“The Ministry for Business, Innovation and Employment told Labour to go slower in raising the minimum wage and estimates 5,100 jobs will be killed off as a result of the hike,” says ACT Leader David Seymour.

“The move to force businesses to pay $352 million more in wages will mean they raise their prices or close, and more people will be out of work and on welfare for longer. As we head for recession, New Zealand can’t afford that.

“The minimum wage has increased by 44 per cent under Labour – how many businesses have increased their productivity by 44 per cent in the past six years? Almost none.

“In a classic example of good intentions and poor results, some of New Zealand's most vulnerable workers will be stripped of an opportunity to gain valuable skills and work experience. This is condemning young, unskilled workers to the scrapheap.

“Michael Wood argues the minimum wage increase will have a ‘stimulatory’ effect on the economy. But official advice shows increasing the minimum wage doesn’t increase productivity or economic growth, and is a poor way of tackling poverty given this is a transitional stage for many workers:

‘There is also an argument that lifting the minimum wage can result in increased overall consumer demand caused by minimum wage earners spending the additional money as they normally spend a high proportion, if not all, of their earnings. For this to happen, the increase in overall spending would need to be significant. As only a small number of people earn at or near the minimum wage…this effect is unlikely to occur in New Zealand.’

“New Zealand already has one of the highest minimum wages in the Western world. This means that the potential for job losses in future is even greater.

“Labour is raising the minimum wage because inflation is out of control. Its focus should be on getting inflation under control through a return to rational economics – cutting wasteful spending and getting the Reserve Bank focused on only prices.

“The Government should also focus on the underlying drivers of a high-productivity, high-wage economy: low, flat taxes; a flexible labour market; openness to overseas capital and workers; a world-class education system where parents and students have choice; and a welfare system that doesn’t create dependency.

“Forcing businesses to pay workers more than those workers can produce is the simplest recipe for higher unemployment.”

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