Editorial: Dare we dream of a higher-wage economy?

Finance Minister Grant Robertson with a copy of his Wellbeing Budget 2021 on Parliament steps ahead of today's unveiling. Photo / Mark Mitchell

Editorial

EDITORIAL

Economic commentator John Gascoigne reflected in December last year: "New Zealand, despite its enormous potential, remains a low wage, cash-strapped agricultural nation in relative economic decline and societal disintegration."

The picture isn't quite that bad. New Zealand was ranked just outside the top 20 nations in the world in 2019 for gross national income - ahead of France, the UK and Japan. Still, New Zealand's weekly earnings are considerably less than Australia's, and that has long been a comparison that rankles.

Now, Covid-19 has broken the circuit, where New Zealand seemed fated to a combination of low economic growth and strong population growth fuelled by immigration - and the Government appears keen to seize on that.

The pandemic has also demonstrated another potential game-changer for our productivity aspirations and this is an opportunity that should be seized with all hands.

This week, the Government announced wealthy investors and "highly-skilled workers" will be the targets of an immigration "reset" to reduce the economy's reliance on low-wage migrants.

Economic Development Minister Stuart Nash says that would include making it harder for employers to take on workers from overseas, other than in areas of genuine skills shortages.

Nash points out the closed borders reversed the trend, as exemplified in the horticulture sector, where wages began to rise to meet the expectations of local workers rather than traditionally low-paid immigrants. It wasn't without casualties, with some produce left to rot in fields.

The Government suggested its proposed - and much decried - wage restraint on the public sector was also part of a strategy to improve the lot of those on lower wages and raise up the lives of the poor and disadvantaged.

Another plank was increasing the minimum wage by 30 per cent over the past four years. Predictions that a higher minimum wage would to more unemployment have failed, quite spectacularly. Labour market data for March shows job numbers now sit at 0.3 per cent.

Our 4.7 per cent unemployment rate is now lower than it was during the so-called "rock star economy" years from 2013 to 2015.

All this has undoubtedly gone some way to raising the standard of living of those on low wages, but another factor has given this nation cause for optimism.

The Government measures have been complemented by the business sector's response to the pandemic and the $13 billion of wage subsidies advanced to keep the wheels of industry turning.

As ASB economist Mark Smith pointed out, businesses and individuals proved to be more adaptable and flexible than anyone imagined. Surveys have continued to reflect strong business confidence. This could be our game-changer if built upon in Budget 2021.

The Government has broadly hinted that child poverty and housing, particularly for Māori, will be focuses in Wellbeing Budget 2021.

Today, Finance Minister Grant Robertson also has the opportunity to both recognise the role businesses and their employees have played in keeping the economy from foundering, and plot a course towards a higher-wage economy.