Defining low pay

New Zealand does not have an official measure of low pay. The data analysis in this report has used a relative definition of low pay of two-thirds of the mean hourly wage for all employees. This was $22.90 an hour in the Survey of Working Life (SoWL), giving a low-pay threshold of approximately $15.30 an hour.[3]

Low pay amongst prime-aged (25-54) employees in New Zealand

In the March 2008 quarter, an estimated 234,100 prime-aged (25-54) employees were low paid - just over one in five (20.5%) of all prime-aged employees - that is, they earned less than $15.30 an hour or two-thirds of the mean hourly wage. Women were more than twice as likely as men to be low paid - 27.5% of women (154,000) and 13.8% (80,100) of men. As will be discussed more fully later, prime-aged employees working less than 37 hours a week are more likely to have low hourly pay. Of all female employees aged 25-54, low pay is most prevalent for Pacific women - 43.1% of Pacific female employees (9,300) are low paid compared with 41% of Maori (12,600), 30.9% of 'other' ethnicities (21,000), 31.2% of European/Maori (9,100) and 24.9% of European female employees (102,000) (Figure 1).

Figure 1: Low-paid prime-aged employees by gender and ethnicity, March 2008

Data table for Figure 1

Trends in low pay

In English-speaking countries in particular, over recent decades, there has been growth in the proportion of jobs that are some combination of low-paid, casual and part-time (Richardson and Miller-Lewis, 2002). The extent of industry bargaining, industry regulations and standards, qualification requirements and the existence and level of minimum wages as well as wage subsidies can all impact on the distribution of wages and salaries and prevalence of low wages.

In New Zealand, wage inequality increased substantially during the 1980s (Dixon, 1998). Job growth has occurred disproportionately at the high-skilled and low-skilled ends of the market as deregulation within the labour market and exposure to global competition restructured the economy. More recent analysis indicates that wage inequality remained relatively steady over the 10 years to 2007 (Pacheco, 2009). Stepped increases to the minimum wage and wage rises during the period of economic growth will have mitigated earlier trends of declining real wages. Growth in the proportion of jobs that are part-time appears to have levelled off (Dwyer and Ryan, 2008). On an hourly basis, there is a concentration of earners at the low end of the distribution.[4]

Characteristics of low-paid workers

Lack of recognised skills is a key factor associated with low pay. Low pay is more common amongst very young workers and amongst school leavers with no prior work experience. Women re-entering employment following time caring for children (particularly sole mothers), employees who have no qualifications or have lost jobs, migrants and employees who work part-time also feature disproportionately amongst the low paid.

In March 2008, female employees aged 25-54 who were low paid were almost twice as likely as all prime-aged female employees to have no qualifications (29% compared with 15.7%). Prime-aged male employees who were low paid, however, were even more likely to have no qualifications (33.8%). Low pay is significantly more common in some occupations and industries than others and more common amongst some groups of workers than others.

Characteristics of low-paid jobs

Jobs that are low paid tend to have all or some of the following characteristics:

• They are in firms that are open to competition with few barriers to new market entrants.
• They produce goods or services where there is particular consumer or funder resistance to increases in prices.
• There are no or few qualification barriers to taking on the job.
• The required skill level is low or is related to skills that are undervalued, particularly those obtained through caring and housework[5]
• There are low levels of collective bargaining or unionisation.

The proportion of prime-aged employees who were low paid in March 2008 was higher than average in these occupational groupings: elementary occupations (54.3%), service and sales workers (50.7%), agriculture and fishery workers (39.9%), plant machine operators and assemblers (24.7%) and clerks (21.3%).

Industries with higher than average proportions of low-paid prime-aged employees are wholesale and retail trade, accommodation, restaurants and cafés (38.3%), agriculture, forestry and fishing (37.8%) and health and community services (24.4%). In all countries, low pay tends to predominate in services where the jobs replicate activities that were done by women unpaid at home. Two labour-intensive service sector jobs that are the focus of this report - cleaning/caretaking and sales - tend to be low paid everywhere, although there can still be quite a variation in the level of wages paid by different firms. Personal care or support work is often also low paid, but this is not the case in all countries (Fujisawa and Columbo, 2009).

Size of establishment and sector of employment

Internationally, there is a tendency for low-paid work to be disproportionately located in smaller firms. However, in New Zealand, low-paid prime-aged women are slightly more likely than all prime-aged women to work in larger establishments (Figure 2).

Figure 2: Distribution of prime-aged employees by size of establishment, March 2008

Data table for Figure 2

While international literature suggests that low pay tends to be more in smaller firms, Figure 2 shows that prime-aged low-paid women (at least on the relatively wide definition of low pay used in this report) are slightly less likely to work in smaller enterprises than all prime-aged women. The same is true for low-paid prime-aged men in New Zealand.

There is also a tendency for low pay to be more prevalent in the private sector, and this is the case in New Zealand. Figure 3 below shows that, for prime-aged women, low pay is also slightly more common in the not-for-profit sector. Both these patterns are also true for men.

Figure 3: Distribution of prime-aged employees by sector of employment, March 2008

Data table for Figure 3

Tenure

Low pay is more prevalent amongst those employed casually or on a temporary basis (Department of Labour, 2009). Low-paid prime-aged female employees, and especially low-paid women working less than 37 hours a week, are also more likely to have been with their employer for a shorter period than other prime-aged employees.

Tenure data shows a much larger proportion of low-paid prime-aged female employees have worked with their current employer for less than a year than is the case for all prime-aged female and male employees. The same is true of low-paid prime-aged male employees. Low-paid prime-aged females are also much less likely to have been with their same employer for 5 years or more than other female employees. However, around half of all female employees - whether low paid and/or working less than full-time or not - have been with the same employer for between 1 and 5 years (Figure 4).

Figure 4: Tenure of prime-aged employees, March 2008

Data table for Figure 4

New Zealand-born and migrant employees

As shown in Table 1, European employees, both male and female, are less likely to be low paid than other ethnic groups. Migrant women who have been in New Zealand for less than 5 years and migrant men who have been in New Zealand for less than 10 years are over-represented amongst the low paid. While New Zealand-born men are a little under represented amongst the low paid, this is not the case for women born in New Zealand.