Working for Families is corporate welfare

The Working for Families package is corporate welfare.

It’s our low-wage economy which is driving the policy and next week it expands as even middle income families feel the pinch. It is in effect a package of subsidies for employers paying poverty level wages. (A poverty income is recognised internationally as one which is less than 60% of the average income)

It is needed because wages have slumped over the past 20 years. In 1989 for example the average weekly pay for a New Zealand worker was equivalent to $740 in today’s dollars. However by the end of last year this had dropped to just $592.

Two factors in particular have led to this 20% slide in real incomes – the Labour Party’s Rogernomics policies and the National Party’s Employment Contracts Act.

The Rogernomic economic reforms of the 1980’s which we were told would deliver higher wages and a stronger economy delivered the opposite. Economic growth stagnated while the end of import duties saw the country flooded with cheap, low quality imports. Well paid manufacturing jobs were lost and replaced with low-paid, part-time work. The promised gains – a strong economy and high wages with real incomes rising – were a deliberate illusion generated to help us through the “pain” of economic reform. The “pain” of course was restricted to working New Zealanders while shareholders, managers and directors continued to bask in the warm glow of rising incomes and profitable returns.

This pattern continues today under a Labour government. Despite 6 years of a strong economy the incomes of working New Zealanders remain in the doldrums.

Last year the base salaries of chief executives rose by 6% but working New Zealanders had to do with just 3.1% while four in every ten workers received no increase at all. These percentages only tell part of the story. A 6% increase on $100,000 is $6,000 but 3.1% on $30,000 is just $930.

To underline the injustice, according to Finance Minister Michael Cullen speaking in January, over the past six years of Labour-led governments company profits have increased at twice the rate of workers wages!

National’s Employment Contracts Act of 1990 continued Rogernomics into the so-called “labour market” and greatly reduced the bargaining power of workers while extending the rights of employers. Under this legislation wages tracked down faster with barely a hiccup when Labour came to power in 1999.

The ECA gave businesses a free ride. For the past 16 years they have seen a steady increase in their income delivered not by innovation or increased productivity but by a steady erosion in the real value of wages. Their profitability has been built on lower incomes for workers.

The high profit, low wage economy wanted by the Business Roundtable has now been delivered to employers on a plate.

And so we have Working for Families.

It is a brutal admission that New Zealand is a low-wage economy but instead of the pressure going on companies to convert high profits to wages, the government prefers to subsidise wage levels with government funding.

The big push from business now is to increase productivity and workers are told there can’t be significant increases in wages until there are productivity gains. This message is repeated by the government. Helen Clark would prefer to see on-going pressure on workers’ incomes rather than telling businesses that low-wages are unacceptable.

So workers are told they must work even harder or smarter if they want income increases. Tell that to a breadwinner working several part-time, low-paid jobs to keep the family fed!

The next stage of working for families comes on stream next week when the income thresholds are raised so that even families with children earning up to $100,000 will be eligible for extra income. Government examples indicate such a family could expect to get $3976 extra per year.

Not so beneficiaries. It is estimated that even when the package is implemented there will still be 175,000 children living in families with incomes below the poverty line.

Because it is a package of business subsidies, to make it more efficient the government could just cut out the middle-man and pay the money straight into the back pockets of company managers, directors and shareholders.

This is not so much a cynical observation as a recognition that in our economy working New Zealanders are an economic resource rather than human beings and herein lies its immoral and unethical character. Our economy is essentially a parasitic relationship between non-working shareholders and working New Zealanders whose efforts bring them their unearned income.

It has often been said that the best economic and social structure is the one you would pick before you knew what position you would hold in it. An honest answer from our politicians and business leaders would for a start mean an end to the scandal of corporate welfare which masquerades as Working for Families.