News: New Zealand lifts living wage for low-income earners

Compensation & Benefits

New Zealand lifts living wage for low-income earners

Will the lowest-paid workers receive the benefits of economic growth?
New Zealand lifts living wage for low-income earners

The national living wage in New Zealand has increased to $23.65 an hour, an amount meant to represent how much money each worker needs to fully take part in society.

The 2022-2023 rate was based on 68% of the average hourly earnings in the country, which were at $34.76 in June 2021. It is also 90c more than the previous living wage of $22.75 last year.

While the new living wage is voluntary for employers, more than 300 companies have already expressed their commitment to pay their workers at least half of the rate.

Charles Waldegrave, a coordinator and lead researcher with the Family Centre Social Policy Research Unit, calculated the $23.65 per hour living wage.

“It’s important to ensure that our lowest-paid workers can receive the benefits of economic growth, and that they are also supported to cover [the] cost of living. This year’s increment of 90 cents per hour provides a 4% increase on June 2020,” Waldegrave said.

Read more: Pay transparency – Should you publish your employees' salary data?

Making a big difference

The new living wage is expected to benefit many New Zealand workers, who often have to put in longer hours at their jobs to earn enough for their needs.

“It has stopped me from working long hours – no more weekend jobs, no more stress and fatigue,” Josephine Wiredu, a cleaner and E tū union member, said.

“I am able to look after my well-being and spend more quality time with [my] family, especially my two young daughters.”

For economist Shamubeel Eaqub, the new rate created a benchmark especially in a time the rate of inflation is forcing workers’ earnings to go backwards.

“It stops you from going backwards,” Eaqub said. “You’ve got a minimum increase that keeps up with the cost of living.”

Read more: Do workers from ethnic minorities earn less than white peers?

However, not everyone is optimistic about the new living wage. Gareth Kiernan, chief forecaster at research firm Infometrics, believes the inflation that New Zealand is currently experiencing has already swallowed much of the increase in workers’ rates.

Kiernan explained that the rate of inflation has already increased by 2.36% during the five months since the new rate was established. By comparison, the living wage in the country only increased by 3.96%.

“Another way of looking at it is that inflation from September 2021, when the living wage last increased, to September 2022 is forecast to be 6.4% - meaning that the living wage increase is only compensating for 62% of the lift in the CPI over the last year,” Kiernan said.

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Topics: Compensation & Benefits

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