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A living wage – the difference your pay rate makes

Monday, November 6, 2017
A living wage – the difference your pay rate makes

How much pay is enough when it comes to a healthy bank balance and quality of life in New Zealand today?

It’s not so much a ‘how long is a piece of string’ question, but one of fairness, equity and balance that Massey University researchers are focussing on by leading a studying on the living wage concept.

A multi-disciplinary team from the School of Psychology’s End Poverty and Inequality Cluster (EPIC), Massey Business School’s MPOWER (Massey People, Organisation, Work and Employment Research group) and AUT’s Department of Management have won $845,000 in a Royal Society of New Zealand Marsden grant to explore the workings of the living wage. They will be examining its feasibility from both worker and employer perspectives, and in particular how better pay affects quality of life and wellbeing.

The study will involve surveys and case studies of employees and employers from a range of workplaces – including a city council; a public-sector Maori organisation; a Pacific social enterprise; and a local small or medium-sized enterprise – to better understand the costs, benefits and potential barriers to adopting the living wage in New Zealand.

There is an urgent need to examine the case for a living wage for low-paid workers in the national context of growing poverty and poor productivity, the team argues.

“Working poverty has soared due to low pay, insecure work that provides interrupted or insufficient hours of paid employment and rising housing, energy and food costs – all of which disproportionately affect women, younger and older people, and Maori and Pacific peoples in particular,” the researchers say.

The research team includes leading employee relations and community and organisational psychology scholars working within an international network of academics under the United Nations-backed Project GLOW: Global Living Organisational Wage.

They hope the findings from their three-year project will help inform policy benchmarking, knowledge-sharing and theoretical development around the living wage.

The aim of the study Living wages: Transforming lives, transforming work? is to better understand the contribution that being paid a living wage might make in lifting low-paid workers from the poverty trap, in terms of material outcome and subjective wellbeing.

“Employer perspectives are equally important, in terms of their motivations, constraints and consequences,” says Professor Arrowsmith, from Massey Business School.

What is a ‘living wage’?

Massey psychologist Professor Stuart Carr says living wages; “usually refer to higher minimum wage rates derived from calculations of the material cost-of-living needs of a hypothetical household unit. However, the broader concept of living wages goes much further. It implies that not just cost-of-living, but also human quality-of-living will follow from meeting everyday material needs.”

The notion of a living wage links to material needs but also people’s aspirations for dignity and respect.

Around 70 organisations in New Zealand voluntarily accredit with the Living Wage Aotearoa New Zealand to pay their staff a living wage – when they could legally pay them less (the minimum wage).

The minimum wage in New Zealand is currently $15.75 and will rise to $16.50 in April 2018 – a change introduced by the new Labour-NZ First-Green coalition government. The current living wage in New Zealand is $20.20, set by the Family Centre Social Policy Research Unit, and is the amount the new government has said it will increase the minimum wage to in four years.

Gap between minimum wages and rising living costs

Researchers say that while a national minimum wage is “a legal floor” intended both to provide protection for workers and encourage fair competition among employers, minimum wages are now widely recognised as “failing to provide sufficient cost-of-living income.”

“This is due not only to the growth of informal work, poor awareness and weak enforcement of wage laws, but mainly to minimum wage rates not matching increasing living costs and the realities of precarious work,” says Professor Arrowsmith.

“This generates a growing interest in living wages from stakeholders, including local and central government and employers needing to recruit, retain and motivate staff as well as social campaigners, employees and trade unions.”

The research team emphasises the importance of the longitudinal nature of the project. For example, some employers in low-paying sectors might struggle with the consequences of paying a living wage; “but over the longer-term, higher pay could lead to returns through improved recruitment, motivation, retention, productivity and consumer branding, including in small firms,” says Professor Arrowsmith.

“We clearly need to learn more from the experiences of employees and employers along a wage spectrum, especially in low-paying organisations and sectors.”

The project team comprises: Professor Stuart Carr, Professor Darrin Hodgetts, Dr Siautu Alefaio, Professor Jane Parker and Professor Jim Arrowsmith – Massey University, and Professor Jarrod Haar – AUT.

Theirs was one of 26 projects, totalling more than $15.6 million, awarded to Massey researchers by the Marsden Fund last week.

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