An Inclusive Growth Agenda For The Next Generation

A newly released report from the Helen Clark Foundation and the New Zealand Institute of Economic Research calls for a minimum wage boost to improve inclusion and incentivise investment in capital and skills, leading to greater productivity. The report can be found here.

NZIER Deputy Chief Executive Todd Krieble says, “minimum wage reviews are too focused on the short-term. Backing people from the get-go with good wages is a form of ‘predistribution’ that means we can be less reliant on ‘tax and transfer’ to smooth out household incomes. This is important because inequality is a drag on growth and well-being.

“With border controls to prevent importing COVID-19 limiting the inflow of migrants, labour will become relatively scarce and costly. Capital has never been cheaper. This is an unheard of combination of factors and should allow for a more equitable economic model. The recovery gives us an opportunity to build a more inclusive economy that shares the gains.”

Krieble says, “the idea that minimum wage increases cause unemployment in advanced countries is not well supported by the evidence. In any case it is a very short-term view if we want a fairer society.”

Kathy Errington, Executive Director of the Helen Clark Foundation says “as is made clear by the comments from two exceptional young leaders profiled in our report, we need to create a country where the incomes of low income people grow more quickly than those of wealthy people. Lockdown brought home to many of us that the essential workers who keep us alive are not paid at a level which recognises their value to society. Cleaners, supermarket workers and other essential workers need more than applause at 7pm – many of them urgently need more money. Our work with NZIER on this discussion paper – drawing on the OECD Framework for Inclusive Growth – is our contribution to the kōrero about how to achieve this.”

The paper suggests the following six opportunities for developing an inclusive growth agenda in Aotearoa.

Investing in people and places currently left behind by:

1. identifying and removing barriers to skills development and learning for those ‘stuck’ in low-wage jobs.

2. identifying and providing social support to reduce precarity, such as childcare and accessible transport.

It further suggests supporting business dynamism and inclusive labour markets by:

3. when reviewing minimum wages, placing less emphasis on short-term disemployment effects and more on a medium to long-term view of raising minimum wages to encourage investment in upskilling and gains to productivity

4. supporting entrepreneurship, innovation and dynamic markets to lift firm performance and, when necessary, worker transitions to firms with a brighter future.

Finally, it suggests the delivery of efficient and responsive government by:

5. using good-practice participatory engagement tools to involve citizens and service users in design of policies and programmes that affect them

6. requiring child and youth impact assessments for major policy proposals with likely intergenerational distributional impacts.

Our strong response thus far to Covid-19 and the attendant disruptions to the status quo has opened the door to real, inclusive step change in Aotearoa New Zealand. The aim of this paper is to explore these possibilities and to generate further constructive discussion in this area.