While it is early days for New Zealand’s new coalition government, the cost of living crisis is still hurting a lot of working New Zealanders.
The National Party campaigned on tackling the crisis. “Our plan is carefully targeted to ensure that those who will benefit the most are working New Zealanders. It’s about time they got some relief from Labour’s cost-of-living crisis and National will deliver that to them”, Christopher Luxon said.
The minimum wage effects a significant proportion of our workforce and helps to enable many of our most vulnerable working New Zealanders support themselves and their families. Ministry of Business, Innovation and Employment (MBIE) figures show that there were estimated to be just under 80,000 people earning between the current minimum wage of $22.70 and $23 last year.
Last month Stats NZ advised that the Consumers Price Index increased 4.7 percent in the 12 months to the December 2023 quarter and that the cost of living for the average New Zealand household increased 7.0 percent in the 12 months to the December 2023 quarter.
Yet the new government recently announced that the minimum wage will increase by only 2 percent, from $22.70 to $23.15, from 1 April 2024. Workplace Relations and Safety Minister Brooke van Velden said given economic headwinds with a softening labour market and high net migration, a cautious approach was required to raising the minimum wage.
MBIE reviewed a range of scenarios on the wage increase. It recommended an increase of 4 percent to $23.60. It said adopting this increase would be "prudent" because the cost of living crisis was likely to remain an issue and the labour market will be more sensitive to minimum wage increases compared to the past two years, as unemployment looks to be increasing.
But it is understood that in a Cabinet paper that the Workplace Relations and Safety Minister had proposed and recommended that Cabinet only adopt a 1.3 percent increase.
Of course the Labour Workplace Relations and Safety spokesperson Camilla Belich said the "tiny" increase was not enough to help low income earners in a cost of living crisis. "This pathetic increase is beyond disappointing. As the price of goods and services continue to climb, the coalition government has chosen to turn a blind eye to our most vulnerable income-earners by not increasing minimum wage to a level in line with inflation."
Last year the then Labour government increased the minimum wage to $22.70, a boost of 7 percent (in line with inflation last year). The former Prime Minister Chris Hipkins said "I do understand that a number of small businesses will have concerns about this decision, however in a cost of living crisis we can't leave those on the lowest incomes behind".
The Employment Court has said that the Minimum Wage Act “is a statute of fundamental importance in the sphere of employment law in New Zealand. It is a statute that is designed to impose a floor below which employers and employees cannot go. It is directed at preventing the exploitation of workers, and is a statutory recognition of the diminished bargaining power in low paid employment”.
The CTU has argued that “A low minimum wage keeps New Zealand’s general wage levels low and traps many workers and employers in a low-wage low-skill equilibrium. It consequently has negative consequences for productivity, equality, poverty, the gender pay gap and labour participation rates”.
The issue of course is complicated. Increasing low pay is not the same as alleviating poverty. It is not uncommon for parents to work two or more jobs to support their family. Reports of students working up to full-time to help their family are becoming more common. Even workers paid above the minimum wage may face poverty if they need to support a large family, and low-paid workers may live in so called “high-income” households.
What is clear is that our lowest paid workers will continue to go backwards as the cost of living continues to increase. Future minimum wage increases by this government are also likely to fall well short of inflation and the cost of living. There is no sign yet of that relief promised by National in their election campaign.
Where does the pay for our most vulnerable workers cross the line from a minimum level of fair pay into exploitation? Read more...