Simon Collins

Simon Collins is the Herald’s social issues reporter.

Living on less than $18 an hour

Aspiring Labour Party leaders David Cunliffe and Grant Robertson have lifted the idea of a 'living wage' from a grassroots campaign on to the national agenda. Social issues reporter Simon Collins reports

Ngalu and Ofa Tauelangi work as cleaners for TVNZ. Photo / Dean Purcell.
Ngalu and Ofa Tauelangi work as cleaners for TVNZ. Photo / Dean Purcell.

A "living wage", for Ofa and Ngalu Tauerangi, would mean the chance to get a good night's sleep.

The couple, who work full-time for Spotless Services to clean state-owned Television New Zealand's Auckland headquarters, need extra part-time jobs as well to make ends meet.

Ofa, 48, cleans at the New Zealand Herald from 1pm to 5pm each day, then at TVNZ from 6pm to 2am - paid until midnight, but actually working beyond that to help her husband, Ngalu, 47, who is paid until 2am.

Until they got too tired to keep going, they both did three jobs - cleaning at the airport, at a school and at the downtown Imax cinema.

After 15 years with Spotless, both still earn $14.10 an hour, just above the legal minimum of $13.75. A "living wage", defined by a union and church-led campaign as $18.40 an hour, has seemed just a dream.

"I can't sleep, I can't stay home, because if we not pay the rent, my family's on the road," says Ofa. "If I go to $18.40, maybe I'm working one place because there is enough for the family, and I sleep."

The living wage campaign, which Ofa backs as a delegate for the Service and Food Workers Union, suddenly leapt to political centre-stage this week when the two leading contenders to head the Labour Party dramatically endorsed it.

Grant Robertson pledged to set a timetable to pay the living wage to all government workers and contractors.

David Cunliffe promised to "roll out a living wage as a minimum for public servants and, as we can afford it, through the contractor process".

But the third contender, Shane Jones, refused to commit to the policy, and Prime Minister John Key said it would cost $2.5 billion and destroy 26,000 jobs.

What's the idea?

The idea of the living wage is that it's all very well to let the free market set the prices of apples or bananas, but when it comes to the price of human labour, humanity cannot be so indifferent. The market needs to be modified by requiring that wages are "enough to live on".

Exactly what is enough to live on varies depending on where people live, how many people depend on their wages, their housing costs, and so on.

But researchers fixed the standard to meet the basic needs of a family of two adults and two children, the minimum required for population replacement. They assumed rent of $275 a week, the national average for the poorer half of the population, and came up with a total income required to meet all basic needs of $1038 a week after tax.

They then assumed that one adult works 40 hours a week and the other 20 hours. Allowing for tax and family tax credits, each adult would need to earn $18.40 an hour before tax for the family to end up with $1038 a week in the hand.

Even working 87.5 hours a week between them, Ofa and Ngalu Tauerangi take home only $850 a week after paying tax, KiwiSaver and repayments on student loans they took out to study part-time at Laidlaw Bible College. Ngalu will be ordained on September 22 as an unpaid minister in the Tongan Methodist Church.

The couple have one son, aged 20, who lost the use of an arm in a car accident as a baby and still lives with them on a benefit.

They pay $392 a week on rent for a three-bedroom state house in Mangere. The high rent appears to be a hangover from the time when they both worked three jobs.

Ofa has not slept well lately because the family got behind with the rent when Ngalu's mother, who is visiting from Tonga, became sick and Ofa had to take four weeks off to care for her and pay her medical bills.

"I rang my boss and said I want to come back to work because [of] my house," she says.

"I don't want my family to stay hungry. I don't want my family to stay on the road."

The campaign

The living wage campaign's public meetings with local body election candidates around Auckland and Wellington come across like a Billy Graham crusade. A meeting organised by women's groups in Ponsonby this week started with fervent endorsements of the living wage by 14 groups ranging from Business and Professional Women to Pasifika.

Former Equal Employment Opportunities Commissioner Judy McGregor warned that "women's rights are in trouble", with no discernible political will to implement equal pay.

"There are 123 people employed by Auckland Council earning over $200,000, and there are more than 1500 people earning less than the living wage. That is simply not acceptable," she declared.

Local body candidates were then asked to make three "pledges" - to pay the living wage to all council and contracted workers, to implement pay equity, and to prioritise the safety of women and children.

Unsurprisingly, everyone did. Organiser Annie Newman says there was the same unanimous support at the only other Auckland meeting held so far, in Papatoetoe, where unions asked southern candidates to pledge support for the living wage and not to sell the port.

"Some people came up to me at the beginning and said they were concerned that they didn't want to agree to this because supporting the living wage would put some people in Papatoetoe off voting for them," Newman admits.

"I said, 'You have the opportunity to say no.' Every single one said yes."

At the next meeting, organised by migrant groups at the Mt Roskill War Memorial Hall at 4pm today, candidates will be asked to pledge to give council internships to refugees, properly resource the council's Ethnic Peoples Advisory Panel and consult with migrant and refugee groups twice a year, as well as implementing the living wage.

Organiser Agnes Granada says Len Brown and six other mayoral candidates, along with two Albert-Eden-Roskill ward candidates will attend, but Citizens and Residents candidates Christine Fletcher and Nigel Turnbull have declined, "because these two people are against the living wage".

Brown told the Herald this week that he was waiting to see costings by officials before deciding on the living wage.

"I'm not agin it," he said. "But I'm mindful of the fact that if we were to implement it, we would be moving the minimum wage up $5 an hour. That has consequences to our budget."

Advances and setbacks

Hamilton became New Zealand's first city to endorse the living wage in a fiercely contested 7-6 vote on May 21. Wellington followed, by a more comfortable 10-5 margin, in June.

But on July 3, Hamilton reversed its decision with a 6-5 vote to reject the living wage after officials reported that the cost had blown out from an initial estimate of $170,000 a year to a revised figure of $545,900, not including contractors.

Auckland Council is also divided, voting by a narrow 9-7 margin on March 12 to ask officials to study the implications of a living wage.

However, the campaign got a huge boost in May when The Warehouse said it would move all staff with at least three years' experience and the required training levels on to a living wage of between $18.50 and $20 an hour by August next year. The company says 6000 of its 12,000 staff already earn at that level and a further 3000 to 4000 will move up to it next August.

Auckland's Anglican Synod will debate a motion being moved today by former Herald business editor Rod Oram that all Anglican institutions, including schools and social services, should pay the living wage to all their staff and contracted workers within three years.

"It's very central to our faith and gospel," Oram says. "We can't, as an organisation, have any credibility in that discussion unless we put our own house in order."

The cost

As Key said this week, the cost of paying a living wage across the whole economy would be enormous. As the figures on this page show, 39 per cent of all wage and salary earners earned less than $18.40 an hour in June 2012.

Key's estimated cost of $2.5 billion is in line with a Herald estimate in February of about $1.6 billion just for the biggest affected industry, retailing and hospitality, and with an economy-wide estimate of $3 billion to $4 billion by NZ Institute of Economic Research director Jean-Pierre de Raad.

Imposing that kind of cost all at once would force many employers to lay off staff or close down. But that is not being proposed. The idea of the living wage is for employers to pay only when they can afford it.

Newman says the idea of starting with the public sector is that money taken from ratepayers and taxpayers should not "pay people to live in poverty".

Auckland Council's initial advice is that it would cost $2.5 million to pay the living wage to its 1544 direct employees, 19 per cent of its workforce, who are now below it. That would add about 0.2 per cent to the rates bill.

Hamilton's $545,900 for 144 low-paid workers would add 0.4 per cent to rates. Wellington would have to pay $900,000 extra, also adding 0.4 per cent to rates, to pay the living wage to all 814 employees now earning below $18.40. So far it has allocated $250,000, starting with people who have worked for the council for two years.

No council knows yet the cost of extending the living wage to contracted workers.

Central government officials estimated that it would cost taxpayers $68 million a year to raise the minimum wage from $13.50, where it stood until April, to $15 an hour. More than half of that ($36.6 million) was for aged care, and almost all the rest ($31.7 million) was for other caregivers.

Aged Care Association chief executive Martin Taylor says lifting the country's 20,000 rest home caregivers to $18.40 would cost $180 million a year, suggesting that the total cost for all Government-funded workers might be broadly around $400 million.

That would require, for example, lifting the top tax rate on incomes above $70,000 from the current 33 per cent to 35 per cent.

Those taxpayers would have less to spend, but low-paid state workers would have more. Even right-wing blogger Eric Crampton, a Canterbury University economist, wrote this week that the net effect would be minor: "Lots of people queue for jobs in the high-paying sector, but they'll take lower-paying jobs in the private sector."

Is it worth it?

Herald readers' first reactions to the Labour MPs' promises last weekend were negative. Two-thirds of almost 10,000 people who responded to a write-in online poll said a living wage for public servants was "too costly" (46 per cent) or "unfair" (19 per cent).

Only 22 per cent said it was "a great idea", and 13 per cent said it was "good but he should have waited until it was costed".

Auckland deputy-mayor Penny Hulse, who signed up to the living wage at the Ponsonby meeting, said afterwards that the council would need to be careful before taking more from low-income ratepayers to pay more to low-income council workers.

"But many of our ratepayers are contractors to council who also deserve the living wage so they can afford to pay the rates, so it's complicated," she said.

As Key argued on Monday, it is much more efficient to reduce poverty by directly subsidising people in need through benefits, family tax credits and other top-ups than to raise all low-end wages.

Almost a third of those earning below $18.40 are under the age of 25, including many students with part-time jobs who may live in middle or high-income families.

Many women, who make up 56 per cent of those below the living wage, may also have higher-earning partners.

A study in Britain this year found that individuals earning below the British living wage were actually more likely to be in the middle deciles of household incomes than in the poorest three-tenths of households, where many rely totally on welfare.

"Increasing wages at the bottom of the labour market is a relatively inefficient way of tackling low income across all households," the study said.

But as women argued at Ponsonby, society should be concerned not just with inequality between households but also with inequality within homes. Women still earned on average of only $25.41 an hour in June, 13.4 per cent below men's $29.34.

Morris Altman, a renowned Canadian economist who moved to Wellington's Victoria University in 2009, argues that a living wage is "a moral imperative situated in the natural rights of individuals".

His research suggests that a wage rise can actually pay for itself by raising productivity through motivating workers to work harder and stay in their jobs, and by inducing employers to introduce new technology and train workers to work smarter.

But that is only true, he warns, if wages are raised at a rate that productivity can keep up with. "So one has to be ultra-careful about by how much one increases. If it's a radical increase, that might be too much to deal with in the short-term," he says. "You might need a bit of an adjustment period to get productivity up."

- NZ Herald

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