Avaluable tool against inequality

You’ve probably already heard the howls. On the left any call to increase minimum wage is met with an exhaled howl of relief and educated nodding that higher wages drive increased productivity making awealthier, fairer, more inclusive society for everyone.

On the right the long, high-pitched howls are those of indignation and disbelief that anyone could be so distanced from reality. Increased wages make everyone worse off as employers become reluctant to take on new employees and start questioning the ones they do have.

The truth is likely somewhere in the middle. A higher minimum wage will not bring economic doom, but neither will it cure an unequal society.

The idea to increase the minimum wage of $18.90 to the living wage of $22.10 per hour is the obvious headline grabber of the recent “Gains for Everyone” report from the Helen Clark Foundation and the New Zealand Institute of Economic Research.

How much we pay our lowest earners always gets people’s attention and the point of the suggestion is arguably to spark discussion.

It is an irony that the politicians, economists, business owners and even media commentators who opine so knowingly on the costs and benefits of paying people more or less have only a distant memory of earning aminimum wage themselves.

If we could hear more of the voices of people earning the minimum wage we might understand how a few dollars more an hour can change their life.

It could mean they sleep easier with less anxiety over how they’ll pay their bills. They may start putting cash aside to pursue a hobby, or put it towards retraining for their dream job, or maybe they’ll use it to support a family member in need.

What they do with it is their choice. Some will make bad choices. But you don’t need a research paper to tell you the freedom to make such choices is ameasure of a well-functioning society.

A $3.30 hourly increase won’t fix everything. Yet it represents a step forward in the fight against inequality, rather than a step back.

On the other hand there’s no escaping it represents a significant cost to the price of doing business. At nearly $7000 more per year for a fulltime worker, any increase, no matter how “socially responsible”, would need to be well signalled and incremental.

Covid-19 has had a disproportionate impact on Ma¯ori and Pacific Islanders – groups already behind in almost every economic and social indicator – and now the booming propertymarket is entrenching existing wealth.

New Zealand as a nation state knows from experience there are far more costs than benefits to a society when inequality runs rampant.

Many New Zealanders’ experience of their country is unavoidably unequal. As the “Gains for Everyone” report points out, it takes four generations for those on low incomes to move to average incomes.

That’s comparablewith Australia, sure, but still ameasure significantly at odds with the egalitarian ideals that for many of us underpin what it means to be a Kiwi.

In October New Zealanders voted for a new government, overwhelmingly backing a party whose leader has often emphasised kindness and fairness.

We can expect it to use the minimum wage as a tool to address inequality. It is unlikely the increase will be as steep as $3.30, but progress towards such a goal is a step in the right direction.

... the freedom to make such choices is ameasure of a well-functioning society.