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A Minimum Wage Rise Puts Costs Onto Employers Not Taxpayers

Minimum wage rise would put costs onto employers rather than taxpayers

"Recent discussions about Labour's plans to increase the minimum wage seem to have missed an important point" Says Kay Brereton of the Wellington People's Centre.

Currently taxpayers subsidise employers paying the minimum wage through the Working for Families Tax Credit package. Increasing the minimum wage would put the costs onto the employers who are benefiting from the labour of their employees.

The Minimum Family Tax credit ensures that sole parents working a minimum of 20 hours per week, and couples with children working a minimum of 30 hours per week receive nett pay of $408 per week.

This equates to $20.40 per hour after tax for sole parents and $13.60 per hour after tax for couples, which means taxpayers are subsidising this employment to levels well above the current minimum wage.

I doubt that employers are operating with the additional capacity to reduce staffing numbers should the statutory minimum wage increase, and question whether it is fair that the New Zealand taxpayer so heavily subsidise these employers to pay a wage the government clearly believes is insufficient to support a family.

Further it has been asserted that a rise in the minimum wage would fuel youth unemployment. This is an interesting idea given that thousands of people have been added to the pool of those seeking work through the current policy of work testing sole parents and sickness beneficiaries.

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