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Is it time to make the minimum wage a living wage?

Minimum wageMarch 13, 2017

Is it time to make the minimum wage a living wage?

The minimum wage reflected below is from 2017, for 2018’s minimum wage please refer to our latest post here. 

  • Minimum wage will increase to $15.75
  • New living wage is estimated at $20.20
  • Difference $4.45 per hour, $178 a week

New Zealand was the first country to set a minimum wage, in 1894. Alone, this is an extraordinary and revolutionary landmark. As the pioneers in this space, New Zealand continues to break new ground; having relatively one of the highest minimum wages in the world and continuing to lead the dialogue about the living wage.

Living wage campaigners have calculated that it now takes a wage of at least $20.20 an hour to support a decent quality of life in New Zealand. Living Wage Movement Aotearoa New Zealand are pursuing their agenda by bringing together community groups and unions to campaign for implementing the Living wage. The work of groups like this compounded with the broader ongoing public debate about the struggle of low-income families raises a key question: how great is the gap between the minimum wage and the amount of money needed to meet a minimum standard of living?

Workers and employers continue to argue over the issue of a minimum wage. Workers say they want to receive a minimum “living” wage that permits them to meet the most basic needs of life such as food, clothing and living arrangements.

Conversely, for business owners the evolution of employment law is a never ending challenge. As workplace relations specialists, we work with owners and employers to determine accurate wage rates applicable to their staff in response to changes in minimum wage rates each year. Almost every discussion we have with owners includes questions about minimum wage, living wage, and why they matter.

What is the living wage?

The living wage is a non-binding goal, designed to put pressure on employers to raise workers’ pay above the legal minimum.

Calculated annually, this amount reflects what a full-time worker needs to earn in order to afford a decent standard of living. Estimates of what constitutes a living wage can vary by location and household type. Advocates are increasingly hoping that living wage estimates will influence the setting of legal minimum wages.

Living Wage Movement Aotearoa New Zealand  say the new figure reflects the impact of rising prices on a typical Kiwi family struggling to pay the rent and cover everyday costs from supermarket trips to school uniforms.

What is the minimum wage?

Minimum wage is the lowest wage permitted by law and is enforced by legislation. The government announced in January that the minimum wage will increase by 50 cents to $15.75 on 1 April 2017. The starting-out and training minimum wage rates will also increase from $12.20 to $12.60 per hour.  Visit Minimum wage set to rise for more details about the changes and what you need to do to comply after 1 April 2017.

What about the effect on small businesses?

Although many might adjust to a higher minimum wage by letting staff go or by reducing staff hours, there are other options that could reduce the burden on your business. So, regardless of how your business responds to a rise in minimum wage nationally, no net negative impact is expected on employment across the country.

The past few years have seen a rise in interest in the issue of wages from a range of stakeholders including consumers, the media and, not least, workers themselves. We have seen some important developments in thinking on the issue, and a number of valuable new reports have been published.

The issue of fair wages. 

Advocates of the living wage argue that it makes good business sense – that to remain competitive and attract the best talent, we needed to increase our wages, ensure that every employee has access to a fair wage and help our people plan for their future retirements. If we help employees on these fronts and show them a path for career growth, they would come to work more focused and engaged. For businesses, higher wages mean better employee retention and increased productivity, which translate into happier customers and healthier profit margins. Raising the minimum wage could do the same for our country by strengthening our overall economy.

What are some businesses doing about it?

As the cost of living rises each year the living wage rate is increased. Over the last four years, 64 businesses across New Zealand have joined the Living Wage Movement, committing to paying their staff at least the yearly living wage rate.

Last year the majority of representatives on six councils around New Zealand voted in favour of paying all council employees the living wage.

Recently, Living Wage national convenor Annie Newman has announced that the living wage rate will increase from $19.80 to $20.20 on 1 April 2017.

But even the minimum wage as it stands seems too hot for some to handle as a few employers claim they cannot afford to pay even the bare minimum required by law. Small and medium business have less financial room to manoeuvre, and are sensitive to any changes in their wage bill.

Some businesses paying the living wage – or more – argue that it is their fiduciary duty to expand their business, increase profits and keep employees happy. If we want to remain competitive as a country and continue to grow a strong middle class, all businesses may soon recognise that paying a living wage is not just goodwill, it is good business.

The living wage debate has many sides. What’s your side? Let us know your opinion, email us at [email protected]

As always, we are on hand to help you with any questions. If you require advice regarding the new minimum wage rates, please contact an Employsure specialist on 0800 675 700.

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