Budget forces employers to pay more for employees’ savings, while the unemployed lose out

If I have read correctly, Treasury has predicted a 4 per cent wage growth for about six years. In order for that to happen people need to be working and to have wage rises. To have wage rises employers need to pay employees more money. To spend more money on wages, employers have to spend less on other things or to grow.

Despite Treasury being wrong about many things in the past, it could be right, this time. Perhaps wage rises will be funded by cuts to budgets less the increase in KiwiSaver contributions employers are forced to make. Contributions which will now be taxed to give the Government a cut, meaning you have to pay more in your KiwiSaver account, but get proportionally less back.

How can that possibly happen, you ask? Surely you have to have more money to pay higher wages. Perhaps it won’t happen. Perhaps wages won’t grow. Perhaps public money will go into MPs’ superannuation increases to compensate them for losing the $10 a week KiwiSaver employer subsidy the rest of us also miss out on?

Perhaps it is better to give the rich tax cuts so that people like the Westpac Chief Executive can continue to get a tax cut to pay for 500 low paid workers who lose their weekly $10 government contribution to KiwiSaver. That’s the “zero” part of budgeting.

The other part is the real thing: it doesn't jut provide for zero spending it reduces spending by $1.2bn over the next four years. . How do we know? It's in the budget - it contains $4bn spending over the next four years, but identifies savings of $5.2b.

How's that predicted 4 per cent wage growth looking now?

What will happen if a prospective employee starts work. They`ll be offered the opportunity of Kiwi Saver if they don’t have one. They`ll start on a low income and as a result will get more Working for families payments than they otherwise would – but these payments will not compensate for the lower salary that employers offer as they have to put more into their new employee’s Kiwi Saver account.

If employers can’t afford to keep their staff on they`ll be made redundant and the worker will pay less tax but have increased WFF payments with his tax-payer funded benefit, if he has kids. If that former worker wants to go to university to retrain to do a couple of papers, he`ll not only forgo extra employer KiwiSaver contributions, he’ll also have to take a bank loan to fund his studies other than tuition costs, which he can get a loan and pay back later.

Perhaps this budget means the rich - who have had tax cuts - are better off - and the moderately poor, who didn’t get much tax relief and are about to lose some WFF payments are not much worse off – but the poor are permanently poor, can’t afford KiwiSaver, can’t afford to study, and have increasing costs for food and bills.

Their biggest source of income, if they have a few kids and manage to get a part time job for $180 - could be their working for families payments if they don’t want to study on a student allowance.

Budget hits students hard

In Treasury's latest forecasts government funding for Tertiary education will fall every year from 2009-2014. Most of this reduction is due to a tightening in eligibility for student loans, but it also includes falls in funding for tuition and other tertiary education spending.

Yet more are entering tertiary education – some in order to stay off the dole, others to retrain. When in government, Labour wanted more to study instead of going on the dole, but National wants more to get jobs now that they are fully qualified tertiary students, and restricting others from getting student loans.

In the budget policy statementBill English said:

We will need to become more effective in moving young people from education and training into the labour market, and also in utilising the skills of others such as older workers, part-time workers, migrants and women with dependent children who may want to work more

But what about those already in the labour market - perhaps women with dependent children - who want to study? Thousands study part time, but will no longer be able to borrow any money through the student loans scheme for course –related costs. Now for the average Victoria University student that may not be such a big deal, for the average Massey student living in Palmerston North doing one paper with no contact course it may not be such a big deal – but what about a person in Oamaru who has recently lost his job and is doing four papers through Massey and has to travel to contact courses in Palmerston North for three of them?

That student will now have to pay for his air fares – after paying for books. Or fail his paper if he doesn’t turn up. And what happens if his laptop breaks down- he can’t go to uni to use their computers – he lives in the sticks. He cant borrow from the student loan scheme to get money to fix it. And if he is 55 or older he won’t be able to borrow for living costs either. The only other options are a bank loan or borrow off friends.

If he is in a partnership and gets a job earning $200 a week, he may be entitled to an abated student allowance, but, due to the nasty abatement regime, if he and his partner earns a combined $700 a week, that family would get less net income than if they earned $400 - income that will have to be used to pay for the air fares and accommodation to the student’s contact course or to fix a computer - both of which would be needed to pass a course of study if the contact course was deemed "absolutely compulsory" to attend.

Getting an education just got harder for some students who don’t want to hitchhike.