Julie*, 30, earns the minimum wage working at a fast food restaurant in Dunedin. She works between 30 and 35 hours a week, and says it has been months since she last earned more than $400 in a week.
Julie recently moved in with family friends to save money and help pay back some debt. Two weeks ago, after board and petrol and other necessities, she had $8 left of her paycheck. “That was to get anything I needed for the week. Toiletries, or if I wanted to treat myself, or if I wanted to go out and have a drink with a friend.”
When it’s quiet, Julie gets the option to go home early, and has to toss up finishing early with losing that hours pay. “You don’t want to be there, because it is a pretty crap job, but you think, it’s only an hour, you might as well get it.”
Julie’s fast food job was meant to be a stopgap, after she was made redundant when the factory she worked in was moved offshore, but she has now been at the restaurant for more than four years. She is now studying by correspondence so she can get another – better-paying – job.
Figures from the Department of Labour/Department of Statistics. You can check out inflation with the Reserve Bank's inflation calculator. Photo: Steve Bolton
Julie is one of more than 50,000 New Zealanders who work for the minimum wage. Those earning the minimum wage tend to be young, female and Maori or Pasifika, do not have formal qualifications, and work in retail or hospitality. A report [PDF] by the Ministry of Business, Innovation and Employment says there are about 178,800 low wage workers aged between 16 and 64 years who earn between $13.75 and $15 an hour. Nearly half of these workers are under 25-years-old.
By international standards, New Zealand has a comparatively high minimum wage; as a percentage of the average wage, it is the highest in the OECD. Some believes it creates unemployment, because business can’t afford to take on more staff or give existing staff more hours, or results in jobs being sent offshore. But others argue that the current minimum wage isn’t enough to support one person, let alone a family.
At the beginning of April, the minimum wage was raised from $13.75 to $14.25 an hour. The so-called “starting-out” – youth – and training rates went up from $11 to $11.40, 80 per cent of the adult minimum. It’ll mean about $10-15 more a week for Julie, depending how many shifts she gets.
At the time of the increase, Prime Minister John Key told Radio New Zealand the Government has raised the minimum wage every year it has been in office. “But we know there is a balance between raising the minimum wage and making sure we don’t put businesses or jobs at risk or create a disincentive for firms to hire new employees.”
But the Council of Trade Unions said the increase isn’t enough, and wants to see the minimum wage lifted to $15.50 this year. While the minimum wage is high in comparison to the average, it hasn’t increased along with inflation, and so people are still worse off.
But Jenesa Jeram, 23, a research assistant at the free-market think tank the New Zealand Initiative, says there is a balance to be struck between protecting workers, and controlling inflation and unemployment.
If the minimum wage goes up too high, so could the prices of things we buy, and jobs could be lost. “That’s because employers can’t afford to pay their workers that much, and even if they could, their workers aren’t reflecting the productivity that would justify that increase.”
Jenesa points to measures like Working for Families and accommodation supplements as ways the government attempts to balance the cost of living with a productive economy.
“Determining whether wages are set at the right level really depends on what we believe minimum wages and youth rates are for,” she says. “A young person living at home has different needs from a family of four, say. So by setting a minimum wage, we’re balancing a whole range of factors, and it isn’t necessarily the best instrument for doing so.”
But the co-convenor of the Stand Up youth union movement, Asher Goldman, 29, says wages that are too low defy the point of having them at all. “Wages are about enabling people to participate in society, and you can’t participate fully in society on the minimum wage, and you especially can’t if you have extra needs or dependents,” he says.
What we know is that young people are contributing to the survival of their families. This is not play money for them; they don’t go out and buy skateboards. For many youth in New Zealand, this is about how they survive and get by.
Money gives you “breathing room” to participate in your community, like by organising events or caring for others, in a way that you can’t if you’re struggling financially. “Money doesn’t mean participation, but money gives you that breathing room. If you have enough money to live, you have a little bit less to worry about; you can sleep a little bit better.”
He makes the point that certain demographics are disproportionately affected by the minimum wage. “If you’re a young Māori or Pacific person, if you’re a young Māori or Pacific woman, and if you’re a disabled young Māori or Pacific woman, then you’re doubly, triply, quadruply screwed.”
People often argue that those on the minimum wage can seek further training or education to increase their earning potential. But actually, Goldman says, people on the minimum wage are often working two or three jobs just to break even, especially if they have dependants. “Where are you going to find the extra eight, 12, or 16 hours a week to give yourself an education? Where are you going to find the money?”
Last May, the starting-out wage was introduced, aimed at easing young people into the workforce. The Department of Labour says the starting-out wage is designed to incentivise employers to take a chance on hiring young people. It means 16- and 17-year-olds, or 18- and 19-year-olds who have been on a benefit, can be paid 80% of the adult minimum wage for their first six months of employment.
Nick Cross, a law and economics student at Victoria and policy chair for the Young Nats, says a lot of young people – in particular those who are still living at home, or who are earning other benefits like the student allowance – see their first job as more about getting experience than earning money.
“[It’s] about being able to say to their future employers, perhaps if they’re studying and they’re looking at getting jobs which they need their degree for, that they have work experience, and they’ve been able to show that work ethic, and they’ve been able to get references. For a lot of young people I don’t think the job is primarily about the money. It’s about those other things.”
MBIE says over 60 per cent of the minimum wage workers aged 16 to 24 years are in study, compared with 11 per cent of the total wage workers. It says the high proportion of young workers in part-time minimum wage jobs while studying suggests that they are likely to move into higher paying, full-time jobs in the future.
“As a young person myself, I’ve definitely been in the situation of you can’t get a job without experience, and you can’t get experience without a job,” says Jenesa Jeram. “So youth rates are really an incentive to employers to get young people in and invest in their training and development and see where they go from there.”
For a lot of young people I don’t think the job is primarily about the money.
Asher Goldman says the starting-out wage reflects a lack of faith in the ability of young people. “They want to be able to participate in society and earn a bit of pocket money, or actually they might need to earn to support their families. … So why should we be penalising them just because they happen to have not had their 18th birthday yet?” He points to the Living Wage campaign, saying it’s “not just about unions trying to push up wages”.
The Living Wage campaign is a drive by unions, churches, and other groups to encourage businesses, and in particular the public sector, to voluntarily pay a wage of $18.80. Its convenor Annie Newman says it’s an attempt to address the growing gap between rich and poor. “There’s an enormous jump between where many youth are being paid, and what we know workers need to survive and participate in society.” She argues that people should be able to afford to go to church, have hobbies, and help out their families if they are working full-time.
Newman says for many young people, their first job isn’t just while they’re studying for better things. “What we know is that young people are contributing to the survival of their families. This is not play money for them; they don’t go out and buy skateboards. For many youth in New Zealand, this is about how they survive and get by.” She points out that many are joining the so-called “brain drain” over the Tasman for better-paying jobs and more opportunities.
A Treasury report on the campaign says almost all teenagers and the majority of people in their twenties earn below $18.40 (then the target figure), and 63 per cent of households earning below $18.40 are single adults without dependants. It says that the increase would have the most impact on young adults, particularly those without children, though it might also mean they’d have more difficulty finding work. “MBIE has estimated that forecast employment would reduce by 25,000 if the minimum wage was lifted to the Living Wage.”
Treasury’s report points out that the research (by the Family Centre Social Policy Research unit – PDF) used to set the living wage at above $18 was based on a two-person family with two children. It says that represents only 6 per cent of families earning below the Living Wage. “Those who have the highest deprivation level (i.e. absolute, not relative) are sole parents and this analysis generally does not apply to them.”
Annie Newman says the study reflects a growing working poor in New Zealand. She says it needs to be set at higher levels in Auckland and Christchurch, for example, because of the cost of housing. And she cites consultancies like KPMG’s argument that paying a Living Wage makes good business sense. “If you don’t have money pouring into local businesses, you have poor local economies,” she says. “If you have kids with money, and they go and have a coffee, they’re putting money into the local economy – so actually it’s good for business.
“There’s a growing understanding that we have to put money into people’s pockets if we want to have flourishing economies. Or otherwise we’re driving out our best, and we’re also splitting up families”
What we’re teaching our kids is that their work isn’t valuable. We’re teaching our kids that they shouldn’t have loyalty to their work or their boss, they shouldn’t expect anything, and they shouldn’t offer anything in return. And that’s the complete opposite of what we want to be doing.
The debate over the minimum wage is raging in the United States, where it was last raised in 2007, to US$7.25. Business Week reports President Barack Obama has called for a $9 federal minimum by 2015 and endorsed an ambitious bill, which is stuck in House and Senate committees, to raise it to $10.10 by 2015. NPR last week looked at how long people have to work in their city to buy a burger. It came to the conclusion that “residents in fancy neighbourhoods don't have to work as long to buy burgers, even though burgers are more expensive in fancy neighbourhoods.”
The Young Nats’ Nick Cross agrees that people earning the minimum wage can’t lead a life with all the entertainment and ability to participate they might want. “But I think we’ve got to balance that against [the fact that] we simply are not wealthy enough as a country for everyone to be able to do that. And certainly if we were to raise the minimum wage to something like the living wage, it would simply result in a lot more people being unemployed.”
He points out that raising the cost of labour is most likely to mean fewer jobs are available for the people who need them the most. “It’s not necessarily about what business can and cannot afford, because a lot of business are quite wealthy, but it is about what businesses would do in response to the minimum wage being raised,” he says. “You see in supermarkets for instance, a lot of supermarkets moving towards electronic checkouts, where there’s no requirement to have a person working the checkout. As soon as the cost of labour goes up, you’re going to see more and more changes like that in other areas of the workforce.”
Asher Goldman says the cumulative effect of youth rates, the 90-day trial period things like the growth of unpaid internships (which The Wireless reported on last year) is to dissuade young people from entering the workforce.
“What we’re teaching our kids is that their work isn’t valuable. We’re teaching our kids that they shouldn’t have loyalty to their work or their boss, they shouldn’t expect anything, and they shouldn’t offer anything in return. And that’s the complete opposite of what we want to be doing…. Basically, the message is you’re not important, you can’t do any better, so suck it up and deal with it.”
At $14.25 an hour, or even $11.40, most people should be able to buy a cheeseburger after an hour’s work – though whether they can afford to is a different question. And fast food-worker Julie says she thinks her workplace quietly put up prices between five to 20 cents the same day that the latest minimum increase came into force. “I thought it was coincidence. Yeah, right.”
In an election year, wages become a political issue, as a measure of how the Government is handling the economy. Labour and the Green Party have both pledged to lift the minimum wage to $15. Finance Minister Bill English has promised that next month’s budget will lift wages and create jobs.
Both of those options are not much consolation for Julie as she heads to man the drive-thru on the morning shift.
For her, the Living Wage of $18.80 seems like a dream, and not one she can see coming true any time soon. “I know people that just go in and serve coffee and bake a few cakes on a daily basis and get paid $17.50. I really work really hard. We’ve got a lot of pressure working in fast food. And you know, the workload isn’t easy a lot of the time, and I think it’s worth a lot more than even $15.”