It is a mistake to underestimate the importance of the decision to lift the minimum wage to $20 an hour by April 2021.
This will involve a significant real increase in wages for hundreds of thousands of workers in this country.
Employers will be screaming. Every time there is a bump in unemployment as a consequence of capitalism’s business cycles, the increase will be blamed on the minimum wage increase.
Minimum wages usually go up each April 1.
In the last four years to April 1, 2017, there has been an overall increase of $2 an hour from $13,75 to $15.75.
In percentage terms, this was faster than the average hourly wage increase from $27.48 to $29.90 in the four years to the end of the March quarter 2017.
This means that there was an increase in the minimum wage as a percentage of the average wage from 50% to almost 53%. Bosses were grumbling under the National government about this.
Internationally, minimum wages are usually between 30 and 50% of the average wage.
But in New Zealand the minimum wage have been up to 80% of the average wage just after World War II, and was two-thirds (for adult males at least) as late as the mid-1970s.
During the nine years of the previous National government from 1990 to 1999, there was only one increase in the adult minimum wage and the real value of the minimum wage dropped from about 50% to 40% of the average wage. No minimum wage applied to workers under 20 until 1994 when one was established for 16-19 year-olds at 60% of the adult rate.
Then Labour lifted the rates from 1999 to 2008 to restore the 50% level of the average wage before leaving office.
Just as importantly, the application of a youth rate of only 60% of the adult rate from aged under 20 was progressively eliminated by increasing the percentage and dropping the age, first to 18 and then 16.
This process was in part a product of the ongoing campaign by Unite Union others to lift wages and end youth rates in the fast food industry through the SupersizeMyPay.Com campaign.
National has maintained around the 50% percentage of the average wage for the adult rate and even increased it slightly since they returned to office. But they have restored a youth rate that is 80% of the adult rate that can apply for up to six months for new employees aged 16-18 or trainees.
Again, at least in part, this was pushed along by a massive campaign by Unite Union and others to push the minimum wage from $12 to $15 at that time that involved collecting 200,000 names on a petition.
The average wage increased by 8.8% in the four years to March 2017.
If we apply a similar increase through to March 2021 then the average wage will reach $32.53.
With a minimum wage of $20 at that time it will be equal to 61.5% of the average wage.
This will be a significant step forward towards to goal of the Council of Trade Unions to make the minimum wage two-thirds of the average wage.
Currently, this percentage would equal today’s living wage number of $20.20 an hour.
Making the living wage the minimum wage is a realistic and achievable goal after stage one has been achieved when we reach $20 an hour on April 1, 2021.
Currently, most of the collective agreements that Unite has signed have been based on a “minimum wage plus” formula. That means as the minimum wage moves up all rates above the minimum move up as well.
In addition, in the last round of negotiations with fast food companies, we insisted that there needed to be at least a small increase above the minimum wage increase for workers when they started. McDonald’s and Restaurant Brands agreed to at least ten cents increase each year of their agreements. So new McDonald’s workers will be on at least 30 cents an hour above the minimum wage in April 2020.
For more senior and supervisory staff that will mean that most will be on or above the equivalent of the living wage then as well.
As the minimum adult wage moves towards the Living Wage then workers will simply be able to make ends meet after a weeks work, according to a statement from Unite National Secretary Gerard Hehir.
“It will make a huge difference to hundreds of thousands who most desperately need help” said Gerard Hehir. “Over four years it is a 6.75% average increase per year. That is not excessive when we currently have full-time workers relying on welfare support, state subsidies and charity – and still struggling. Employers need to pay their workers enough to live – it really is that simple.
“There are almost 700,000 workers earning less than the Living Wage (currently $20.20) – over a third of all employees. (see the CTU’s Shrinking portions to low and middle‐income earners: Inequality in Wages & Self‐Employment 1998‐2015).
“Winston Peters was spot on when he said many who felt capitalism was working against them were ‘not wrong’. The starkest measure is the Labour share of GDP in New Zealand which has fallen from nearly 59% in 1980 to only 50% in 2015 – 5% below the OECD average. Where has it gone? Corporate profits as a share of GDP have gone from 10% in 1980 to almost 25% in 2015. We shouldn’t be afraid of asking businesses to start reversing that trend – it is well overdue and only fair.
“The scaremongering around loss of jobs is just that according to Unite: When Unite successfully campaigned to abolish youth rates in 2008 there were dire predictions of mass youth joblessness. Youth employment actually increased in the years that followed. Recent research has consistently shown that hysterical claims of minimum wage increases causing rampant inflation and unemployment are simply wrong (see Why Does the Minimum Wage Have No Discernible Effect on Employment? by John Schmitt ).
“Everyone will benefit from the increases. Those wages will be overwhelmingly spent in local communities – benefitting local businesses. That will particularly help regional economies. Low paid workers won’t be jetting off overseas or importing expensive cars and luxury goods – they will be looking after their families, paying down debt and maybe even saving some money. The biggest barrier to getting into KiwiSaver is actually not being able to afford the weekly contributions
“Employers who don’t think their workers are worth $20 an hour should look at their business model. New Zealand has a productivity problem. Rather than relying on low wages and low skills, they should be looking to make their employees more productive. Investing in skills, training and new technology is the answer – not paying your workers the least the law allows you and complaining that it is too much.
“Taxpayers will be better off as well. The huge rental and income subsidies to low paid workers will actually reduce. This exposes who these government payments are really subsidising – low wage employers rather than their low paid employees. It is absurd that the loudest voices against minimum wage increases are also often the loudest in demanding tax cuts and complaining about government subsidies.
“On behalf of our members, and all low paid workers in New Zealand, Unite congratulates the NZ First, Labour and the Greens for making a real difference. There is a lot more to do – but it is a great start” concluded Gerard Hehir.
It’s certainly a good thing, but is it enough? I ask because the minimum wage has been rising by ~50c a year, albeit on a ‘case by case, you’d better be grateful peasants’ basis by the Natz, and this is only an 80c rise per year. Then again, if we can get the principle of 3-year targets for the minimum wage into a trend, that’d be awesome.
I’Ve heard a few businesspeople complain that they won’t be able to afford such a wave increase. Really? If their margins are so tight that they have to rely on poorly paid staff, then there’s something seriously wrong with their business model.
ANyway, an increase in wages boosts turnover because there’s more money in circulation being spent. SO those grizzlers will benefit long term. The corolllaryis lower wages and low turnover as consumers can’t afford to buy goods and services.
Why is the wage increase in over FOUR YEARS from now ?
WHY NOT NOW WHEN THE LOWER INCOME FOLKS NEED IT ?
Corporate control still heavily entrenched.
Hang in a bit more,…. Peters hasn’t yet been able to take the hatchet to the Reserve Bank / Treasury and ‘rearrange ‘ a few long term far right wing ‘thinkers’ thus far…
THAT’S when the fireworks will REALLY start.
Just as the London based Mont Pelerin Society using the Business Roundtable did things in rapid stages to upend our economic and social order under Douglas and Richardson ,… so too will this govt need some time to undo all the damage caused.
Knock those out , and that is a keystone for the next stages to follow.
But I agree ,… the workers need relief NOW !!!
The minimum wage rise will do a few things. It will of course, for a short term, put more money into workers’ pockets. It will though lead to employers trying to find ways to replace more workers with more automation. It will also lead to employers passing on the extra costs to customers, where they can. That will be mainly within New Zealand, like for instance in labour intensive industries, and in the supermarket retail business. People may have more to spend, but also face higher costs and prices, thus over time neutralising the gains.
So prices will also go up, maybe just a fraction, maybe more. Business people and employers will use the increase by legislation as an excuse to hike prices.
It will also increase pressure on workers, as employers will try to increase productivity to achieve the same output as before, for the same wage costs, meaning a few may not get jobs or even lose jobs.
Exporters will not be able to pass on costs, so they will be such businesses that will expect higher productivity for the higher wages.
As other employees, who may get just a bit more than the minimum wage, will feel they may by comparison end up a bit less better off, they will insist on wage or salary increases. Thus there may be increased wage and salary pressure throughout the levels of remuneration.
Increasing the minimum wage itself, within limits, and over a three year term, will not be the disaster some will make of it, it will though have such consequences, as just described.
What we need is not just higher wages, but better productivity, more efficiencies, more output and thus better living standards across the board for years to come.
If such increases do not come with some improvements that go with it, then we will simply see much else increase in costs also, food, clothing, appliances, energy and rents. That cannot be what we want.
Hence I treat this with caution, and will wait and see what else the government does, for workers, and the economy as a whole, which also needs to become much more sustainable, not just in using energy.
“Again, at least in part, this was pushed along by a massive campaign by Unite Union and others to push the minimum wage from $12 to $15 at that time that involved collecting 200,000 names on a petition.”
Yes, all good, but at the same time, the prices of fast food increased significantly also, as I note.
Protecting Wage Increases
The increases in wages for NZ Workers is to be commended. It must also be protected.
Because the national mob will be screaming and spitting and frothing that the wage increase is an attack on their god given wealth.
But as Mosa points out their is plenty of capitalist dosh out there. After all, dairy farmers who work day and night all year – apart from 3 months off during winter – can afford to pay their CEO 8.32 $millions of Dollars per Annum without a murmur.
So Billy English will be working on strategies to get his capitalist monies back into his nationalist pockets. Every cent of it.
To counter that, i suggest that any business supplier or retailer who raises his prices will pay an increases in Income Tax.
So if Butter, Cheese, Meat, Fish and Vegetables go up – so do Taxes. If Electricity rises in price – so does Energy Income tax. Same with Transport. Clothing too.
Landlords put up the cost of their Rentals ? Well yes. But their Income Tax rises too. Real estate goes up? Estate Agents and Conveyance Lawyers pay higher Income Tax. Banks want to increases their Interest Rates – Up will go their Income tax.
In every case Share Holders will pay higher Income Tax if their consumers are charged more.
You see, The New Government are good capitalists. They want to look after the people who do the work in this nation. Wages are to be protected.
… “Employers who don’t think their workers are worth $20 an hour should look at their business model. New Zealand has a productivity problem. Rather than relying on low wages and low skills, they should be looking to make their employees more productive. Investing in skills, training and new technology is the answer – not paying your workers the least the law allows you and complaining that it is too much ” …
Nice article , Mr Treen.
Yes , – for far too long many unscrupulous employers eagerly lept on the bandwagon enabled by the original neo liberal take down of NZ. The Roger Douglas’s , the Ruth Richardsons and the Jenny Shipleys of this world.
But now its time to literally pay the piper because they have been partying in the sunshine for well over 3 decades, – 33 years , in fact. And leaving workers out in the frigid conditions of poverty.
They’ve had their fun,… now its time to pay for the ticket fare.
And that ticket fare is to start paying a living wage. They want to get rich quick on the backs of low waged workers? Out of luck . Unions and workers who should be joining unions need to be pushing hard to silence these rogue employers and shut their neo liberal agendas down.
All the insulting , belittling excuses and lies about raising the minimum wage causing large job losses are just scare tactics from an insecure far right wing business elite ( here’s to you , New Zealand Initiative and Co) that know as soon as the cats out of the bag their grip on power and control , obscene salary’s and massive profits at the expense of workers is finished.
And they know that grip on power and control died with this election.
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