The "clueless" Dr Clark

Labour's Dunedin North MP Dr David Clark has made a remarkably frank admission on TV this morning; under the headline Labour MP clueless on minimum wage price tag the Herald reports:

Labour MP David Clark has admitted he doesn't know how much it will cost employers if the minimum wage is raised to $15 an hour, despite sponsoring a bill to do just that.

Tomorrow Mr Clark's member's bill to raise the minimum wage to $15 was one of five pulled from the ballot.

Speaking to TVNZ's Q + A this morning Mr Clark said he had not yet had the chance to gauge how different party leaders and members of Parliament felt about the bill.

"I think it's a very reasonable policy. It will affect a couple of hundred thousand New Zealanders, and right now, actually, we're all bearing the costs of having people living in poverty, and we don't need to do that. It's an easy fix," he said.

That's right Dear Readers; Labour wants employers to pick up the tab for people on low wages, but have no idea how much it will cost; read on:

Raising the minimum wage to $15 an hour was a start to fixing some of the problems, he said.

But he admitted the cost to employers had not yet been calculated.

When asked what the overall cost would be, he said Labour did not know exactly how much it would cost.

He then admitted he had not costed it, but understood there had "been work done around it".

"I think that we've seen that the millions of the dollars that it will put into the economy of raising the minimum wage will actually have a positive boost, it will have an economic advantage. So we're not talking about costs here. We're talking about boosting the economy," he said.

Sadly, a raise in the minimum wage to the degree that Dr Clark is advancing will hurt small businesses more than it will help them. Labour may not have done the sums, but we did back in October last year when we debunked Labour's election policy. Here's some of what we said back then:

We're involved in the ownership and management of a couple of small to medium businesses. So we were interested to see that Labour was releasing its work and wages policy today.

One thing stands out immediately; Labour's desire to increase the minimum wage to $15.00/hour. So here's a hypothetical scenario:

Let's say our business has just employed an office junior; a young person who rocked up to our offices seeking work. This person was unemployed, and had little work experience but there was something about them that made us think that we could develop them into a really good team member. Lo and behold; there's a change of government, and suddenly instead of paying this person $13.00/hour (which they were thrilled to be earning), we have to pay them $15.00/hour. The young person is doing really well, and we take the hit and keep them on.

But then we have two accounts clerks who each earn $16.00/hour, and an office manager on $20.00/hour. The reason that they are paid at those rates is because of the value their respective jobs, and their performance in them add to the business. Aren't we honour-bound as a "good employer" (unlike Matt McCarten, we pay PAYE on due date) to increase their pay as well, by a similar rate to that which the office junior's pay went up?

You see Dr Clark; it's not just as simple as paying people $15/hour. If the minimum wage goes up, so will everyone else's. Our wage bill is in the order of $1m per annum, so an arbitrary, across-the-board 15% wage increase would cost us an additional $150,000 per year. That would be totally unsustainable for us; our businesses run at break-even at best. There is little doubt for our businesses that we would have to reduce our staff numbers.

So who wins there Dr Clark? We certainly don't; nor do the staff members whose jobs are lost, and their families. And far from the Wanganui economy receiving a shot in the arm, there are suddenly less people spending.

Once again, Labour has not thought this policy through. The $15 minimum wage was rejected at the 2011 General Election, and we hope that it is rejected again when Dr Clark's Bill is debated in a few weeks time. 

We suggest that David Clark go and talk to some employers too. We'd me more than happy to dialogue with him and tell him just how his simplistic plan is flawed. Because it's small and medium sized businesses like ours that are the engine room of the New Zealand economy , and Dr Clark and his friends run the risk of throwing a spanner into the works.