Wage, benefit review needed—Mr Douglas

Press, 3 December 1987, Page 42

Wage, benefit review needed —Mr Douglas

PA Auckland A review of wages and benefits is needed to increase the incentive to work, says the Minister of Finance, Mr Douglas. At present, he said, the “absurd situation” prevailed whereby wageearners fared worse than social welfare beneficiaries.

Mr Douglas was speaking at Wiri this week at the opening of the New Zealand Can, Ltd, plant, a $3O million complex built by New Zealand Breweries and a United States company, PAC International.

After saying he was pleased to hear that the plant would provide 60 more jobs, Mr Douglas said a “meaningful gap” needed to be created be-

tween those on wages and those not employed. He cited the example of a single income family with one child, with net pay of about $265 each week.

“A one-child family supported by a beneficiary can receive the same amount...” said Mr Douglas. “The current system can encourage dependency, leading to lower economic performance, higher taxes, greater social problems and less resources for other social priorities.” He emphasised it was not an argument against beneficiaries. People whose circumstances did not allow them to work deserved the support of the State.

“But if that support is

actively discouraging people who want to work from doing so, then the system has stopped working.” He said the wage and price freeze under the National Government had compounded the problem by leaving benefits pegged to the inflation rate. Benefits rose 20 per cent during the freeze, but wages increased only 4 per cent. “The distortion is further magnified because wage movements are on a pre-tax basis, while benefit increases are calculated after-tax. “It is vital that we start injecting into the system some incentives to work. We must seek a fundamental review of the wage and benefit structures.”