Living wage doesn’t kill jobs, it creates them

Catriona MacLennan makes a case for raising the minimum wage, saying it's catastrophic for Kiwis to try to subsist on low incomes

On a wintry night in Manurewa, community, faith and union groups gathered in a church to ask political parties to commit to paying a living wage.

Those attending heard the heart-wrenching stories of workers on the minimum wage, who struggle to house, feed and clothe their families on $15.75 an hour.

A woman who works as a cleaner and is paid just above the minimum wage said her family had no hope of buying a home and the living wage would make a huge difference in their lives.

“This will help with my son’s education and future, helps him to play rugby to represent Aotearoa New Zealand in the future and a home that we could proudly call our own. We know that the Government can afford it.”

It is fundamentally wrong and unfair that people working full-time should be paid far too little to live on and to support their families.

It is also catastrophic for New Zealand’s future and for the families and individuals forced to try to subsist on such low incomes.

In the past, families could support themselves, buy a home and bring up children on one income.

The collapse in real wages in recent decades has put paid to that, and means many families in New Zealand struggle to survive with both parents working and sometimes doing two or three jobs.

The Living Wage Movement began in response to this wage decline: its philosophy is that workers should be paid an hourly rate sufficient for them to pay for the necessities of life and participate as active citizens in the community.

In New Zealand, the living wage is calculated each year by the New Zealand Family Centre Social Policy Unit and covers expenses such as food, transport, housing and childcare.

The Living Wage Movement started in the United States and the United Kingdom, and spread to New Zealand in 2012.

2017 is the year in which the living wage has become mainstream in our country.

This was epitomised nowhere more clearly than in the results of the Deloitte BusinessNZ Election Survey, in which 91 percent of the 575 businesses taking part said they would be prepared to pay a living wage in the near future.

In 2017, more councils have committed to paying a live wage, and the number of private sector employers who are adopting it keeps rising.

And the September 9 Roy Morgan political poll found that poverty and inequality were again identified by respondents as the biggest single issue facing Aotearoa.

It is impossible to eliminate poverty without paying workers enough money to live on.

A key scare tactic used by opponents of the living wage is the suggestion that it will result in job losses. That is not what the evidence shows. Nor is it a logical argument.

The Living Wage Movement Aotearoa New Zealand in 2017 has held election forums in Auckland, Hamilton, Wellington and Christchuch, at which political party representatives have been asked to commit their parties to supporting a living wage.

Representatives of the Labour, Greens, New Zealand First and Māori parties signed pledges at the forums to:

- support and promote the living wage being implemented in the core public service within 12 months of the new government being formed;

- back changing government procurement policies to ensure all contracted workers move to a living wage within the next term of government; and

- develop an ongoing relationship between the Government and the Living Wage Movement Aotearoa New Zealand through an advisory group to champion the living wage throughout the economy.

The National Party declined invitations to attend the forums.

A key scare tactic used by opponents of the living wage is the suggestion that it will result in job losses.

That is not what the evidence shows. Nor is it a logical argument.

People on low incomes spend 106 percent of their disposable incomes. This means their pay immediately goes on goods and services, creating more jobs and increasing the tax take. It also results in lower spending on Working For Families.

A paper by Paul K Sonn and Yannet M Lathrop titled Raise Wages, Kill Jobs? Seven Decades of Historical Data Find No Correlation Between Minimum Wage Increases and Employment Levels was published by the United States National Employment Law Project in May 2016.

It examined historical data relating to the 22 increases in the United States federal minimum wage between 1938 and 2009 to ascertain whether or not the claim that raising wages led to job losses could be substantiated.

The paper studied employment trends before and after minimum wage increases, looking at both the overall labour market and at key indicator sectors most affected by minimum wage increases.

The authors reported that the small number of cases in which employment declined following a federal minimum wage increase all occurred during periods of recession or near-recession.

The authors concluded that the results were clear: basic economic indicators showed no correlation between federal minimum wage increases and lower employment levels, even in the industries most impacted by higher minimum wages.

On the contrary, in 68 percent of instances, overall employment increased after a federal minimum wage rise.

Sonn and Lathrop said that, in the most-affected industries, the rates were even higher. In the leisure and hospitality sector, employment rose 82 percent of the time following a federal wage increase. In the retail sector, the figure was 73 percent.

The authors reported that the small number of cases in which employment declined following a federal minimum wage increase all occurred during periods of recession or near-recession.

Sonn and Lathrop said their results were not surprising, as they mirrored the findings of the substantial majority of modern minimum wage research.

The authors also pointed to a 2010 study by University of California economists examining job-growth patterns across every border in the US where one county had a higher wage than a neighbouring county. The results were the same as other research.

In Scotland, a paper was produced for the Scottish Government in the run-up to the roll-out of a living wage for workers directly employed by the Scottish Government and the National Health Service.

The document said that two decades of intensive research comparing employment levels under different minimum and living wages in the United States had failed to confirm the hypothesis that a higher wage floor reduced employment.

The paper reviewed studies of the impact of the living wage or the adoption of a minimum wage higher than the federal minimum wage in Maryland, Baltimore, Los Angeles, Boston, Chicago, San Franciso and Florida. The study also examined meta-studies and multi-city analysis in the United States. This research included a 70-city study; 64 studies on the impacts of increasing wages in the United States; 700 stores across the country; 45 states; and 504 counties.

In addition, the report examined average annual city contract costs after the passage of living wage laws, and the economic impacts of various living wage ordinances. The increases in city contract costs as a percentage of city budgets after the passage of living wage laws were 0.067 percent for Alexandria, Virginia; 0.079 percent for Berkeley, California; 0.067 percent for Cambridge, Massachusetts; and 0.006 percent for San Jose, California.

The paper reported that overall employment growth in six states with minimum wages above the federal minimum between 1998 and 2003 was 0.55 percent, compared with 0.43 percent for 39 states paying only the federal minimum wage.

Restaurant industry employment growth over the period for the six states paying the higher wage was 1.4 percent, compared with 1.9 percent for those paying the minimum. Hotel industry employment growth for the six states was 0.61 percent, compared with a decline of 0.24 percent for the 39 states.

A 2014 United Kingdom report predicted that increasing the National Minimum Wage would create 190,000 more jobs.

It’s great that 91 percent of businesses in the Deloitte BusinessNZ Election Survey would be prepared to pay a living wage in the near future.

By doing so they would be following in the footsteps of many United States, Australian, United Kingdom and New Zealand firms which are already doing this.

What is needed now is speedy action from businesses to act on these very positive words.

*Catriona MacLennan is a barrister and journalist and pro bono researcher for the Living Wage Movement Aotearoa New Zealand.

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