Kathy Errington and Peter Wilson explain why, despite Covid-19, this is exactly the right time to be pushing for an increase in the minimum wage

You have probably heard the howls.

When our recent co-publication ‘Gains for Everyone’ argued for (among many other measures) a higher minimum wage to create a more productive economy, a variety of the usual voices emerged to respond, seeking to defend keeping minimum wage levels where they are now.

This raises a few questions.

First, if current wages fall short of what is adequate to live on (the living wage is $22.10 per hour, compared to the $18.90 minimum wage) and meet one’s basic needs, who picks up the difference? The answer right now is families, charities, and, mostly, the state through a variety of programmes such as Working for Families. An accommodation supplement is also needed by a number of working people in order to keep a roof over their head. The costs of meeting these needs don’t just disappear; instead the Government effectively supports some businesses to continue paying low wages – as reinforced in ‘Could do better’, the newly released NZIER report to the New Zealand Productivity Commission.

In short, we argue that pushing wages up moves the economy up the value chain, as it justifies investment in staff training and productivity-enhancing technology and other equipment. This is a good thing.

To use an example from the horticulture sector, as showcased in ‘Could do better’, using a hoist instead of ladders to allow pickers to access fruit would reduce health and safety risks from falls, make the job less physically demanding, and increase the amount each worker can pick per shift (because they don’t have to climb up and down ladders carrying full baskets of fruit). All of these changes make it possible for the grower to pay a higher wage for a more attractive job and stay profitable. A true win-win.

As so many marginal jobs have already disappeared due to the lockdown, now is the time to set in train an economic transformation for a higher productivity, higher skilled, and higher waged economy.

If not now, when? Little good has come from Covid-19, but an inclusive-growth policy reset can be one positive.

It is unfair to group the business community together on these issues, or for any one voice to claim to represent everyone. Many boards and management are thinking about the productivity and inclusivity nexus, in the interest both of their firms and the country.

This is vital work. The impact of generations of low paying jobs was discussed by two youth leaders profiled in our report.

Vi’iga Alapati says she wonders what choices she might be able to make if her family was financially comfortable and she wasn’t bound to the question “How is this going to help them?”. Photo: Supplied

Te Haua Taua was the first person in his whānau to both graduate from high school and attend university. “Administration, cleaning, trades, warehousing and labouring are the jobs most of my immediate and wider whānau do…My mother was made redundant prior to lockdown and was unable to find suitable employment for a while. In order to do the basics like pay the bills and put food on the table she found temporary work stocking food parcel orders. This is reality for many Kiwis. Inequality is still a big challenge in our country… Māori communities know we are the first fired and last hired.”

Vi’iga Alapati said “I would like {New Zealand} to not just know but to understand that it’s not easy for us. As a young person, I always wondered what it would be like if my family were financially comfortable and where I would be if all my choices I made in life weren’t bound to the question “How is this going to help them?” It would be nice to live in a society where we not only get to help our families but also contribute just as much to our individuality without having to prioritise one over the other.”

If we want things to change from the picture their comments painted of our country – a reality with which we should not be comfortable, and should not accept – we will need to do things differently.  New Zealand has been a low wage, low productivity economy for some time, and that has not changed under the pre-pandemic policy settings.

With border controls to prevent importing Covid-19 limiting the inflow of migrants, labour will become relatively scarce and costly. Yet capital has never been cheaper. This is an unheard-of combination of factors and should allow for pursuing a more equitable economic model. The recovery gives us an opportunity to build a more inclusive economy that shares the gains, and we should take it.

Kathy Errington is the Founding Executive Director of the Helen Clark Foundation, previously she worked in the economic section of the New Zealand embassy in Tokyo.

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