The cost of just one promise

Tracy Watkins at Stuff reports:

Key said yesterday the “living wage” promise was “unbelievable”, and a “back-of-the-envelope calculation” put its cost at $2.5 billion if rolled out to all low-paid workers, or $68 million a year if implemented just within the core public service.

Economists had also estimated it would cost 26,000 jobs, because of the extra cost to business.

And that’s just one policy!

Someone who earned $13.75 an hour working 40 hours a week with three children would pay $4000 a year in tax on an income of $29,000. But they would get about $23,000 a year back in accommodation supplement and Working for Families payments.

The living wage calculations by the Anglican Church are unsuitable for application across the board as a minimum wage. They are based on an employee having a certain number of children. Not all employees have children, in fact most don’t. A 17 year old cleaner doesn’t need $18.40 to live on. Hell many university graduates start on less than $18 an hour.

The Dominion Post is unimpressed with the three candidate’s mad rush to the far left:

Well that didn’t take long. Labour’s American-style primary contest is only days old, but already it is apparent that in terms of policy none of the three contenders for the leadership has any more to offer than the departing David Shearer.

Caucus favourite Grant Robertson’s big idea – one quickly signed up to by party champion David Cunliffe – is to introduce a living wage of $18.40 an hour for all government workers. Meanwhile, Shane Jones, the outsider in the contest, is threatening to pass laws to regulate how much supermarkets can charge for food.

Both ideas sound great. Who doesn’t want lowly paid workers to get greater reward for their efforts? Who wouldn’t welcome a reduction in food prices? The problem is that neither proposal is remotely deliverable.

Labour’s leadership candidates are employing the rhetoric of old-fashioned class warfare. Soak the rich to feed the poor. 

I don’t know why the three of them just don’t come out and say they are deporting all rich pricks, confiscating their wealth and declaring poverty to now be illegal!

Mr Robertson will say his proposal applies only to government workers and contractors, but limiting its application only creates inequities of another sort.

Why should a cleaner mopping out a privately owned building earn several dollars an hour less than a cleaner vacuuming a government building? Why should a worker in a privately owned rest home receive less government support than would otherwise be available, because the Labour Party has decided to advantage a subset of all workers.

Oh I can answer that one! So the unions will vote for them to become leader.

Mr Robertson and Mr Cunliffe may also point out that their proposal is to introduce a living wage “over time”. However, the caveat either renders the proposal meaningless or recklessly irresponsible. Meaningless, if by “over time” they mean the amount of time it would take the minimum wage to rise to that level under the present system. Recklessly irresponsible, if they are actually intent on establishing an elite class of privileged workers.

New Zealand is a global price taker, not a price setter. The country prospers when it is nimble and flexible. It suffers when it is rigid and flat-footed.

Governments can no more raise living standards by decreeing higher wages, than they can by telling supermarkets how much they can charge for a leg of lamb or a box of cornflakes.

If Messrs Robertson, Cunliffe and Jones are serious about running the country, they should advance serious policies.

Their decision to have a US style primary has meant they are captured by the unions and activists, and hence we now have a US style pork barrel competition.