The money for increases in business costs will have to come from somewhere – and it will come from consumers
Opinion: Growing up in India, shopping was a totally different experience to here in New Zealand. Negotiating even for routine items like grocery, clothes and shoes was common and expected.
Imagine walking into your local mall and trying to do this. Instead, the style is to look for the stores with a bargain or wait for sales.
Whether you are a consumer who actively negotiates prices or a silent bargain hunter, the thing that is common to these styles of shopping is looking for the best value for your money.
But it is not a one-sided affair. The best value for money for a consumer should also be a best value for the business, for that transaction to happen.
The state of small-to-medium enterprises after a series of lockdowns and alert levels is such that they are desperate to get back on their feet. The value of their money that they had before lockdowns will no longer be the same now due to the enormous cost of lockdowns.
In such times one would imagine the government to be in business and jobs preserving mode. But as things stand, many businesses – while still surviving because of government’s temporary support plans for businesses experiencing revenue drop due to Covid-19 – are forced to cope with another increase in bills through the $1.20 increase in the minimum wage to $21.20 an hour from this month onwards.
The increase was announced with a statement promising that it would help hard-working cleaners, security guards and supermarket workers who had worked the minimum wage through the lockdowns and contributed to the Covid-19 response.
Despite all the efforts to make it sound sympathetic, it felt disingenuous.
Government placing the emphasis on these workers acted as an “emotional exit” from valid criticism of steep minimum wage increases.
The discussion should be about economic management, rather than an emotional “guilt trap” for anyone who tries to oppose it.
We all want our hard-working members of society to be paid fairly. If the Government believes that such a steep minimum wage increase year after year is the only way to help low-income families, then surely there is a case against the Government for not matching the wage subsidy during lockdowns to the minimum wage.
For many small businesses seeking time to get back on their feet, the payroll is a big part of their overall operating costs. So many will be in difficult discussions with their banks, finding ways to make ends meet.
Businesses that will be most affected by this increase in minimum wage are unfortunately the ones that have tight operating margins, leaving very little room for cost absorption.
We’re still in the early stages of the lockdown effects on businesses and it will really hit hard when the Government is no longer injecting money into businesses to help.
Logically, the wage increases are going to be sustainable only if a worker is able to produce work that is of equal or more value than what they are being paid.
If the value of work done rapidly declines compared to the wage that the worker is being paid, then the employer will have no options but to look at other means which might include closing down, cutting staff or moving out of New Zealand.
This is all without mentioning the need for businesses to gear up for so-called Fair Pay Agreements that will give the government further control over setting of wages. And the goal of this government is to impose a living wage of $22.75 during this term.
The money for such increases in business costs will have to come from somewhere. And it will come from consumers.
But consumers are always looking for a bargain. So, to think that the increase in the minimum wage will only pinch businesses and not those on the minimum wage is not the reality.
Many of these hunting for a bargain are themselves on the minimum wage.