$15 minimum wage is suicidal say Indian business leaders
In the run up to the annual review of the minimum wage, which about 100,000 New Zealand workers receive, the New Zealand Herald reported that of the 2300 people it surveyed about the issue, 3.5% of respondents said the minimum should be lower than the current $12.50 an hour; 30.5% thought it should remain unchanged; 61% thought it should go up and 5% did not have an opinion.
While the clamour from political parties like the Maori Party, Labour and the Greens is for the minimum wage to be revised to $ 15 an hour, it was always unlikely the government would agree to such a steep rise. It has now revised the minimum wage to $12.75 an hour, announced this week.
Earlier, speaking to NewstalkZB Prime Minister John Key had said, “I think it's important they [workers] are able to make ends meet as best possible, but also there's got to be a recognition that where there are increases in wages that they have to be paid for – we don't want to be threatening people's jobs so there's a balancing act here and that's what the Cabinet will consider.”
Most businesses feel that any argument for increasing the minimum wage to $15 and hour is untenable. In the wake of the recession, New Zealand business had lobbied against the increase.
Indian Weekender spoke to two prominent members of the Indian community engaged in running businesses for their comments a few days before the announcement of the revised minimum wage of $12.75.
“Why do we need to stop the minimum wages at $15 an hour, why not $20 if that is the easiest way to make ends meet for 100,000 people? By increasing the minimum wage year after year we are only making the survival for businesses harder and harder,” says Ram Rai who owns and runs the popular Jewel of India restaurant in Auckland’s Mission Bay.
“By bringing in planeloads of students from Asia and South America we are giving the unscrupulous among employers the chance to employ these students at half the minimum wages. There is a thriving parallel black economy here in New Zealand. How do you expect employers to pay legitimately and compete against their counterparts who have unfair advantage?” Mr Rai asks.
“Increase of minimum wages from $12.50 to $15 per hour should not be looked at in isolation,” says Kanu Patel a professional accountant and business adviser at Auckland-based Patel Pike and Associates. “In addition to the wages they also have to budget for four weeks holidays, 10 – 11 days statutory holidays, 5 days sick pay that is accumulated if not used, 1 – 2 days compassionate leave, Accident Compensation levies, Kiwi saver contributions, Double time and day in lieu if the employees work on a public holiday. In addition employees get three months paid parental leave and the employers have to keep the job open for twelve months.”
Mr Patel says many business owners have expressed alarm at such a move without considering other factors. “I was speaking to the owner of a chain of five hair salons that employs 70 staff. He was very concerned and said his strategy would be to eliminate apprentices, reduce employee hours of work and stop employing anyone untrained and inexperienced. He would change his policy and employ adults over 25 years of age.”
Mr Rai said things had progressively gotten harder over the years.
“My wife and I ran a business for 9 years and employed 25 staff. Most of the jobs in our business required minimum skills. As law-abiding citizens we employed only NZ residents and paid minimum wages or a $1 over the minimum wage,” he said.
“As the government kept increasing wages year after year we could not keep up with additional $1 over the minimum wage. When we bought the business the minimum wage was $7.70 and in 9 years it went up by a whopping 66%. In the meantime, our competitors and customers made sure that our product price remained the same or lower than what it was 9 years ago. Our competitors could hire students or people on benefits. We could have done it too if we wanted. But we did not.”
Mr Patel agreed with Mr Rai in saying that law abiding business were concerned that more employers will pay employees lower wages, cash under the table and not deduct PAYE, thus making law abiding business uncompetitive in the market.
A disappointed Mr Rai said, “The end result of our honesty and staying clean was throwing away the business for practically nothing. We had to sell our home to pay the creditors. Eighteen staff lost their jobs. I had a job with a five-figure salary and a mortgage free home 9 years ago when I bought the business. My wife and I worked 16 hours a day to only pay others not ourselves. Do not come with a survey and say that 61% of the people support the minimum wage to go to $15. Go and do a survey of those families who run legitimate businesses and ask them how they feel. Are they even getting paid, leave alone the minimum wage?”
But Mr Rai added that he is not against minimum wage revision or rewarding employees for the hard work they do. “If we want to implement minimum wages and comply with all the rules and regulations learn to enforce those rules. Go after those employers who bend the rules. If we continue to punish the legitimate businesses we will not have many small and medium businesses left in this country. I have met employers who have exited from businesses saying they would rather go on unemployment benefit than running a business,” he said.
Mr Patel said small businesses were fragile. “Sales have been declining or have remained static. Their gross margin is under severe, stress and with rising costs their profits are declining or in some cases disappearing,” he said.
Mr Rai was unsparing in his criticism: “We as nation are hell bent on punishing the very backbone of our economy. When the sun shines everyone wants to hold umbrella for you, but when it rains there is none.
Given an opportunity majority of the small business operators would like to exit and move. They are there because all their life savings and the family home is on the line.
“How come countries like USA and Singapore implement minimum wage? In a free economy wage should adjust according to supply and demand. If an employer is not willing to pay the right wage, he or she will not attract the required staff.”
“The country would be better served by focusing on economic growth, reducing unemployment and giving businesses opportunity to strengthen their financial position before any additional burden is placed on them,” Mr Patel said.
In the run up to the annual review of the minimum wage, which about 100,000 New Zealand workers receive, the New Zealand Herald reported that of the 2300 people it surveyed about the issue, 3.5% of respondents said the minimum should be lower than the current $12.50 an hour; 30.5% thought it...
In the run up to the annual review of the minimum wage, which about 100,000 New Zealand workers receive, the New Zealand Herald reported that of the 2300 people it surveyed about the issue, 3.5% of respondents said the minimum should be lower than the current $12.50 an hour; 30.5% thought it should remain unchanged; 61% thought it should go up and 5% did not have an opinion.
While the clamour from political parties like the Maori Party, Labour and the Greens is for the minimum wage to be revised to $ 15 an hour, it was always unlikely the government would agree to such a steep rise. It has now revised the minimum wage to $12.75 an hour, announced this week.
Earlier, speaking to NewstalkZB Prime Minister John Key had said, “I think it's important they [workers] are able to make ends meet as best possible, but also there's got to be a recognition that where there are increases in wages that they have to be paid for – we don't want to be threatening people's jobs so there's a balancing act here and that's what the Cabinet will consider.”
Most businesses feel that any argument for increasing the minimum wage to $15 and hour is untenable. In the wake of the recession, New Zealand business had lobbied against the increase.
Indian Weekender spoke to two prominent members of the Indian community engaged in running businesses for their comments a few days before the announcement of the revised minimum wage of $12.75.
“Why do we need to stop the minimum wages at $15 an hour, why not $20 if that is the easiest way to make ends meet for 100,000 people? By increasing the minimum wage year after year we are only making the survival for businesses harder and harder,” says Ram Rai who owns and runs the popular Jewel of India restaurant in Auckland’s Mission Bay.
“By bringing in planeloads of students from Asia and South America we are giving the unscrupulous among employers the chance to employ these students at half the minimum wages. There is a thriving parallel black economy here in New Zealand. How do you expect employers to pay legitimately and compete against their counterparts who have unfair advantage?” Mr Rai asks.
“Increase of minimum wages from $12.50 to $15 per hour should not be looked at in isolation,” says Kanu Patel a professional accountant and business adviser at Auckland-based Patel Pike and Associates. “In addition to the wages they also have to budget for four weeks holidays, 10 – 11 days statutory holidays, 5 days sick pay that is accumulated if not used, 1 – 2 days compassionate leave, Accident Compensation levies, Kiwi saver contributions, Double time and day in lieu if the employees work on a public holiday. In addition employees get three months paid parental leave and the employers have to keep the job open for twelve months.”
Mr Patel says many business owners have expressed alarm at such a move without considering other factors. “I was speaking to the owner of a chain of five hair salons that employs 70 staff. He was very concerned and said his strategy would be to eliminate apprentices, reduce employee hours of work and stop employing anyone untrained and inexperienced. He would change his policy and employ adults over 25 years of age.”
Mr Rai said things had progressively gotten harder over the years.
“My wife and I ran a business for 9 years and employed 25 staff. Most of the jobs in our business required minimum skills. As law-abiding citizens we employed only NZ residents and paid minimum wages or a $1 over the minimum wage,” he said.
“As the government kept increasing wages year after year we could not keep up with additional $1 over the minimum wage. When we bought the business the minimum wage was $7.70 and in 9 years it went up by a whopping 66%. In the meantime, our competitors and customers made sure that our product price remained the same or lower than what it was 9 years ago. Our competitors could hire students or people on benefits. We could have done it too if we wanted. But we did not.”
Mr Patel agreed with Mr Rai in saying that law abiding business were concerned that more employers will pay employees lower wages, cash under the table and not deduct PAYE, thus making law abiding business uncompetitive in the market.
A disappointed Mr Rai said, “The end result of our honesty and staying clean was throwing away the business for practically nothing. We had to sell our home to pay the creditors. Eighteen staff lost their jobs. I had a job with a five-figure salary and a mortgage free home 9 years ago when I bought the business. My wife and I worked 16 hours a day to only pay others not ourselves. Do not come with a survey and say that 61% of the people support the minimum wage to go to $15. Go and do a survey of those families who run legitimate businesses and ask them how they feel. Are they even getting paid, leave alone the minimum wage?”
But Mr Rai added that he is not against minimum wage revision or rewarding employees for the hard work they do. “If we want to implement minimum wages and comply with all the rules and regulations learn to enforce those rules. Go after those employers who bend the rules. If we continue to punish the legitimate businesses we will not have many small and medium businesses left in this country. I have met employers who have exited from businesses saying they would rather go on unemployment benefit than running a business,” he said.
Mr Patel said small businesses were fragile. “Sales have been declining or have remained static. Their gross margin is under severe, stress and with rising costs their profits are declining or in some cases disappearing,” he said.
Mr Rai was unsparing in his criticism: “We as nation are hell bent on punishing the very backbone of our economy. When the sun shines everyone wants to hold umbrella for you, but when it rains there is none.
Given an opportunity majority of the small business operators would like to exit and move. They are there because all their life savings and the family home is on the line.
“How come countries like USA and Singapore implement minimum wage? In a free economy wage should adjust according to supply and demand. If an employer is not willing to pay the right wage, he or she will not attract the required staff.”
“The country would be better served by focusing on economic growth, reducing unemployment and giving businesses opportunity to strengthen their financial position before any additional burden is placed on them,” Mr Patel said.
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