Beware the rise of the low wage

Low wages comparative to growth are not a victory for capital or business boards. They are an insult to the covenant of trust which should exist in a company between shareholders, executives and workers.

Paying employees fairly is fundamental to modern business, which should have a focus on quality team building, reputational management and genuine corporate responsibility, post global financial crisis (GFC).

Yet this week, we learn unions in New Zealand are predicting a rise in strike threats because companies are driving down wages in a threat to the economy, the stability of our society and the reputation of our business community.

Annual wage increases have been less than 2 per cent for the past four years and that is across the board, affecting all levels of endeavour.

Kiwi workers already have low wages compared to other developed countries and there is a growing number of people here who are working and are still in poverty. Poverty is defined as having between 50 or 60 per cent of the country’s median disposable income, which is currently around $48,000 a year according to Statistics NZ.

NZ’s real gross national disposable income has increased 66 per cent between 1992 and 2016, and with the exception of a couple of years; 2009 and 2010, in the wake of the GFC, the rise has been constant.

By driving wages down we risk going backwards, and harming many hardworking businesses which rely on growing affluence and purchasing power to survive and thrive.

Simple economics shows that when income falls, people stop buying or switch to cheaper goods and services - fast food sales rise and the spectre of streets packed with two dollar stores, second-hand and charity shops, haunts many areas.

The positive effect of higher wages include better motivated workers, and more thought going into producing quality products.

It is not a reasonable excuse that employers cannot afford to pay fairly and factor in wage rises rather than cuts. The CTU union’s figures show that between 1988 and 2013, measured labour productivity rose 58 per cent, but wages went up just 18 per cent after inflation.

That is not a fair gap in itself. But the CTU says that even the cost of labour itself has fallen 6.6 per cent over the past two decades, so there must be money in the communal business pot to keep living standards of workers higher and still make a healthy profit. Companies need to take responsibility and step up to the mark, not down.