Call to lift basic wage in face of cost crunch
The minimum wage should be raised to the level of the living wage to ensure lower-income households can fully participate in society, Council of Trade Unions director of policy Craig Renney says.
The living wage increased by 90 cents yesterday, to $23.65 an hour. It is set at the level that is deemed to allow workers to live a full life.
The minimum wage, by comparison, is now $21.20 per hour for adults, up from $20 last year and $18.90 the year before.
ASB chief economist Nick Tuffley said that until recently, the increases in the minimum wage each year had comfortably outstripped inflation by a difference of three percentage points or more.
Since Labour came into power, the minimum wage has increased 34.6%. Over the same period, cumulative inflation has been 14.2%.
But over the past year the rate of inflation has eroded much of the value of the latest jump.
Inflation was running at 7.3% a year in the June quarter. The minimum wage increase that took effect in April was 6%. Across the workforce, median weekly earnings from salaries and wages increased 8.8% in the year to the June quarter.
Renney said the numbers hid extra pressure going on lowerincome households.
‘‘At a high level, the minimum wage has increased with the CPI [consumer price index] rate over the past couple of years but we know CPI is an average and so for lowincome households over the past 10 years they have seen much higher rates of inflation than general households.’’
The Household Living Price Index shows that in the year to the June quarter, all households had a 7.4% rate of inflation compared with 6.5% for the lowest-spending group.
But in pre-pandemic years lowerspending households had higher annual increases than the biggest spenders.
‘‘Low-income households, where the inflation is in rent, food, fuel, rates – that is core inflation you can’t avoid. That is rising faster than general inflation. People on low incomes are really doing it tough because their inflation is higher than general inflation,’’ Renney said.
‘‘While the minimum wage has gone up, which is great, the minimum wage is an hourly rate.
‘‘It does not mean that households get all the hours they need or want, to put food on the table and keep a roof over their head. We certainly are seeing underemployment in New Zealand – people who want more work and can’t get it – there are around 190,000 people in New Zealand who want more work and can’t get it right now despite record low unemployment.’’
They might be in the wrong part of the country, in an industry that was struggling or had problems getting to work, such as transport or childcare.
‘‘The cost of childcare is rising much faster than inflation.’’
He said lower-income households also had less ability to substitute purchases for something cheaper.
‘‘I like to joke that tall, handsome, white economists like me, we can choose a different price point for our cheese – we can choose a second level of French brie because we can trade down.
‘‘If you are on the minimum wage or you are in a very lowincome household you can’t trade down.
‘‘There is nothing left to trade down. That is why we have always called for the minimum wage to be the living wage. The living wage is calculated to allow a household to lead a decent, fulfilling life.’’
He said even if people on the minimum wage could work 70 hours a week to get a decent income, ‘‘that is not a life. It is about being able to have some time for your family, or for yourself.’’