The 9 day fortnight

Starting to see some details around the vexed question of who pays for the 10th day if workers go on a nine day fortnight.

Obviously the business can’t still pay staff for the tenth day, when the whole idea is to help businesses survive by reducing their costs. Having them pay the same wages for one less day’s work would make things worse, not better.

So that leaves either the workers not getting paid for the tenth day, or the Government paying.

As usual, John Key looks to be heading towards a pragmatic compromise, according to Tracy Watkins in the Dominion Post:

The Government has ruled out a wage subsidy on the grounds of cost, but is considering an allowance based on a “benchmark”, such as the average or minimum wage.

Government sources say a 100 per cent wage subsidy for the lost day’s pay is too expensive and would send the wrong signals to business, which might see it as an opportunity to trim wage costs by getting the Government to pick up the tab.

The minimum wage is $12.50 an hour which is $100 for an eight hour day. So the Government would be paying around $2,600 a year to a worker on their day off. If 100,000 workers go onto this scheme, then the cost is $260 million a year plus admin costs.

Some unions have said they want it higher, such as the median wage. The problem with that though, is some employees who earn less than the median wage will actually get paid more by having the tenth day off for training, than is otherwise the case.

In the long term is is silly to think a sustainable business model is to have the Government pay 10% of the wages of every worker, to save businesses model. If that is a good idea, then why not have the Government pay 100%.

So the key is that it has to be temporary and targeted. It arguably is not economically efficient – but if it can avoid unemployment hitting double figures, that will reduce the downstream effects in terms of crime and benefits etc.

I am nervous about the ability of the Government to target it only to firms that really need it. They team that has to implement this will need to be very good.