Dream of a higher wage economy

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. We were ranked just outside the top 20 nations in 2019 for gross national income — ahead of France, the UK and Japan. Still, our weekly earnings are considerably less than Australia, 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.

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. He 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 low-paid immigrants.

The Government suggested its proposed — and much decried — wage restraint in 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 a higher minimum wage would lead to more unemployment have failed spectacularly. Our 4.7 per cent unemployment rate is lower than it was during the “rock star economy” years, 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. Government measures have been complemented by the business sector’s response to the pandemic and the $13b of wage subsidies advanced to keep the wheels of industry turning.

Businesses and individuals proved more adaptable than anyone imagined.

The Government has broadly hinted child poverty and housing, particularly for Ma¯ori, will be focuses in Budget 2021. Today, Finance Minister Grant Robertson 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.