Living wage not new

A ‘living wage’ is not a recent political ideal. 100 years ago the Dunedin City Council was trying to provide a living wage for married men

ODT 100 years ago:  Sorting jobs for discharged soldiers

Living wage approved

In accordance with notice of motion at the Dunedin City Council meeting, Cr Bradley moved –

(a) That all the corporation employees’ pay be raised to a living wage, and that no married man shall receive less than 3 pounds for a week’s work consisting of six days;

(b) that all married men receiving 3 pounds 5 shillings per week and under shall receive a war bonus of 5 per cent on his wages for each child under 14 years;

(c) that no employee, either male or female, over 18 years shall receive less than 20 shillings per week.”

3 pounds converted to $6 in 1967, and 5 shillings concerted to 50 cents.

Cr Bradley was granted leave to add the words to the beginning of the motion “that it be a recommendation to the Finance Committee”. In speaking briefly to the question, he said the motion spoke for itself. He thought the time had now arrived when some steps should be taken to place married men on a better footing as regards pay. He thought every councillor recognised the necessity of an increase being granted in the direction he had indicated, and that every councillor was prepared to see a living wage paid to the council’s employees.

Child labour was common to, even for town boys (it’s probably still normal for farm kids to do some work at home):

Boys for farm work

Although the school holidays are yet at least a month distant, it seems that, owing to the desire to utilise the services of lads during the shearing season, a number of boys will probably be leaving school next week for work in the country, and week by week more will follow.

The Director of the Technical School has a number of boys going to stations at Gladbrook, Omarama, Matakanui, and farms in different parts of Otago. This is in accord with a decision of the board, which does not intend to prolong the holidays.

– ODT, 15.11.1917.

 

Labour’s workplace policy

Labour announced their workplace relations policy today.A modest increase in the minimum wage and the retention of trial periods (with some modifications) are included.

Key points:

• Increasing the minimum wage to $16.50 an hour.

This is currently 15.75 so it isn’t a big increase.

• Replacing the current National Government’s ‘fire at will’ law with fair trial periods that provide both protection against unjustified dismissal and a simple, fair, and fast referee service.

• Introducing Fair Pay Agreements that set fair, basic employment conditions across an industry based on the employment standards that apply in that industry.

• Promoting the Living Wage by paying it to all workers in the core public service, and extending it to contractors over time.

• Doubling the number of Labour Inspectors.

Backing fair pay and conditions:

Working for fair pay

Labour will boost the minimum wage to $16.50 an hour and base future increases on the real cost of living for people on low incomes. Over time, we will work towards lifting the minimum wage to two-thirds of the average wage as economic conditions allow.

Labour is committed to being a good employer in government. All core public sector employees will be paid at least the Living Wage, at a cost of $15m, and this will be extended to contractors over time. Labour will also double the number of Labour Inspectors to 110 to help ensure working people’s rights are protected. This will cost $9m.


Fair trial periods

Labour has always supported trial periods for new employees, as a way of giving a person a chance. National’s ‘fire at will’ law is unfair because it denies employees any recourse against unfair treatment and unjustified dismissal. This means an employer can sack an employee without a fair reason, denying that person and their family a livelihood. Treasury has found ‘fire at will’ has created no jobs and not increased hiring of disadvantaged jobseekers. Instead, it has allowed some bad employers to exploit employees.

Labour will replace the existing law with trial periods that include recourse for employees in the event of unjustified dismissal. Employers, particularly small businesses, have legitimate concerns that resolving employment disputes can be time-consuming and expensive. So Labour will establish a new referee service for claims of unjustified dismissal during trial periods. The referee will hold short hearings without lawyers and be able to make decisions to reinstate or award damages of up to a capped amount. This simple, fast, and fair service will be provided free for the parties involved, at a cost to the Government of $4m.


Fair Pay Agreements

Fair Pay Agreements (FPAs) will be agreed by businesses within an industry and the unions representing workers within that industry. FPAs will set basic standards for pay and other employment conditions within an industry, according to factors including job type and experience. The recent care and support workers’ settlement is an example of how employers, employees, and government can come together to create an agreement that sets base conditions across an industry.

By setting a floor, FPAs will prevent the ‘race to the bottom’ seen in some industries, where good employers are undercut by some bad employers who reduce labour costs through low wages and poor conditions. FPAs will create a framework for fair wage increases where good employers are not commercially disadvantaged for doing the right thing.

FPAs will cover all employees and workplaces within the relevant industry. Negotiations on FPAs will begin once a sufficient percentage of employers or employees within an industry call for one. This threshold and the precise implementation of FPAs will be developed in government in consultation with all stakeholders.

See the manifesto chapter for a full list of initiatives.

‘Living wage’ set at $20.20

The contentious one size fits all ‘living wage’ has been set at $20.20 for this year.

The current minimum wage is $15.25 per hour and is set to go up to $15.75 in April.

RNZ: Living wage put at $20.20 an hour

Living wage campaigners are encouraging companies to pay a minimum of $20.20 an hour from July.

The rate, more than $4 above the adult minimum wage, is at the level needed to provide families with the necessities, they say.

Krissie, a cleaner for The Fresh Desk company in Lower Hutt, is paid the current living wage of $19.80 an hour. She said it had made a huge difference to her life.

Of course more money in their pay packet will make things easier.

Low wages are a problem, especially in sectors like aged care.

Calculating one ‘living wage’ for many situations and areas and employee ages and circumstances is an odd approach.

The minimum wage will be sufficient for many young people in their first job who have no dependants and no accumulated debt, especially if they still live with their parents or in the lower cost regions of the country.

But it is paltry for people with families living in high cost Auckland or Queenstown.

The big question is whether it is sustainable for employers who have to pay it, or if they would have to reduce staff or shut down if wage costs get too high.

 

‘Living wage’ promise from the other side of Goff’s mouth

Just after posting on Phil Goff’s vague ‘promises’ to reduce rates rises – ‘Reduce rates’ promises – he is now speaking out the other side of his campaign mouth:

RNZ: Goff promises push for council staff living wage

Former Labour MP Mr Goff said he wanted all council staff earning at least the living wage.

Mr Goff estimated about 1500 of the more than 9000 council staff were being paid below the living wage and said the council should be leading by example.

“People are struggling to look after their families properly when they’re on the minimum wage. I can’t do much about the vast majority of those people but as mayor at least I could meet the obligation of being a good employer, to pay a decent living wage to the people that at the moment are barely on the minimum wage.

“Auckland is the country’s most expensive city to live in. We have to recognise that in how we treat our staff.

He said it would be just for staff directly employed by the council, but he would look at broadening that to contractors in future.

At a cost of $4 million it would not be funded from increasing rates but through cutting council costs, Mr Goff said.

Which costs Goff would cut to fund this increased expenditure are not specified.

“Now this isn’t something I can do unilaterally, it would require a vote of a majority on council and I’m conscious of the fact that it was voted down by councillors,” he said.

“But I believe if we relate the living wage solely to those employed directly by the council and we fund that out of efficiencies that we find then I can get a majority of councillors to support this.”

“Fund that out of efficiencies that we find” – yeah, right.

From Goff’s policy:

Where new expenditure is sought, the expectation will be that funding should be secured by the discontinuation of lower value activity, rather than simply assuming the continuous growth in functions and expenditure.

There is no mention of a living wage in his policy at the moment. On staff costs:

As a first step each department within Council will be set an efficiency target, averaging 3-6 percent across total Council expenditure to contribute toward future cost pressures. 

Areas where staffing and expenditure are very high or have increased disproportionately, such as in governance and communications, will be expected to find higher levels of savings.

He may have to factor in a disproportionate increase in wages of $4 million now. Or he could just ignore it and hope no one notices the conflicts.

Like many political candidates Goff talks costs and rates reductions out of one side of his mouth and spending promises out of the other.

Living wage pushes power prices up

I think the ‘living wage’ campaign is fine, advocating for higher wages for low paid workers isn’t a bad thing even though the setting of the level of a living wage is debatable due to many varying factors with work and living costs.

But there is a wider cost of higher wages – higher prices.

NZ Herald: Power bills to rise as autumn arrives

Meridian Energy spokeswoman Michelle Brooker said prices rose last year to contain costs which had been affected by inflation, and to allow for business decisions such as putting call centre staff on to the living wage.

So the price they charge for power is higher due to paying living wages. That’s not surprising.

Incidentally companies should look at putting call centres in provincial centres where the cost of living and the cost of housing is much lower than in the big cities, especially Auckland. That would reduce the cost of doing business as well.

I’ve bought power through Meridian for probably a decade, they have been one of the cheaper options for me.

But rising power prices prompted me to look around, and I have just dropped Meridian and changed to Flick Electric Co (effective this week). Meridian offered me a $200 credit not to switch but I’d prefer to just have lower prices rather than one off incentives they give to some customers that add to costs for other customers.

Flick Electric Co. gives New Zealanders access to the wholesale price of electricity direct from the spot market.

In fact we pass on all of the costs of getting power to your place, without any mark-up – that’s generation, distribution, transmission and metering – and then charge you a transparent fee to be your retailer. So, you can relax knowing exactly who you are paying for what. It’s honest and fair.

And in your personalised online portal we’ll show you exactly how much power you’re using every half hour of every day, and what you’re paying for it, so you are empowered to change how you use electricity to save even more.

You can find out how much you could save by joining Flick on Consumer NZ’s PowerSwitch website.

Flick offers three main advantages that I can see:

  • Lower prices generally
  • Allow you to use some power (like chargers, dish washer, clothes dryer) at a time of day or night that the power is cheaper.
  • They don’t lock you in to a term contract.

This means I can save money and save more money by monitoring power usage and spot prices and adjust my use to minimise costs.

We’ve got some smart tools that make it easy for you to see where the price is at any time.

This helps you take advantage of lower prices and means you make your own decisions about when and how much electricity you want to use.

he key price points to note are the morning peak, higher daytime prices, generally lower prices later in the evening, and the very best prices tend to be overnight. When you’re with Flick, managing your power use during these times will make a real difference to your bills.

So if you want to take control, if you’re cool about riding the daily price curves, if you can do some stuff when the price is low, Flick’s for you. It’s your choice – and that’s what Flick’s really all about.

Sounds good to me.

And through me (and many others) reducing power usage and spreading load it makes for a a more efficient use of power for New Zealand.

I initially found out about Flick through Consumer’s PowerSwitch website.

A potential disadvantage with Flick is that bills may fluctuate due to short term spot market price changes, but I’m prepared to wear that as the cost plus model should work out cheaper over time.

Time will tell how this works out. If it’s too expensive or too much hassle I can switch to another supplier whenever I like.

I don’t know if Flick pay a living wage or not. But like most consumers I want the best deal I can find.

Minimum wage and social welfare

Last week the Government announced that New Zealand’s minimum wage would increase 50 cents to $15.25 per hour on 1 April (2016).

The starting-out and training hourly minimum wages rates will increase from $11.80 to $12.20 per hour. It is set at 80% of the minimum wage.

“An increase to $15.25 per hour will directly benefit approximately 152,700 workers and will increase wages throughout the economy by $75 million per year.

For a 40 hour week that works out at $610. Annually it is $31,720.

“With annual inflation currently at 0.1 per cent, an increase to the minimum wage by 3.4 per cent gives our lowest paid workers more money in their pocket, without imposing undue pressure on businesses or hindering job growth.

“The Government has increased the minimum wage every year since coming to office, from $12 to $15.25. This is an overall increase of 27% compared to inflation of around 11%.”

New Zealand was the first country to set a minimum wage, in 1894. Relatively we have one of the highest minimum wages in the world. The current Australian minimum wage is higher at A$17.29, but is as low as US$7.25 in the USA (it varies state to state).

Yesterday Radio NZ had a debate on at How high should the minimum wage be set? (link to audio there).

Eric Crampton, who is an economist and the director of the New Zealand Initiative…

…said among developed countries New Zealand already had the highest minimum wage in relation to the average wage.

Mr Crampton said it was unreasonable to set the minimum wage high enough for people to live off it without any subsidy.

“I don’t think that there is any problem that is solved by the minimum wage that is not better solved through things like wage subsidies and Working for Families,” he said.

The minimum wage was poorly targeted and welfare systems were better placed to support lower-income workers, he said.

“We should look at where the burden of supporting lower productivity or lower income workers should fall,” he said.

“Should it fall on the employers and customers of firms that supply goods and services that are produced by lower income workers? Or should it fall on the tax base more broadly?

“We’ve got a tax system that’s progressive – it tries to spread the burden to where it can be afforded. When we instead put that burden onto employers of lower productivity workers, we knock them out of work.”

Former MP Laila Harré, now the co-owner of a living-wage restaurant…

…said full-time workers should not need to rely on government handouts.

“If people go to work, one should expect to learn a living from that job,” Ms Harré said.

“We have many non-viable businesses keeping themselves viable by surviving on these incredibly low rates of pay, [and] often extraordinarily dangerous working conditions.”

University of Auckland economics professor Tim Hazledine…

…said businesses generally had a great degree of ingenuity to adjust to change.

New Zealanders had a social and cultural expectation that adults should go to work and receive a living wage, he said – and the economy could adjust to that.

The Living age Movement Aotearoa New Zealand increased their suggested minimum to $19.80.

The Movement calls on Government, employers and society as a whole to strive for a Living Wage as a necessary step in reducing inequality and poverty in our society.

Striving for a ‘living wage’ is fine. Whether a much higher minimum should be imposed is debatable.

A problem with a set ‘living wage’ is that one size doesn’t fit all workers.

And if it is set too high then some businesses (and jobs) may not be viable, so the risk is that it would result in higher unemployment and make it more difficult for low skilled and especially young people to get jobs.

New Zealand also has an extensive and increasingly complex social welfare system that supports the unemployed and the unemployable, and also substantially subsidises many low paid (and not so low paid) workers through Working for Families.

Working for Families on it’s own is complicated enough with four types of payments:

  • family tax credit
  • in-work tax credit
  • minimum family tax credit
  • parental tax credit.

As well as that Accommodation Supplements are available and their are subsidies available for pre-school and out-of-school care.

Few would argue over having a minimum wage, although the level will always be debatable.

A higher ‘living wage’ is much more questionable except as an aspiration.

Both broad and targeted social welfare to some extent is expected in a modern society but the levels and availability will always be up for debate.

One problem is that social welfare tack-ons make it increasingly complex, at risk of being in inefficient use of taxpayer resources.

Some call for a Universal Basic Income (UBI):

An unconditional basic income (also called basic income, basic income guarantee, universal basic income, universal demogrant, or citizen’s income) is a form of social security system in which all citizens or residents of a country regularly receive an unconditional sum of money, either from a government or some other public institution, in addition to any income received from elsewhere.

A UBI may simplify things but would be difficult to transition to if it meant (as it would probably have to) that some people would get less than they do now, unless it was encumbered with supplemental assistance.

It’s easy to tack on increases, but reducing benefits and subsidies when people have adjusted to and become reliant on current income and welfare levels is tricky and risky.

Some sort of overhaul and simplification of our wage and welfare systems has some merit but would be very difficult to implement unless the country suddenly became rich enough to pay a lot more.

Living Wage now $19.25

Living Wage Movement Aotearoa NZ have done a 2015 update and have now set their ‘living wage’ at $19.25 per hour.

A new rate of $19.25 per hour

The recalculated Living Wage hourly rate for 2015, which comes into effect 1 July 2015, is set at $19.25.  This is an increase, in line with the average movement in wages, of 45 cents on the 2014 rate. The Living Wage enables working parents to afford for their children to go on a school trip, provide heathy food and pay basic household bills. For many it is the difference between barely surviving and having a life.

The rate will apply from July 1, 2015, for Living Wage Accredited Employers.

The Living Wage defined

The Living Wage is defined as:
The income necessary to provide workers and their families with the basic necessities of life. A living wage will enable workers to live with dignity and to participate as active citizens in society
(www.livingwage.org.nz)

The original Living Wage announced in February 2013 was set through independent research by the Family
Centre Social Policy Research Unit led by Charles Waldegrave, who continues to provide the updates on an
annual basis.

Calculating the rate

The Living Wage rate is based on expenditure items for a modest weekly budget. Annual updates reflect wage movements because the Living Wage is a rate in the market. A full review every five years will involve analysis of the movements in expenditure items, wages and inflation to check that the annual increases remain realistic, robust and true to the Living Wage
definition.

Wage movement is reported by Statistics New Zealand in the Quarterly Employment Survey (QES) and the calculated rate is set according to the wage movement for the year to June the previous year because this was the basis of the first determ ination. The QES measures the average hourly wage bill across all jobs in New Zealand. The average ordinary time hourly earnings for the year to June 2014 increased 2.5% from the year to June 2013. The movement of 2.5% on $18.80 was then rounded down to $19.25.

A modest increase

This figure sits at 68 percent of the average hourly earnings in New Zealand ($28.23) for the same quarter.
The most recent HES data for expenditure figures on essential items used in calculating the rate rose by 3.4
percent. It is therefore a modest increase for workers struggling to survive and participate in society.
The increase of 2.5% is small compared to CEOs of major NZX companies who earn on average $1.4million,
or $665 per hour, 34.5 times the 2015 Living Wage rate.

CEO rates rose on average 4% in 2013 with the ANZ’s David Hisco on the top of the list earning $4.1million a year or $1982 per hour – over 100 times the Living Wage.

I think this is well intentioned but highly impractical, but it has become a part of the discussion on income disparities.

The definition “The income necessary to provide workers and their families with the basic necessities of life” ignores the wide range of circumstances and needs needs of workers ranging in age from 16 to 60, from single people, second incomes to sole supporters of families and ranging from small towns in the far north and the south to large cities where living expenses can vary vastly.

And it ignores the value of the work being done.

Failing the Waldegrave necessities of life

Discussions over poverty and ‘living wages’ often include comparisons with “the good old days”, as happened yesterday on a David Farrar Facebook post:

Robin Stephen

Yet we have “poor bashers” here practically blaming children for being hungry. There is a child poverty problem in NZ which just wasn’t there while John Key was growing up

Pete George

“There is a child poverty problem in NZ which just wasn’t there while John Key was growing up.” 
I dispute that. I was growing up in NZ at the same time as John Key. What do you know about that era?

There were plenty of hard up families with kids living in what is now classified by some as poverty. Families were more self sufficient and got by with much less than the majority of families now. Health care wasn’t as good, with immunisations just being phased in. There was far less state assistance. I experienced living in a family with severe financial problems right through my childhood, with nothing like what Rev. Waldegrave suggests are necessities.

Robin Stephen

BTW what are the necessities you dispute with Rev. Waldegrave?

Here are things detailed by Rev. Waldegrave that would have failed his necessities of life test in my childhood (from Living Wage Investigation Report):

Power/Heating

  • Continuous hot water supply and normal use of all appliances. 
  • All rooms warm when people are at home during winter. 

(Only living area warm otherwise very cold in Central Otago winters, household water froze up in winter, hot water dependent on coal range wetback)

Phone

  • Cellphone call costs for necessary calls close to home and keeping in touch with family further away.

Internet

  • Broadband connection.

Holiday

  • Annual holiday for one week away from home area for all family members.

(I had one family holiday when I was a baby, and went to stay with relations on my own twice through my childhood)
Saving 

  • Amount sufficient to build up and maintain a reserve fund to cover emergencies. 
  • Amount sufficient to save for retirement. 

Exceptional Emergency

  • Provision to meet an unforeseen cost that would destabilise the household budget, eg. accidents, legal costs.

Appliances
The household has a basic set of appliances:

  • fridge

(we got our first fridge – paid for by a grandparent – when I was six)

  • computer 
  • lawn mower

(only a push mower)

  • TV

(no TV until about a year before I left home)

  • Music system 

(a brother bought a record player from earned money)

  •  jug
  •  drier

Clothing/Shoes

  • Adequate summer and winter sets of clothing for each member of the household, plus additional items for recreational activities.
  • Clothing at new clothing prices.

(Most clothes were hand-me-downs, made or recycled wool etc)

  • Sufficient shoes for informal, formal, work and recreational purposes per year per household member.

(Often went to school bare foot, one pair of shows at a time and were often well worn with holes before they were replaced)

Childcare

  • After school 
  • Daytime for pre-schoolers

‘Living wage’ and Dunedin City Council

I have been having a debate on the so called ‘living wage’ in the Dunedin mayoralty campaign after the incumbent mayor announced at a forum that he was advising the DCC CEO to implement a ‘living wage’ – although he said he didn’t know how much it was set at!

I have particular concerns about this being done without consulting the elected council, interested parties like the Chamber of Commerce or the public.

I requested information from the council and they have responded – detailed here: DCC acting CEO responds on ‘living wage’

I have also posted my thoughts on it, and I’ll repeat that here.

My thoughts on a ‘living wage’ at DCC

The council’s primary responsibility is to it’s ratepayers and all the people of the city. Many people have concerns about increasing costs and rates, including me.

DCC should also be a responsible employer and pay it’s employees a fair wage for the work done.

I think a one size fits all ‘living wage’  is the wrong approach. The DCC as employer should have flexibility.

If a minimum wage is set too high it can make it much harder for people, especially young people and lower skilled people, to get their first job.

Often I hear people talking of  ‘the good old days’ when we had virtually full employment and it was easy to leave school and walk straight into a job.

I started my first career job in 1973, as a trainee telephone technician with NZPO. I started on $1.00 an hour, $2080 a year. If I completed training I would have doubled that to about $4000.

There was a normal expectation to start low and work your way up.

Expecting everyone to start work on a comfortable living wage raises expectations beyond what real life delivers, and can raise costs above what employers can afford – which means they will employ less people, or no people.

I think the biggest emphasis needs to be on having more jobs, so more people can get off a benefit and earn their own income.

Then we can look at improving skills, increasing experience and improving wage rates.

Just throwing a blanket of money at problems doesn’t solve them – it often has unintended consequences and can create bigger problems – job losses and inflation being major concerns.

I’d love for everyone to live comfortably, happily, safely and healthily. I’ll do what I can to get closer to that ideal. But it’s not something that can be simply fixed by rating and taxing more and artificially forcing up wage rates.

And paramount in a DCC context is that any application of based emotionally charged ideology should be accompanied by wide and robust consultation and discussion.

It is not a decision for the mayor to promote on his own.

 

Act on Campus versus Greens on “Starting-out” wage

Act on Campus, via Facebook: The Green Party has been busy attacking the ACT-supported Starting-out Wage:

Youth age Greens

David Farrar points out some errors at Kiwiblog:

So in summary, the Greens:

  1. Misrepresented the minimum wage change
  2. Inaccurately stated the minimum wage last week was $13.75
  3. Miscalculated the take home pay last week (they were wrong at $13.50 and $13.75)
  4. Miscalculated the change in student loan repayments
  5. Miscalculated the change in Kiwisaver deductions

This is pretty gross incompetence for a political party with you know staff and MPs. There is nothing difficult about going to the IRD website and using their calculator. Their advertisement is false and misleading and they should withdraw it until corrected.

And Act on Campus responded:

They fail to understand that instead of reducing wages, youth rates increase opportunity to find employment.

Here’s our response to the Greens’ latest infographic:

Youth wage Act

Some comments:

Alex Caradus Is $357 a week a living wage?
ACT on Campus For a student, $357 is certainly workable. Students live on the cheap while they study so that they can gain a degree which will reward them with higher earnings later in life.
James Chan net unemployment benefit is $171.84, theyre living

UPDATE: Greens respond to David Farrars calculations and he responds to that:

amandaliarogers(1) Says:
April 3rd, 2013 at 10:06 am

Hi David. The Greens make a point of using our own imagery; most often pictures we’ve taken, but also paying for the stock images we use including this one.

The point of the numbers is to compare the situation that Sandy would experience if the negative changes that National introduced on April 1 hadn’t happened. Pedantically, the situations being compared aren’t ‘last week’ and ‘this week’ but ‘hypothetical week under last week’s rules’ and ‘hypothetical week under this week’s rules’.

We’ve calculated the student loan payments as if the repayments threshold had continued to rise at the rate of CPI inflation, rather than staying static as National has chosen.

The IRD calculators were used to get these results and double checked with our own models.

[DPF: I suggest rechecking. You’ve treated all the changes as discrete and added them together, when they are inter-related. You can’t say wages will drop and also say student loan repayments will increase. Same with KiwiSaver.

I’d welcome your detailed calculations.

Also note the starting off wage doesn’t apply to 1 May.

As for the stock image, the key thing is she isn’t called Sandy, is not a student and is not 18. No problems with use of stock images but they should be used as general background images – not claim to be someone they are not]