The government intends to scrap the Living Wage as a procurement requirement for all government contracts in cleaning, security, and catering. The Tertiary Education Union has mounted a Fight to keep the Living Wage .
But for many families the living wage is not what it first seems. Yes, the hourly rate is to go to $28.95 in September, while the minimum wage will be only $23.50 BUT…
Let’s take a family of 2 parents and two young children in the low wage economy. If only one parent is working for wages, at 40 hours a week on the minimum wage they would get $48880. If they were on the living wage they would have a gross $60,216, or an extra gross $11,336. Sounds a lot better doesn’t it?
But after tax at 30%, loss of working for families at 27%, loss of accommodation supplement at 25%, repayment of student loan at 12% , ACC levy 1.6%, this extra $11,336 is whittled away by up to an effective 95.6%. They could be left with around just $498 extra in the hand for the whole year, around $9.5 a week.
Now let’s say this family is desperate to get ahead and the one earner takes on overtime and weekend work of another 20 hours at the Living Wage to earn an extra $30,100. The family income is now gross $90,314. As a result of the extra $30,000, with tax at 30% ($5335) and then 33% ($4067) total tax is $9,402. ACC is $480, there is a loss of Working for families of $8,100, and the student loan means a further loss of $3,600. Any help from the accommodation supplement may have long gone and the family may barely have $162 additional weekly income in the hand.
Of course, families may earn the extra weekly income by 20 work hours of the parent at home. But this is not always possible and if it did, extra childcare costs might also apply. The 60 hours paid work also means this family will be very time poor.
TEC implies that government’s policy means “ thousands of workers across Aotearoa will no longer be guaranteed the Living Wage”. Perhaps more anger should be directed at the miserly decisions in the budget that further disadvantage those on low incomes.
These include no inflation adjustments to Working for Families tax credits for children, nor to the absurdly low threshold $ 42,700 at which abatement applies. Likewise, the student loan repayments threshold is frozen at $24, 128 which according to the government affects ”about 370,000 New Zealand-based borrowers. It’ll cost them about $1.20 more a week on average”.
Contrast this with Australia where all aspects of their family tax credits are adjusted regularly. The threshold is much higher than in New Zealand at A$65, 000, and the rate of abatement is lower at only 20%.
As well, from their latest budget: The Albanese Government has passed legislation reducing all students’ debt by 20 per cent from 1st June 2025 at a cost to the Budget of $16 billion. This will wipe $5,520 from an average debt of $27,600 for a university graduate. Note also, the threshold for repayment is lifted from $54,000 in 2024-25 to $67,000 in 2025-26, and indexed for future years.
Unions should pay closer attention to raising the visibility of these issues and help stop our low income families fleeing to Australia. We were told on the TV1 on Sunday that now 500,000 New Zealanders need the food support offered by foodbanks include increasing numbers who are in fulltime paid work. Foodbank funding has been cut, and even this last resort for low income families is disappearing. What vortex of misery is in store.
We’ve had the past couple years as proof that when the minimum wage rose to keep up with cost of living increases, what actually happened is that corporations use the media as a mouthpiece to complain that “nobody wants to work anymore” and propose cutting welfare and government spending in order to put the squeeze on the poor so that they’d have no choice.
Most folk already have no choice but to get work to get by – and increasingly people will need to work into their 80’s before they can afford to retire
Thanks (mainly) National, but notable others are ACT and to a lesser degree Labour and NZF, for enforcing a work to live lifestyle despite the fact NZ is a relatively wealthy country that produces enough primary produce for 40 million people – not to mention tax free capital gains for those fortune enough to be involved in the housing market.
It appears that this lot are encouraging growth of prisons (and prison building) and homelessness – thanks again you assholes … utu is coming
It’s interesting Nicola Willis would allow Winston to front foot her corner stone policy replacing Irex with pre owned Toyota’s. They’re not just in complete denial they’re being deceptive. Our only silver lining is Luxon only has a year to completely fuck everything up.
To win the next election Labour need to be stating now, very loudly, come the next election, gst on Food is ‘gone by breakfast’. Plus a years worth of student debt is wiped.
I don’t think we should pin our hopes on tax reform. Whatever Chippie does all his ministers have to be expert in whatever field there passionate about because passion is one thing that can drive someone and in this political climate we need passionate people or they may just give up.
Passion I instinctively draw back from people who spout that. Keep your passion for bedtime. While you are supposedly working for the good of the country – show and do your commitment with well-thought out programs that will have known good effects for citizens and see that people are helped to utilise them and get jobs that will support them, and their families with something left over for a knees-up.
My goal wasn’t to score cheap points. Susan’s been pretty vocal about her support for the tax working group recommendations she herself was on. Just need to read her a bit more before commenting girl.
I would also like to see thresholds for abatement of social payments lifted substantially. Labour needs to understand how discouraging the current arrangements are. Why don’t they? Why did they keep the threshold for WFF fixed and raise the abatement to an absurd level of 27%. Families get demands for repayments going into debt at IRD in a vicious downward spiral
The reasoning is sound, but minimum wage has only gone up to $23.50
Yes but we have to worry about the real impact on disposable income when the wage increases especially for families
I don’t think we should pin our hopes on tax reform. Whatever Chippie does all his ministers have to be expert in whatever field there passionate about because passion is one thing that can drive someone and in this political climate we need passionate people or they may just give up.
It should be called the “barely living” wage
Raising the minimum wage was never meant to be the silver bullet that solves all problems it was to give the government time before all the replacement infrastructure came online. Now we have higher minimum wages and some ran through ferries, no new hospitals, NZDF 20 billion capability plan has been pushed out again. Meh.
Min wage is $23.50 not $25.50
Thanks to those who spotted the error. The min wage is $23.50 not $25.50.
Any family trying to exist on this hourly rate will be really struggling. And the calculations assume a full year of employment at a constant 40 hours a week. (The Working for Families payment for their children is $360 per week in full, but because their income is above the threshold of $42,700 it is reduced by $32 a week.)
The corrected paragraphs are:
But for many families the living wage is not what it first seems. Yes, the hourly rate is to go to $28.95 in September, while the minimum wage will be only $23.50 BUT…
Let’s take a family of 2 parents and two young children in the low wage economy. If only one parent is working for wages, at 40 hours a week on the minimum wage they would get $48880. If they were on the living wage they would have a gross $60,216, or an extra gross $11,336. Sounds a lot better doesn’t it?
But after tax at 30%, loss of working for families at 27%, loss of accommodation supplement at 25%, repayment of student loan at 12% , ACC levy 1.6%, this extra $11,336 is whittled away by up to an effective 95.6%. They could be left with around just $498 extra in the hand for the whole year, around $9.5 a week.
Ill ask the Daily Blog to correct it and thankyou. The perils of this kind of work.
Labour need to harden up and get a proper socialist at the helm. Someone that is going to take it as far left as these CoCks in power have taken it to the right. Give something for Trevor, I’m right and Bob the Fist to cry about in their worst nightmares – a caring community for all and not just some.
Thanks, Susan.
Yes, no inflation adjustments for WFF, the accommodation supplement and the low abatement threshold needs to be address.
The fact we require WFF and accommodation supplement further highlights wages are insufficient.
And the current setup deters wage demand due to the impact (loss of WFF and accommodation supplement) you highlight. Compounding the problem.
This Government talks about growth while intending to scrap the Living Wage as a procurement requirement when they should be changing the minimum wage to the living wage nationwide.
Forty years of neoliberal economics running the economy and idiots such as Ada, I’m right and Bob still try to pin the resultant mess onto the left.
Beyond pathetic.
fRUITY TIME, COMMING, MINIMUM WAGE YOUR CONTRACT, what contract, get to work pick fast your weight.
Why the truck load of shit, as your line followers, lets march the streets lets say out now.
Eh! dare.
$23.50 an hour. “Any family trying to exist on this hourly rate will be really struggling”.
They’ll be not affording sports subs for the kids or pulling their teenagers out of school, cutting the food budget, getting loan sharked, being moved on by landlords pissed about late payments or reborrowing equity in their house.
It is dire for low income families on the Min wage but the point I was trying to make that even on the living wage the abatements/tax/repayments can leave a family no better off for the extra and even worse off in some cases.
The root of the problem must be grasped by Labour and articulated to improve understanding of why reform to thresholds and abatements is so necessary and then make some real meaningful changes. Otherwise why would low middle income families stay?
Well we can all sit here and bitch and moan but you are all preaching to the people who know its not right apart from Bob the fister and a couple of other bots .
Untill we all get our shit together and vote differently nothing will change .
In the mean time there are more people like my cousin and his wife whom were intellegent people who now live in the musk trump rabbit hole .
They dont see that we are a year ahead of the orange one and what we see here now is only going to get way worse now the USA is following but ramping it up even more .Look for the looming depression that may well hit sooner than you think .
Never fear the Natz numbers are ‘rock solid’…they are looking after the ‘squeezed middle’….not their donors and corporations.
A couple with two children and a sole earner on the living wage with a gross of $60,216 pays $1005.61 in ACC levy and no Income tax as they qualify for WFFTC greater than their tax liability.
This is because they are eligible for WFFTC of $267 per week (greater than the income tax liability on an income of $60,216). The couple will receive a net income of $59,210. IE the effective tax rate on the difference between minimum wage and living wage is the ACC levy of1.67%.
You quite clearly do not understand how our income tax system and Working For Families Tax Credit works.
Effective 95.6%….what a load of hogwash. I sincerely hope you are not helping anyone with budgeting advice.
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