The initial response to a call for councils and other big employers to commit to a living wage of at least $18.40 an hour has been dominated by excuses. But what could be more important?

President Barack Obama did the living wage campaign in New Zealand a favour in his State of the Union address yesterday by making a simple declaration. It was wrapped up in his promise to raise the federal minimum wage – something he campaigned on in 2008 but has failed to act upon thus far. But it's something that needs to be put to Prime Minister John Key, amongst others.

Obama called for a boost to the minimum wage set by the federal government from $7.50 an hour to $9 an hour. It is, frankly, not much. Eighteen states plus the District of Columbia already have a higher mandated rate. It amounts to NZ$10.68 given the level of our dollar today, well below our $13.50 minimum.

How does it compares in terms of quality of life? I can't do the complicated sums and analysis, but I'd note how much cheaper groceries, petrol and power are in most American states.

The point however is Obama's telling line:

"Tonight, let's declare that in the wealthiest nation on Earth, no one who works full-time should have to live in poverty...''

Is there a commitment from our government, from each of our political parties, from our busines leaders, to say the same thing?

I'm aware of the obvious question: What is poverty? There are different definitions. And National is unwilling to pin its colours to the mast and define one here in New Zealand. I'm also aware of the easy argument that everyone has different living costs and family sizes, so a general living wage makes no sense. But the Anglican Family Centre that came up with the $18.40 figure is clear that it relates to a couple with two children.

Perhaps employers considering rising to the challenge can start from there and get creative. Perhaps we can look at the breakdown of where that money might go and accept that we're talking about a life that, while satisfactory, is hardly filled with bells and whistles and is in line with the least we should expect in this country.

Rather than be bogged down in the details at this stage, we need to come back to the basic needs this research and campaign lay bare. New Zealand is a horribly low wage economy for such an otherwise rich country. While all these things are linked, I would like to see politicians turning their energy and creativity to wage growth ahead of even housing, the dollar or debt reduction.

Because when you think about the idea of a living wage, surely it is the least we can expect of those in power. If a key purpose of government is to provide for the security and well-being of its people, what is more important than those in full-time work, contributing to the demands of our society, being able to meet their most basic needs?

Whatever Len Brown, Celia Wade-Brown, Bill English, Bruce Robertson of the Hospitality Association, Barry Hellberg of the Retailers Association, and Patrick Lee-Lo of Building Service Contractors might offer as reasons why a living wage is too hard to achieve, there is a simple reply: Is it OK for someone doing a full day's work in New Zealand to be unable to make ends meet? No. End of.

What is a more important use of rates (and a better foundation for a 'liveable city')than ensuring people can pay their bills? If a business can't afford to pay staff enough to live on, are they sustainable (or desirable) or are they not charging enough? Whatever the government is doing to help those less well off (and as taxpayers we do a lot), if work doesn't pay its way, then doesn't more need to be done?

And as consumers, if someone providing us goods or services can't raise a family in decent conditions or have the kind of life we'd expect for our kids, friends or neighbours, then we aren't paying enough.

Even those hoary old arguments about higher wages meaning fewer jobs need to be called out as the charlatans they are. If a job doesn't pay enough to live, it's just not a good enough job.

In other words, there's no reason you can give me why someone in this prosperous, developed nation of ours who works full-time shouldn't be able to live on what they earn. There are no excuses.

Obama again today made his case in simple language: "if you work full-time, you shouldn’t be in poverty.”

Surely we can all stand alongside Obama and say in this rich country no-one in full-time work should suffer poverty. Really, what could be more important and more fundamental? Because if we can't commit to that, what kind of country are we?

Comments (12)

by Brent Jackson on February 14, 2013
Brent Jackson

Hear, hear !

by Jacob Toner on February 14, 2013
Jacob Toner

Doesn't a single rate of a living wage ignore that the living costs for different individuals vary substantially based on things such as location, the number of dependents, and other factors? Instead we have a minimum wage that is augmented with things such as Working For Families and other support for those that need a "top up".

by alexb on February 14, 2013

Perhaps there should be some age based breakdown of what constitutes the minimum wage? I.e, for those under 18 the current adult minimum becomes their minimum wage, 18-21 it becomes $15 an hour and for over 21 it becomes $18.40. Something to that effect could both attack the problem of youth unemployment and bring wages up to the standard where poverty could be diminished. 

by Jacob Toner on February 14, 2013
Jacob Toner

@alexb - Age based minimum wage would still seem to be unfair as it discriminates based on age, and I'm not sure age and income required to live are necessarily linked other than the older someone gets the more likely they are to have dependents or not to live with parents.

by Matthew Percival on February 15, 2013
Matthew Percival

I had posted a big long rant on this but spell checker somehow deleted 2/3rds of my post! When I get a spare 1/2 hour I will post again. Just thought I'd better give Tim some advance warning to get his debating cap on :)

by Tim Watkin on February 15, 2013
Tim Watkin

Ready and waiting MP

by Brendon Mills on February 16, 2013
Brendon Mills

The push back will be huge.


But a living wage is a good thing. There are a lot of people who slog their guts out each day, and it all end up being swallowed up by bills.

by Matthew Percival on February 16, 2013
Matthew Percival

I think the living wage is a good idea in theory but the practicalities just don’t stack up.

1)      We need to look at the recent history with the rise in the minimum wage. In 2000 the minimum adult wage was $7.50. It’s now $13.50, an increase of some 80% far outstripping wage growth in the broad economy. Yet as we have discussed not so long ago inequality seems to be getting greater. The conclusion is that raising the wage floor is an ineffective method of increasing the wealth of the poor.

2)      Let’s consider the effect of the entire economy adopting a living wage. The cost will be passed on to consumers for essentials like food and fuel. The consumer will have little option but to pay more. However for luxuries like say going to the movies, cafe or cleaning the office, the consumer will simply consume less as they will have less disposable income and an unwillingness to pay more for the same service they received yesterday. People will lose jobs and unemployment will rise, the only question is to what extent.

3)      Let’s consider the effect of some in the economy adopting a living wage. Let’s say the public service. How would we pay for such an increase? Either an increase in rates or an increase in overseas borrowing. If we increase overseas borrowing that ultimate means an increase in tax in future years to pay the additional borrowings and interest. Such measures would only compound the pressure on those left earning $13.50, not the result we are after.

4)      All other workers in the economy are going to demand a wage increase at their next review. Fair enough too. Costs will have risen while they will have been earning the same amount. Not to mention those who have taken student loans to upskill will quite rightly think that they should be remunerated above an unskilled worker to pay them back for their investment in themselves. Ultimately my concern is that somewhere down the track once the full effects have filtered through the economy tomorrows $18.40 will be worth today’s $13.50 and we will be back to square 1.

5)      I would also be concerned on the effect the move would have on the willingness of people to start a new business or indeed be self-employed. It’s hard enough as it is and I could point you in the direction of plenty of business owners who work for free or close to it. Raising the wage floor would be a disincentive to be in business which in term exacerbates unemployment.

6) If it was going to work then why not increase it to $50 an hour so we can all be rich?

by nommopilot on February 16, 2013

Bill English, John Key and most of their henchmen are much richer in relative terms since 2008.  They have done an excellent job of managing the economy, from their perspective.  The hardest thing about their jobs is explaining why despite their expert steering, somany New Zealanders are having such a hard time.

I whole-heartedly believe that we need to re-think our economy on a far more fundamental level than simply trying to increase minimum wage.  We, as a society, have enough wealth that everybody should have a decent basic standard of living and access to education. 

It should be the government's responsibility to see that this is the case but they have shirked this responsibility and instead plead too ineffectual to do anything about anything because of [theglobalfinancialcrisisearthquakesthepreviouslabourgovernment] and watch as half the country drowns in rising living costs and yet another engineered housing bubble.

So, I say f##k the minimum wage.  Bring on the universal minimum income.  Say to every citizen of this country:  "There is a place here for you.  You have something to offer so we'll make sure you get what you need."  That way the people who clean away the sausage rolls after cabinet meetings wouldn't have to work a second job in order to afford their damp 2 bedroom flat in Porirua.

by Richard Aston on February 17, 2013
Richard Aston

Matthew you have made so many assumption and direct linear connections its hard to know where to start.

1 "The conclusion is that raising the wage floor is an ineffective method of increasing the wealth of the poor" - income in equality is due to the weathly having proportionately more , not the poor having less. An increase in the minimum wage would clearly increase incomes for lower paid people, its simple math.

2 Increase minimum wage = unemployment - its not that linear. Minimum wage earners ( they are lots of them) spend all their extra money in the economy , they are not big players in the luxaries market eithet .

3 Is so silly I'll ignore it - how many people in the public are on the minimum wage now?

4 "All other workers in the economy are going to demand a wage increase" based on what evidence? Did this happen last time the minimum wage increased?  And ALL workers , wow thats a amazingly collective response to one variable.

5 "Raising the wage floor would be a disincentive to be in business" yes for those new business ideas that rely entirely on cheap labour , considering China etc have that business tied up why on earth would you want to create a business entirely dependant on cheap labour .

6 "If it was going to work then why not increase it to $50 an hour so we can all be rich?"  You are really running out of arguments now aren't you.



by stuart munro on February 17, 2013
stuart munro

A good place to start would be stiffer penalties for abusers who are breaking the minimum wage rules now. That would be fishing companies using the slaveship/charter vessel rort, orchard contracters, and in some cases ethnic restaurants and brothels. I repeatedly reported breaches to the Labour department back in the day. They didn't want to know. To make minimum wages meaningful, the labour department has to want to know. And abusers need to be spending time in durance vile with all the other criminals.

by Tim Watkin on February 23, 2013
Tim Watkin

Matthew, sorry it's taken me so long to reply! As you might expect, we have some different views here:

1) You're missing the differing trends within that time. As the minimum wage (and the economy) grew, inequality shrank. The trends was heading back in the right direction until around 2008/9, when it has started to increase again. You may blame the recession and GFC or National... I'm sure there were other factors that helped close the gap, such as WFF, fuller employment etc... But that rapid increase in the minimum wage you point to is evidence in favour of a living wage – when you raise the bottom, the gap does close.

2) I accept there will be an impact – you can't push at one part of the economy without seeing give in another. But I think you'd do more good than harm. And I don't think you'll see less consumption, as the people earning more at the bottom tend to be spenders by necessity and they'll have more to spend. Oh, and maybe some businesses can afford lower their profit margin a little – that's not fixed, y'know. And assuming NZ has followed international trends, the rich have become much richer in the past three years, so maybe there's room for some movement.

3) I'm afraid I'm with Richard on that one.

4) I don't think minimum wage increases have such a broad effect. But inasmuch as some people demand a higher wage as a result, well, yes, part of the point of this is to help NZ become a higher wage economy. That's a good thing.

5) I would be incredibly surprised if there was a link between the two. We have more self-employment than most developed countries, so I don't think we're on verge of crisis. And anyway, shouldn't anyone going into business do so on the understanding that they need to generate enough profit to pay their workers a wage they can live on? If you can't do that, maybe you shouldn't be in business.

6) I could turn that on its head and say 'why not abandon any minimum wage, then introduce slavery so we can have lots more self-employment and really drive costs down?'. Extremes are just silly. The point is that we make choices (often moral) as a society about what is OK and what isn't. We've decided $13.50 is just OK. Except we know that it isn't. Not for a proper life. So that needs to change. Or are you saying those people don't deserve a proper life?



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