Bernard is an economics columnist for the NZ Herald

Bernard Hickey: Key fickle on minimum wages

The PM pooh-poohs a guaranteed minimum wage, but supports superannuation and Working for Families. Photo / Michael Cunningham
The PM pooh-poohs a guaranteed minimum wage, but supports superannuation and Working for Families. Photo / Michael Cunningham

It may be a little early to be fighting an election over, but the idea of a Guaranteed Minimum Income deserves a lot more thought and debate than the dismissal it got from the Prime Minister.

John Key described the idea, suggested as one of many at Labour's Future of Work Commission, as "barking mad" and "utterly unaffordable". In 2004, he described Working For Families as "communism by stealth", yet he kept that programme more than eight years as Prime Minister.

He is also a staunch defender of several other limited versions of Guaranteed Minimum Income New Zealand already has.

The biggest is superannuation, the minimum income guaranteed to anyone over the age of 65. Some argue it is utterly unaffordable in the long run as the population ages, but Key is not one of those.

Working for Families is another. It effectively guarantees a minimum income for families with children, albeit through a tax-credit system that supplements earned income, rather than an untaxed benefit independent of other income.

There are the benefits we pay to the chronically sick, disabled, unemployed and single parents with young children - and Key last year increased these benefits faster than inflation to reduce poverty and improve the security of the most vulnerable.

Key is right that a true Guaranteed Minimum Income, where the Government essentially paid everyone a version of New Zealand Superannuation, could not be afforded with our tax system. Gareth Morgan's Big Kahuna proposal for a Universal Basic Income of $11,000 a year per adult would cost $18 billion, which he proposed would be paid for with major new tax on capital.

This is where the debate gets interesting and where it starts to marry up with the reason so many other countries are debating a Universal or Guaranteed Minimum Income. Finland and the Netherlands have launched trials and Switzerland will vote in a referendum on one later this year.

The app revolution and globalisation of the services economy is transforming our access to all sorts of services from accommodation and taxis to accounting, telecommunications, media, education and healthcare. Middle-class, white-collar jobs that had seemed immune from the the job losses that hit blue-collar, manufacturing jobs in the developed world over the past 30 years are now in the firing line.

A gig, or freelance, economy is developing where work is insecure, subject to competition from lower-wage countries and unfettered by rules about working hours, tea breaks, minimum wages and PAYE.

Owners of dominant networks and apps in a winner-takes-all economy capture most of the benefit, not workers and not governments.

Many are rightly asking who will buy these goods and services if apps and robots and algorithms do the work and fewer people are in secure and normal jobs that pay a salary with benefits such as holiday pay and a 40-hour week.

If the bulk of incomes are generated by capital owned by a few rather than wages going to many, maybe capital or intellectual property taxes are a better way to support the machinery of government and a civil society.

Some call this massive transformation a Fourth Industrial Revolution or a Second Machine Age. Whatever it is, New Zealand will not be immune from its stresses.

There isn't an app for this debate that allows us to give a Guaranteed Minimum Income an easy star rating or thumbs up/thumbs down. We should do some proper work on it.

Debate on this article is now closed.

- Herald on Sunday

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Bernard is an economics columnist for the NZ Herald

Bernard Hickey is the publisher of Hive News, a Wellington-based political and economic subscription news email service. He also writes for and appears regularly on Radio New Zealand, Radio Live, TVNZ and TV3. He has been a financial journalist for 25 years, having worked for Reuters, the Financial Times Group and Fairfax Media.

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