employing the low-wage, low-skill workers that minimum wages are intended to help.” Neumark concludes that the minimum wage is a relatively ineffective policy for achieving the goal of helping poor and low-income families. “More effective policies are those that increase the incentives for members of poor and low-income families to work,” he concludes.

Whilst New Zealand’s Finance Minister Grant Robertson has said that the minimum wage increases mean that everyone gets “a fair share in prosperity,” National believes that it stifles growth and puts a lot of pressure on small businesses. “We have signalled that in this election year that a small business relief package, in a sense, will be part of the story,” Goldsmith has commented. According to him, to pay for the tax cuts, the party is considering government policies such as fees-free and the Provincial Growth Fund (PGF) which might be done away with. However, the money for the PGF has already been assigned by the Treasury and can’t be cut by the National Party.

Read David Neumark’s article Employment effects of minimum wages.