That’s the uncompromising message from the Rarotongan Beach Resort and Spa managing director Tata Crocombe.
The business owner was responding to the announcement of another increase to the minimum wage, which is to increase to $8 an hour next year.
He said it was no secret that labour productivity in the Cook Islands was low: he suggested about 20 per cent lower than New Zealand. And labour costs were the biggest part of the cost structure of a hospitality operation.
“In our staff if you can earn $50,000 a year in New Zealand we are probably paying you $60,000 a year. The real issue is the low productivity staff who we have to pay relatively low wages for because we need to train them, supervise them, work with them to get a basic level of productivity out of them,” Crocombe said.
Unfortunately, the way the government was increasing the wages was far in excess of the increases in revenues received by most hospitality businesses, he said.
“Therefore it is cutting into other expenditures such as repairs and maintenance, investments in technology, investments and marketing, et cetera.”
Crocombe added that the one-dimensional focus on vote-buying put additional pressure on all of the accommodation and hospitality businesses.
“The net result is probably unintended that is, that employers look to reduce the amount of staff that they employ, particularly school leavers without any experience and replace them with improvements in technology.”
Increases in the minimum wage were driven by political considerations to buy votes, he argued, rather than to find the optimal economic outcome for the Cook Islands.
It would be better if government had an overall economic development strategy that looked at simultaneously reducing the cost of electricity, reducing the cost of government which continues to explode and be a heavy deadweight on the overall economy, increasing tourism expenditure through the Cook Islands tourism corporation to attract more tourists.
Crocombe believes that in the long-term the Cook Islands needs to narrow the gap between the minimum wage in New Zealand and Australia, in order to stem the flow of outward migration of Cook Islands and to encourage grounds in for Cook Islanders living overseas to return back to live in the Cook Islands.
“However, the reality is that we operate our primary industry in the Cook Islands in an extremely competitive environment. Not only are we competing with other South Pacific countries but we are competing with pretty much any destination in the world that offers a sun destination.”