The above is a line from the theme song from now US President Donald Trump’s TV series, The Apprentice, making it possibly less acceptable for use these days than it once was. On a similarly divisive note, the minimum wage is a political hot potato.
Workers and unions want the minimum wage increased, arguing the current rate is not enough to live on. Employers generally argue against increases, saying job losses will occur if the cost of labour grows too high.
Finding the balance is not easy, and pretty much every increase to the minimum wage is met with arguments that it is either too much or not enough.
By way of brief history, the minimum wage is a longstanding feature of our employment landscape. The Minimum Wage Act in New Zealand was enacted in 1945. At the time, MPs said the minimum wage should be sufficient to allow a man to provide for his wife and three kids. Times have certainly changed since then.
The first minimum wage came into force from 1 April 1946. In general, minimum wage increases take effect from that date, and the next increase to the general minimum wage is scheduled for 1 April 2017, when it moves from $15.25 to $15.75. Is that enough, in this day and age, for a man to provide for his wife and three kids? And either way, is that still an appropriate measure?
The Minister of Labour must review the minimum wage each year. Changes to the minimum wage do not require changes to legislation. Rather, the minimum wage is fixed by the Governor General by an Order in Council on the recommendation of the Minister of Labour.
The minimum wage is really the only form of wage-fixing the Government undertakes. Employers, unions and employees are free to agree on whatever remuneration they think fit, so long as it meets or exceeds the minimum wage. The days of the Arbitration Court fixing wages are long gone.
The current union position is that the minimum wage should be fixed at 66% of the average wage, which would take it to around $19.60. That is also close to what unions say a living wage is.
The Unite Union correctly reports the current minimum wage is 52% of the average wage. The union says it was lifted to that level by the Clark Labour Government. The union says the Key/English National Government has maintained it at around that level.
Internationally, there have been several campaigns aimed at lifting the minimum wage and the concept of a living wage is gaining some traction. The United Kingdom recently introduced a National Living Wage of £7.20 for workers aged over 25. The United Kingdom’s Office for Budget Responsibility warned it could result in up to 60,000 job losses.
In the USA, where the minimum wage is lower than New Zealand, unions have campaigned for a $15 per hour minimum wage in the Fight for 15 campaign. This campaign has met with some success, with cities including New York, Los Angeles and Seattle pledging to phase in a $15 minimum wage.
Opponents of Fight for 15 argue minimum wage increases will wipe out jobs and opportunities for young people. The argument is that if the cost of labour increases, it does not become worthwhile for employers to provide entry-level jobs or provide opportunities for inexperienced workers. There are also arguments that increased automation will occur as the cost of labour increases, resulting in further job losses.
Employers’ organisations point out that New Zealand’s minimum wage is actually quite high compared to other countries. Our minimum wage is the 7th highest in the world. Australia has the highest minimum wage in the world.
While Australia’s minimum wage is higher than New Zealand’s, it represents a lower percentage of the average wage than the minimum wage does in New Zealand. New Zealand’s minimum wage is actually the highest percentage of the average wage in the OECD, although statistics can be difficult to compare because the situation changes if the median wage is considered.
The minimum wage will continue to be an important and contentious aspect of employment law and important arguments about the cost of living versus the potential for job losses will continue to be expressed. From an employer’s perspective, compliance with the minimum wage requirements is mandatory and beyond that, wages will likely influence things like recruitment, retention, morale, training, etc.