John Key is wrong on Green plan to end child poverty

by frog

On Wednesday Green Co-Leader Metiria Turei launched the Green Party’s plan to bring 100,000 children out of poverty within three years:

1. Make Working for Families work for every low-income family

Children have the same needs, whether their parents are in paid work or not. Working for Families helps low-income families make ends meet, but it doesn’t provide the same help to kids whose parents receive a benefit. We’d extend Working for Families to provide an extra $60 per week for 140,000 of the poorest households in New Zealand.

2. Provide better study support for sole parents and beneficiaries

Kids do better when their parents have access to education. There used to be support for sole parents to study at university, and it worked: parents moved off the benefit six months earlier and went into higher paying jobs. We’d reinstate and extend this support to help 10,000 people get a higher education and take better care of their kids.

3. Raise the minimum wage to help working parents

275,000 people work for minimum wage, and many of them take care of dependent children. It’s almost impossible to make ends meet on such low wages. We’d raise the minimum wage to $15 immediately to help working parents provide the basics for their kids. This is worth about $60 more per week for someone working full time on the minimum wage.

4. Make sure rental properties are warm and healthy for kids

375,000 kids live in cold, damp houses which make them sick. Most of these houses are rental properties. We’d create minimum performance standards for rental properties which would ensure warm, healthy, homes for thousands of children.

John Key poured cold water on the Greens’ Working for Families and minimum wage proposals:

“The way the system was designed by Michael Cullen under the previous Labour Government was … to ensure there was a real incentive to work. We wouldn’t want to undercut that.” He also indicated any swift move to a $15 an hour minimum wage was unlikely because it could threaten jobs.

Key is wrong on both counts.

Someone working 40 hours a week on the minimum wage at tax code M would have a take-home pay of $501.61 under the Greens’ proposal.  Compare that with the couple rate of unemployment benefit ($335.66) or single parent rate of DPB ($330.70) and it’s easy to see that the minimum wage increase alone provides a considerable financial advantage in moving off benefit into employment.  Even given the additional $60 a week that beneficiary families would receive from WFF under the Greens’ package, they would be more than $100 a week better off if they were to move into employment.

The financial incentive to move off benefit into work is actually stronger under the Greens’ proposal than under National’s (and Labour’s) current discriminatory WFF approach which provides the least assistance to the children who most need it.  The difference is that the Greens provide the incentive by increasing wages at the lower end of the scale, rather than by providing a lower level of support to children of beneficiaries.

Key is on no stronger ground when he says increasing the minimum wage could cost jobs.  The majority of minimum wage workers work for large corporations – mainly in the hospitality, fast food and retail industries.  Studies such as this one show that large corporations do not respond to increases in the minimum wage by slashing jobs.  Their more likely response will be to improve productivity (which to some extent flows from a better paid workforce anyway) and/or to increase prices slightly.

Few small and medium sized employers hire minimum wage workers.  However, the Greens acknowledge that a significant increase in the minimum wage may have adverse employment effects on employment levels in such businesses that do.  For that reason, the Greens’ proposal includes a $20 million a year targeted subsidy to assist SMEs through the transition.   John Key seems to have conveniently ignored that.

frog says

Published in Uncategorized by frog on Fri, August 5th, 2011   

More posts by | more about frog