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Richard Tindiller / RNZ
New Zealand Chief Executive of Business Kirk Hope.
OPINION: I have been very disappointed in the mistaken claims that some employers should not receive the wage subsidy.
It is suggested that some large, profitable companies, or certain types of employers, such as golf clubs, hotels, or casinos, be excluded from the taxpayer-funded package that supports wages paid by companies affected by the Covid-19 emergency.
The argument is made that large employers do not need the subsidy, and many employers do not deserve it.
I think that argument is wrong. I believe that all employers who meet the terms of the subsidy deserve support.
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Large employers with a lot of staff are in great need of a wage subsidy, simply because they have more staff. Large employers that have been forced to close their doors due to Covid-19 are now facing huge ongoing wage bills with no income.
And this is the key: this is not a normal economic recession, it is not even a global financial crisis. It is an economic crisis that many of us have not seen in our lives.
Many companies will have no income for about 10 percent of the year and will have reduced income for a considerable part of the year.
Tourism, hospitality and retail employers had already seen a significant drop in demand in late January, long before the close.
The press
New Zealand learned how wage subsidies worked immediately after the Christchurch earthquakes.
Wage subsidies for all employers who meet the terms is a proven policy. The salary subsidy scheme is based on the Earthquake Support Subsidy (ESS), which provided aid to businesses in Christchurch after the 2010 and 2011 earthquakes,
The ESS was paid to companies to alleviate immediate financial pressures on companies, allow them to make more actionable decisions regarding their future, and most importantly, maintain employment.
Research conducted at the ESS found that it had been successful in achieving those goals.
The wage subsidy is designed to achieve the same purpose: to keep people linked to employment, regardless of who or what their employer is or how big they are.
Research from the University of Canterbury shows that the rapid implementation of the grant was widely recognized as essential to recovery, as it helped many companies avoid closure and retain jobs.
The success of the wage subsidy led the current government to adopt it for the Covid-19 emergency, with virtually no change in how it was implemented in Christchurch.
Similarly, after the global financial crisis, 22 countries implemented wage subsidies as a way to keep people attached to employers.
The policy view was that the fiscal costs of losing that connection, and reaping massive unemployment, were much higher than the cost of wage subsidies to retain it.
The other reason why wage subsidies for all eligible employers is good policy is because they are not really employers at all.
The subsidy goes to the workers. At $ 585 per full-time employee and $ 350 per part-time employee, it’s a modest but significant amount of emergency aid during a time of massive economic turmoil.
Employers receive the funding but must pay it to their employees.
Once the crisis is over, employers will be audited and anyone who has misused or misappropriated the subsidy will be prosecuted.
This is because fundamentally it is not the employers or the companies that receive the subsidy, but the employees.
We all know the value of jobs and jobs. They are essential to the life and health and future of our communities.
But sometimes we forget that it is the business that provides those jobs.
Businesses committed to job and staff retention during the Coviod-19 crisis, with no income, are providing tremendous value to communities.
Those companies do not deserve prejudice.
* Kirk Hope is CEO of BusinessNZ.
