Support for the idea that an ordinary Kiwi should get paid enough to live on and support their family would appeal to most of us as ‘just plain fair’. After all most people contribute to society in all sorts of ways and deserve to be paid adequately for that.
That is the most important argument for a living wage, but unfortunately it is not the most persuasive.
On the other hand, if one looks objectively at the economics of the issue, there is even stronger reasons to justify it.
The common complaint from business is that a living wage costs too much and will lead to job losses. Ha-Joon Chang (Guardian Weekly, 15.11.13) points out that in Germany, the car factories pay their workers twice as much as in America and 30 times more thana those in China. I spite of this they are thriving which may have something to do with the fact that the Germans have invested heavily in plant and equipment and in workers’ training and technical education.
This is in contrast to the Dominion Post’s editorial of November 16 which pointed out that our leaders in Parliament are busy personally investing in non-productive real estate at taxpayer expense rather than supporting the progressive industries they claim to be great fans of.
In the November 14 Dominion Post there was an article proclaiming that the chief executive of Westpac NZ received $3.15 million last year. Clearly this is ‘well-deserved’ and it is sad that it was down $200,000 from the previous year! This is 87 times the average bank teller’s wage of $38,500. Perhaps he could explain how much the productivity of this position has increased over the last thirty years. In 2010 terms and allowing for inflation, the 10% highest income-earners in New Zealand have just about doubled their wages, while the lowest 10% have stayed almost the same since 1984. Are we to assume that the top group have become twice as productive? Even more so, what about the few at the very top like the bank executives of Westpac and the other major (non-)NZ banks?
I wonder if they, as lobbyists, have more sway than the rest of us? Or could it be that many MPs see this sort of job as good for their retirement and don’t want to do anything to rock the boat.
There is another important economic consideration that is very relevant to most New Zealanders, including those on a middle income. Take for example a couple with two children who are both working, one full time, the other half time, but on the current minimum wage. They would get $48,140 in their pocket for the family to live on, but $12,296 of this has been supplied by the taxpayer in the form of in-work tax credits and accommodation allowances. If by contrast, they were on a living wage of $18.40 an hour, they would be getting only $6760 in work-related benefits, and have $5836 more in their pay packet. Even more importantly, this is money that they would tend to spend on the items they have been putting off buying because they couldn’t afford them.
This means that the costs of benefits are reduced, taxpayers subsidise the employers less and more money is in circulation for the benefit of the businesses in our local neighbourhoods. When you consider how many workers are on the minimum wage, this is a substantial contribution to our communities.
Reference: Report of an Investigation into defining a Living Wage for New Zealand, Peter King and Charles Waldegrave, 2012