Latest / Best of Business / Jenee Tibshraeny: NZ Herald Wellington business editor on how Labour's plans for the public sector could impact the economy

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Jenee Tibshraeny: NZ Herald Wellington business editor on how Labour's plans for the public sector could impact the economy · Best of Business

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  Speaker 2: Now, if a Labour-led government pushes ahead with plans to
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  Speaker 2: pay public sector employees at least the living wage, which
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  Speaker 2: is nearly $ 30 an hour, the question, of course, is
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  Speaker 2: how is this going to affect the economy? The Herald's
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  Speaker 2: business editor, Janae Tibshirani, has been taking a look into
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  Speaker 2: this and is with us now.
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  Speaker 1: Hi, Janae. Hi, Heather. What have you found? Very expensive?
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  Speaker 3: Well, it could be. Basically, Labour has committed to paying
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  Speaker 3: all employees in the public service, so that's people who
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  Speaker 3: work in different ministries and departments, ensuring that they're all
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  Speaker 3: paid the living wage, which is $ 29. 90. That's nearly $ 6
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  Speaker 3: an hour more than the minimum wage. So all of
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  Speaker 3: those people, and also people who contract to the public service,
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  Speaker 3: so that could be cleaners or people who provide hospitality
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  Speaker 3: services or security, it wants to ensure that the companies
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  Speaker 3: that employ those people also pay them the living wage.
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  Speaker 3: So I asked Labour, well, how many people could that
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  Speaker 3: be that would be in for a pretty big pay rise,
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  Speaker 3: $ 6 more an hour, and what could the cost of
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  Speaker 3: that be? It doesn't know, or it can't say. But
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  Speaker 3: Labour does reckon that the cost wouldn't be too high
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  Speaker 3: because it doesn't think too many people would be affected.
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  Speaker 3: But the issue here is that it's not included in
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  Speaker 3: the fiscal plan. There's not too much detail around it. And,
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  Speaker 3: you know, the impact across the broader economy could be
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  Speaker 3: quite significant.
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  Speaker 2: Has Labour actually costed this out, looked at what it
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  Speaker 2: could do to productivity?
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  Speaker 3: No, it hasn't. And, you know, that is an issue.
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  Speaker 3: So I spoke to Cameron Bagri, the independent economist, earlier today,
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  Speaker 3: and he made the point that if you artificially jack
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  Speaker 3: up wages... increasing productivity, that could cause inflation, you know,
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  Speaker 3: and that could hurt the very people that Labour is
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  Speaker 3: trying to help. So, you know, and then I also
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  Speaker 3: talked to Alan MacDonald, who is from the group that
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  Speaker 3: represents employers, and he was also worried about it. Because
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  Speaker 3: what it could do is if you are a small
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  Speaker 3: business and let's say you're a cleaning company and you
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  Speaker 3: want to get a contract with a big government department
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  Speaker 3: to do cleaning, that would be a great contract. You
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  Speaker 3: might be deterred if you have to pay all your
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  Speaker 3: employees the living wage. You might not be able to
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  Speaker 3: afford that. So he made the point that that could
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  Speaker 3: actually create an artificial barrier to companies that want to
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  Speaker 3: do work for government departments. So there's a couple of
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  Speaker 3: factors there, you know, and while, of course, you know,
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  Speaker 3: you don't want to see people in a cost of
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  Speaker 3: living crisis, if we're going to call it that, struggling,
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  Speaker 3: the concern is that these sorts of changes could sort
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  Speaker 3: of set parts of the economy off kilter and actually
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  Speaker 3: hurt the very people it's trying to help. And of course,
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  Speaker 3: you know, just going back to the inflation point, if
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  Speaker 3: there is inflation, if businesses face higher costs, they have
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  Speaker 3: to pass those on to their customers, prices go up,
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  Speaker 3: then interest rates go up, You know, it could create
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  Speaker 3: a wage spiral, which is the point that Cameron Begrie made.
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  Speaker 2: Janai, thanks very much for talking us through it. Appreciate it.
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  Speaker 2: Janai Tibshirani, the Herald's Wellington Business Editor.
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