Crone on small business and Labour

February 13th, 2015 at 7:00 am by David Farrar

Xero’s Victoria Crone writes:

I recently attended Labour and Opposition Leader Andrew Little’s State of the Nation speech and heard first hand how the Labour Party is throwing its weight behind small business by placing a big emphasis on the small business agenda. …

There are a few areas where I think that they’re barking up the wrong tree, one being around starting a business. The World Bank Group already ranks New Zealand as the easiest place to start a business.

However, with small business firmly on Labour’s agenda, this bodes well for a great policy debate around small business for the next election.

I agree. I hope they come up with some innovative policy.

I see a few challenges for Labour’s small business policy:  

– Labour has a dilemma as it tries to encourage small business to create jobs. The first is the dilemma between what is essentially a nation of very small and often fragile businesses (remember 92 per cent of our small businesses employ less than five people and these businesses have the highest death rates), who will be taking on additional jobs which represents massive risk for them. A small business has to be able to sustain the extra cost of an additional employee over the long run. The average business owner is already wearing 20 hats. Adding managerial and employment policy to their already long list of day to day tasks will provide extra pressure.  Labour’s policy on encouraging job growth while minimising business risk could be challenging philosophically for the Party.

Most of Labour’s current policies are bad for small businesses. Their policy to scrap 90 day trials especially. But also their policy to massively hike the minimum wage, and make it illegal for a small business to gain Government work unless they pay a “living” wage.

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Little’s state of the nation speech

January 28th, 2015 at 2:00 pm by David Farrar

Andrew Little’s speech isn’t (or wasn’t) on the Labour website, but The Standard has a copy of it. A few extracts and comments:

The Labour Party I lead is about jobs. Good jobs. Skilled jobs. Well paid jobs.

That’s what a good, fair and wealthy society is based on. And it’s what Labour stands for.

A job is about more than just an income. It’s about dignity.

Indeed, which is why welfare reform is so important.

And it’s why the next Labour government will make sure New Zealand has the lowest rate of unemployment in the developed world.

Let me say that again – the next Labour government will make sure that New Zealand has the lowest rate of unemployment in the developed world.

No Government can guarantee that, or control that. It’s a silly useless pledge. The level of unemployment can be impacted by government policies, but the main influence is how well individual businesses are doing. They are the ones that crate jobs – not the Government.

A lot of people don’t know that small businesses were responsible for nearly one third of New Zealand’s economy last year.

And that 41% of the jobs created last year were created in firms with fewer than 20 employees.

And yet the question of how we can help these vital businesses to grow is very rarely at the top of the political agenda.

Well, I want to change that.

Because as much as small business does now, I want them to do more.

Excellent. So will Labour announce they no longer plan to scrap 90 day trials for small businesses (now available to all businesses). This is credited by many small businesses as giving them the confidence to hire an extra staff member. Without a 90 day trial the cost of a bad hire can be crippling to a small business.

Will Labour continue with its policy to have a massive increase in the minimum wage, which will reduce employment with small businesses who are least able to pass increased costs on?

Rhetoric is easy, but policies are what counts.

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A great small business story

September 10th, 2014 at 3:00 pm by David Farrar

Stuff reports:

When the Christchurch earthquake left hairdresser Michele Robertson and her friends short of a workplace, she decided to open her own.

Few 23-year-olds saw opportunity in the destruction of their city. But Robertson, who has worked in salons since she was 16, had always wanted to own her own.

“I was naive enough to think it could work,” she says.

“And it did.”

But Robertson was not without her naysayers.

“The first meeting I had with the bank manager – the earthquake had just happened, he might have been having a bad day – but the way he spoke to me was so degrading,” she says. “I went home and nearly gave up.”

Even reality television show host Tabatha Coffey, of Tabatha’s Salon Takeover, said Robertson was “crazy” when she met her at a hairdressing event at the Sky Tower.

But Robertson figured, “If I failed, I had the rest of my life to fix it. If I succeeded, I’d set myself up for a really good career.”

She opened Balayage, in Addington, five months after the earthquake in July 2011, thanks to $15,000 loan from her parents via the bank.

Mentors such as former boss Sonya Mbonyinshuti and uncle Jon Weir, who owns a construction company in Christchurch, encouraged Robertson to learn from their failures, as well as their successes.

Their main advice?

“Not seeing money that comes into your bank account as yours. It’s not,” Robertson says.

Following this, she paid herself about $200 a week for the first seven months and put most of salon’s revenue into a tax and GST account. She worked six days out of seven, and lived at home.

After one year, Robertson owned Balayage freehold and had a $2000 surplus, which she gave to local charity Te Mapua Child and Youth Trust.

That’s a great story. We need more people like Michelle willing to give it a go. Her experience of very low incomes for the initial year is not unique. I know of an advertising agency where the owners were paying themselves less than the receptionist, in a bid to keep it going.

This is one of the reasons why we should be very wary of employment law changes that will impose extra costs on small businesses. Many of them start off on the verge of failure, and it would not take much to push them over the edge.

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Small business views

September 5th, 2014 at 1:30 pm by David Farrar

MYOB had Colmar Brunton do a poll of 1,000 small business owners.  Some findings:

Preferred Policies

  1. Reduced prices for unlimited data broadband 69% support
  2. Simplification of Provisional Tax rules 67% support
  3. Tighter controls on foreign investment 54% support

Least Favoured

  1. Capital Gains Tax 60% against
  2. Raising age of super 43% against
  3. Remove 90 day trial period 39% against

Trust to manage the economy

  1. National 63%
  2. Labour 8%

 

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Labour bad for small business

May 26th, 2014 at 9:00 am by David Farrar

Stuff reports:

Small listed companies have performed significantly worse under Labour governments over the past 40 years because of major policy changes, a report says.

The report, produced by Massey University economics and finance senior lecturer Dr Chris Malone and associate professor Hamish Anderson, looked at the results of about 500 NZX listed companies since 1972.

“The smaller firms have done abysmally poor during Labour terms of office,” Malone said.

So why?

“We have attempted to ask the question why that has happened and it does appear to be related to policy reform.”

Companies were classified as large or small by splitting the sample at the median capitalisation.

Small firms had average monthly returns of about 0.7 per cent under Labour and between 1.4 per cent and 1.8 per cent under National.

Monthly returns for large listed firms were only slightly better when National was in power, he said.

So a National Government doesn’t help big business, but small business.

BusinessNZ chief executive Phil O’Reilly said the research made a valuable point.

“It’s policy uncertainty and radical policy change that will tend to destroy business confidence,” O’Reilly said.

Businesses wanted policy that was well-signalled, evidence based and supportive towards business growth.

Businesses tended to hold off investing and employing until the impact of policy changes were known, he said.

Even what may appear to be a minor change such as the KiwiSaver contribution rate can have a significant impact on a small business. Your payroll software needs to change. Your employee records need to change, and you ofte then spend weeks or months correcting errors with the IRD.

Regardless of the merits of a Capital Gains Tax, it would hit small businesses badly. It’s easy for a large business to value all its assets and work out capital gains. A small business will not have internal accountants but instead have to spend tens of thousands of dollars hiring external accountants to do this.

Large businesses have HR divisions to cope with changes in employment laws. Small businesses generally will not, and again be hit hardest with any changes.

 

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The union view on jobs

March 16th, 2013 at 8:58 am by David Farrar

Kerri Jackson at Stuff reports:

Small businesses that cannot afford to pay their staff a living wage should probably not be in business at all, a union leader says.

First Union general secretary Robert Reid said while the movement supporting a living wage of at least $18.40 an hour was generally targeted at large corporations and city councils, some undercapitalised small to medium-sized enterprises (SMEs) needed to think about their business practices as well.

“Why should a worker suffer for being employed by a business that maybe shouldn’t exist?

What an appalling statement. It shows the hatred for business that some union leaders have. Small business owners often spend months or years struggling to set up a business when they can’t even pay themselves a salary. And they create jobs for others, but Robert Reid thinks they are making their workers suffer if they pay them less than $18.40 an hour.

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