By Roger Annis, A Socialist In Canada, Nov 1, 2017
Minimum wage will reach $16.50 on April 1, 2018
The new government in New Zealand has committed to legislate a $20 per hour minimum wage by April 2021. The government is a coalition of the Labour Party and New Zealand First party. The Green Party will hold ministerial posts outside the cabinet.
The agreement follows a general election that took place on September 23 (Wikipedia). The three now-governing parties mentioned above won 46, 9 and 8 seats, respectively. The incumbent National Party won 56 seats.
The official policy of New Zealand’s trade union movement is to push the minimum wage to two-thirds of the average wage from the present just-over half the average wage. That would be $20 per hour in today’s dollars. The minimum wage presently is $15.75; it will rise by $.75 on April 1, 2018.
Labour and the Green’s both also officially support the two-thirds of the average wage goal, although Labour had the escape clause of “if economic conditions permit”. NZ First leader Winston Peters has said he wanted $20 per hour to be reached by the end of 2020.
Enclosed below are commentaries by two workers’ rights advocates and activists in New Zealand on the $20 per hour victory.
The wage rise is widely seen in New Zealand as “win” for NZ First, but Labour and the Greens each had promises in this area. There are around 73,000 workers in New Zealand on the minimum wage, or 2.9% of the workforce.
The situation in New Zealand contrasts sharply with that in Canada. The minimum wage in Canadian provinces hovers around $11 per hour, excepting Alberta at $13.60. (One NZ dollar equals 90 cents Canadian.) The provinces of Ontario and Alberta have plans to raise it to $15 by 2019. This is to coincide with elections in each province. (See: $15-an-hour minimum wage emerges as key issue in 2018 election in Ontario, Toronto Star, Nov 16, 2017). After that, the wage would rise by pennies per year according to inflation indexing (approximately 30 cents per year according to present inflation rates of two per cent). Otherwise, it’s even-harsher starvation-level minimum wages in the other provinces.
The proportion of workers earning the minimum wage in Canada varies from a low of approximately five per cent in British Columbia and Alberta and 6.5 per cent in Quebec to a high of 11.6 per cent in Ontario.
Unions in Canada, of course, favour raising the minimum wage to $15 per hour. But Canada has seen nothing like the minimum wage campaign in New Zealand. There, it has been part of a certain revitalization of the entire union movement. This included the formation beginning in 2004 of the militant Unite Union, which today numbers 7,000 members in the fast food, retail and hospitality industries.
Unlike in Canada, the fight for a ‘living wage’ in New Zealand has not been an either/or proposition compared to the lower minimum wage. The fights for each have tended to merge and reinforce one another.
Australia has the highest minimum wage of developed capitalist countries, at $18.29 per hour. See country comparisons in 2016 here.
The minimum wage decision is big win for workers in New Zealand and should be celebrated
It is a mistake to underestimate the importance of the decision to lift the minimum wage to $20 an hour by April 2021. This will involve a significant real increase in wages for hundreds of thousands of workers in this country.
Employers will be screaming. Every time there is a bump in unemployment as a consequence of capitalism’s business cycles, the increase will be blamed on the minimum wage increase.
Minimum wages usually go up each April 1. In the last four years to April 1, 2017, there has been an overall increase of $2 an hour from $13.75 to $15.75. In percentage terms, this was faster than the average hourly wage increase from $27.48 to $29.90 in the four years to the end of the March quarter 2017. This means that there was an increase in the minimum wage as a percentage of the average wage from 50% to almost 53%. Bosses were grumbling under the National government about this.
Internationally, minimum wages are usually between 30 and 50% of the average wage. But in New Zealand, the minimum wage has been as much as 80% of the average wage just after World War II, and was two-thirds (for adult males at least) as late as the mid-1970s.
During the nine years of the previous National government from 1990 to 1999, there was only one increase in the adult minimum wage. The real value of the minimum wage dropped from about 50% of the average wage to 40%. No minimum wage applied to workers under 20 until 1994, when one was established for 16-19 year-olds at 60% of the adult rate.
Then Labour lifted the rates beginning 1999 to restore the 50% level of the average wage before leaving office in 2008.
Just as importantly, the application of a youth rate of only 60% of the adult rate from aged under 20 was progressively eliminated by increasing the percentage and dropping the age, first to 18 and then 16.
This process was in part a product of the ongoing campaign by Unite Union and others to lift wages and end youth rates in the fast food industry through the ‘SupersizeMyPay.com’ campaign.
National has maintained around the 50% percentage of the average wage for the adult rate and even increased it slightly since they returned to office [in 2008]. But they have restored a youth rate that is 80% of the adult rate; it can apply for up to six months for new employees aged 16-18 or trainees.
The situation was pushed along by a massive campaign by Unite Union and others to push the minimum wage from $12 to $15, including collecting 200,000 names on a petition. The average wage increased by 8.8% in the four years to March 2017.
If we apply a similar increase through to March 2021, then the average wage will reach $32.53. With a minimum wage of $20 at that time, it will be equal to 61.5% of the average wage. This will be a significant step forward towards to goal of the Council of Trade Unions to make the minimum wage two-thirds of the average wage. Currently, this percentage would equal today’s living wage number of $20.20 an hour.
Making the living wage the minimum wage is a realistic and achievable goal after stage one has been achieved when we reach $20 an hour on April 1, 2021.
Currently, most of the collective agreements that Unite has signed have been based on a “minimum wage plus” formula. That means as the minimum wage moves up all rates above the minimum move up as well.
In addition, in the last round of negotiations with fast food companies, we insisted that there needed to be at least a small increase above the minimum wage increase for workers when they started. McDonald’s and Restaurant Brands agreed to at least ten cents increase each year of their agreements. So, new McDonald’s workers will be on at least 30 cents an hour above the minimum wage in April 2020.
For more senior and supervisory staff, that will mean that most will be on or above the equivalent of the living wage then as well.
As the minimum adult wage moves towards the Living Wage, workers will simply be able to make ends meet after a week’s work, according to a statement from Unite National Secretary Gerard Hehir.
“It will make a huge difference to hundreds of thousands who most desperately need help. Over four years, it is a 6.75% average increase per year. That is not excessive when we currently have full-time workers relying on welfare support, state subsidies and charity – and still struggling. Employers need to pay their workers enough to live – it really is that simple”
“There are nearly 700,000 workers earning less than the Living Wage (currently $20.20) – over one third of all employees. (See: Shrinking portions to low and middle‐income earners: Inequality in Wages & Self‐Employment 1998‐2015, by the Council of Trade Unions.)
“New Zealand First party leader Winston Peters was spot-on when he said many who felt capitalism was working against them were ‘not wrong’. The starkest measure is labour’s share of GDP in New Zealand, which has fallen from nearly 59% in 1980 to only 50% in 2015. This is five per cent below the OECD average. Where has it gone? Corporate profits as a share of GDP have gone from 10% in 1980 to almost 25% in 2015. We shouldn’t be afraid of asking businesses to start reversing that trend – it is well overdue and only fair.”
“The scaremongering around loss of jobs is just that according to Unite. When Unite successfully campaigned to abolish youth rates in 2008, there were dire predictions of mass youth joblessness. Youth employment actually increased in the years that followed. Recent research has consistently shown that hysterical claims of minimum wage increases causing rampant inflation and unemployment are simply wrong.” (See: Why does the minimum wage have no discernible effect on employment?, by John Schmitt, of Center for Economic Policy Research, in Washington DC.)
“Everyone will benefit from the increases. Those wages will be overwhelmingly spent in local communities – benefitting local businesses. That will particularly help regional economies. Low paid workers won’t be jetting off overseas or importing expensive cars and luxury goods – they will be looking after their families, paying down debt and maybe even saving some money. The biggest barrier to getting into KiwiSaver is actually not being able to afford the weekly contributions”.
“Employers who don’t think their workers are worth $20 an hour should look at their business model. New Zealand has a productivity problem. Rather than relying on low wages and low skills, they should be looking to make their employees more productive. Investing in skills, training and new technology is the answer – not paying your workers the least the law allows you and complaining that it is too much.”
“Taxpayers will be better off as well. The huge rental and income subsidies to low paid workers will actually reduce. This exposes who these government payments are really subsidising – low wage employers rather than their low paid employees. It is absurd that the loudest voices against minimum wage increases are also often the loudest in demanding tax cuts and complaining about government subsidies.”
“On behalf of our members, and all low paid workers in New Zealand, Unite congratulates the NZ First, Labour and the Greens for making a real difference. There is a lot more to do – but it is a great start”, concluded Hehir.
A living wage – time to shift the boundaries and think global
One of the first announcements of the new Labour-led government was that the minimum wage will rise from $15.75 to $16.50 an hour in April 2018. It will then increase each year, reaching $20 an hour by 2021. While this news got some over-excited responses (from the left and the right) most people understand this is not a seismic shift.
The minimum wage has risen every year for over a decade, mostly pushed by union and community campaigns for a living wage. Despite talk of the new coalition being a ‘change government’, the Labour-led team will have boosted the lowest-paid workers a mere 25 cents an hour more than the National government likely would have. The living wage remains, as ever, postponed.
There are some other measures such as Labour’s Best Start package which will add around $60 a week to families with young children. There will also be an increase to the accommodation supplement, and free health care will be extended to children an extra year from 13 to 14 year olds. Again, a very modest increase on the programme of the previous government.
Labour and their coalition partners have promised to be ‘fiscally responsible’ and the business community is already saying they are happy to work with the new government. That the Labour-led government is not unlike National is not surprising. The two main parties have a long history of running the capitalist state seamlessly. For instance, National kept in place the previous Labour government’s ‘Working for Families’ tax subsidy for low-income workers. In practical terms this subsidises employers who pay low wages, so National decided to increase it.
Poverty levels have hovered at between 20 to 30 percent of the population over the past two decades. With skyrocketing house prices in Auckland the poverty issue became a hot election topic. Jacinda Ardern has vowed to reduce child poverty, even becoming the newly-minted Minister for Child Poverty Reduction. So far there has been no mention of raising benefits – where the deepest levels of poverty are – suggesting Ardern’s ministry is unlikely to do more than tinker.
The name of the ministry and the term ‘child poverty’ gives a clue to the approach. Don Franks in an article here argues the ‘child’ poverty approach “covers over the fact that thousands of workers don’t get paid enough with the notion that kids suffer because their parents are too shiftless or selfish to provide for their families.” He notes “the other advantage of reducing poverty to Child Poverty is that the setting is not about creating social equity but entirely about helping children – the most vulnerable.”
Social equity is not just about reduction in poverty, it is a fundamental shift from an unequal society and it needs to reach beyond national borders.
If by 2021 the minimum wage is $20 an hour, it is unlikely to be a living wage with costs rising in the interim. A living wage is defined as the income necessary to provide workers and their families the basic necessities. Many of our basic needs are provided by goods produced in other countries, particularly in the low-wage third world. Commodities produced in low-wage countries are consumed mostly in imperialist countries, of which New Zealand is a member.
Should a living wage in New Zealand be a separate issue from the need for workers globally to have a living wage?
Linking a living wage in New Zealand to a global living wage campaign would be a real step towards working class unity. In fact, to limit the fight for decent conditions to one country makes no sense in a globalised world. When the clothes we wear are made by Bangladeshi garment workers being paid 30 cents an hour is the grinding poverty in that country an issue we can ignore? When the computers and phones we use are made by Chinese workers earning $2 an hour in high-tech sweatshops can we deny this is super-exploitation?
A globalised living wage campaign in a world of globalised production makes real sense. We will be discussing this in future articles, and we’d like to hear your thoughts on the idea of a global living wage.