Denise Roche

The Living Wage will help the economy

by Denise Roche

What is it with this government and their complacency about the hundreds of thousands of people who are living in poverty in this country?

Yesterday the Prime Minister John Key ‘slammed’ the concept of introducing a Living Wage and suggested that introducing a better pay rate for low paid workers will be bad for the economy.

His comments came in the wake of contenders for the Labour party leadership promising to introduce a Living Wage.

After considerable research the Living Wage has been set at $18.40 per hour.  This would allow workers to provide for their families and enable them to participate in civil society.

The minimum legal hourly rate is $13.75 but this is not enough to live on and the fact that two out of every five of the 270,000 children who live in poverty have at least one parent in the paid workforce is testament to that.

Typically the government meets any suggestion of increasing the minimum wage rate with the assertion that we will lose jobs as a result.  A couple of years back they said that raising the minimum wage to $15 per hour would mean the loss of 6000 jobs – however Treasury documents revealed that this wouldn’t be the case.

The Prime Minister’s assertion the Working for Families tax credit is fixing poverty wages is completely out of touch with what is happening in the work place.  The documentary on inequality Mind the Gap that aired on TV3’s Inside New Zealand programme last week clearly outlined that Working for Families mostly ends up as a subsidy for employers.  It acts as an incentive to keep pay rates low because the tax-payer tops up workers’ wages.

A low wage economy is no way to fuel growth.  The government tends to forget that if wages are higher there is a larger tax take and there is more spending in the local economy.  (Workers don’t tend to put their savings in off-shore tax havens.)   Research from overseas shows that Living Wages are good for the economy and employers reap rewards through increased productivity, a more stable workforce so less training costs and fewer days lost through absenteeism and sickness.  Staff morale is also higher and businesses also gain an enhanced public image and reputation.

This government persists in saying that the cost of introducing a Living Wage is unaffordable.  But when we look at the gains – which includes healthier families, better education outcomes for kids, less reliance on welfare, less crime and a more equal society -  the benefits far out-weigh the costs.

Published in Economy, Work, & Welfare by Denise Roche on Tue, September 3rd, 2013   

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