Time for rethink on wage subsidy?
by Belinda Mackay, Gisborne Chamber of Commerce president
This weekend, while contemplating the move to Level 3, I happened upon a podcast by Spinoff contributor, Bernard Hickey. In the face of businesses throughout Aotearoa being given half a billion dollars within two days of the wage subsidy version 2021 being available, Hickey made some very salient points. It got us thinking; should businesses, and this includes Tairawhiti businesses, while they qualify for the subsidy during lockdown, take it?
When we went into lockdown last year the landscape looked very different. We didn’t know what our economy would look like when we came out of lockdown and things looked very scary. This time around, while there is concern, there is not the same uncertainty.
Last year, the wage subsidy worked well. Some may argue it worked too well and is moving our country into a period of inflation. What can’t be disputed is that at the time it saved jobs and stimulated economic activity.
We know that some businesses (including local businesses) did very well after lockdown, particularly construction. Of the top five businesses that received the largest subsidy pay-out (Air New Zealand, Fletcher Building, The Warehouse Group, Downer & Fulton Hogan), one could argue that this time around only Air NZ would truly have a case for claiming an additional wage subsidy. The remainder of those businesses all reported strong profit at the end of their financial year, some paid shareholder dividends. Did those businesses pay back the subsidy in the face of strong profit? Well, The Warehouse paid back the money after they took the subsidy, made staff redundant and then reported a full year profit of $44.5m, and Fulton Hogan paid back $1m. I’m sure that this happened locally too.
Many businesses that took the subsidy, in hindsight, didn’t need it, generated profit, made people redundant, paid out dividends and did not pay the money back. All parties would argue that “at the time they thought they needed it and they received it within the parameters of the scheme”.
Another point Hickey makes in his podcast, which I agree with, is that while government agencies are not concerned with getting money back from business, they have been litigating to ensure beneficiaries pay back the money they owe. This says, “it’s OK for business to keep, say, the $33m that Fulton Hogan got but if you’re a beneficiary, watch out”.
Hickey suggests the Government should have taken the $14 billion that businesses received and distributed that instead amongst our team of 5 million, so each of us received $2800 each. Imagine the impact for the people of Tairawhiti.
For some of us, that would mean spending money with local businesses affected by lockdown. For others, it would mean the ability to help feed, heat and clothe their family which would also benefit local business. Any which way you look at it, that payment would generate economic activity and would help lower-income families, who have not been positively affected by the post-2020 Covid lockdown boom.
The horse has bolted on this idea this time but until we’re a well-vaccinated country, lockdown will continue to be a tool used to deal with Delta.
So, for any future lockdowns, perhaps, before business approaches the Government for yet another wage subsidy, us business owners should ask, “just because our business can qualify, does that mean we should?” And because lockdowns may well continue to occur until we are a well-vaccinated country, the Government should look at the scheme and ask themselves if there is a better way.