Submissions: Minimum Wage
MINIMUM WAGE SUBMISSION 2007
To the Minister of Labour on the Annual Review of the Minimum Wage from the National Advisory Council on the Employment of Women (NACEW)
1. Do you have any comment on the government’s goal for the adult minimum wage to reach $12 an hour by the end of 2008, if economic conditions permit, or its implementation?
The majority of the Council welcomes the government’s goal to increase the minimum wage to $12 an hour by the end of 2008. As women are more highly represented amongst low income earners an increase to the minimum wage will have a direct impact on their economic conditions and that of their families.
NACEW notes that government will also benefit from this increase as there will be less need for welfare benefits, and an increase in tax revenue from income and spending (23).
Increasing the minimum wage will also contribute to a fairer distribution of income in society more generally both by gender and ethnicity as Maori and Pacific women, in general, are over-represented among low paid workers.
2. What impact would an increase to $12 per hour have on your members/workers/business?
Female workers, part-time workers, multiple job holders, sole parents and Maori and Pacific workers are all over represented amongst low paid workers . Women make up 74.9% of part-time workers and part-time workers are more than twice as likely to be in low paid jobs compared to all workers (45.1% of part-time workers are low paid, compared to 21.5% of all workers).
29.5% of sole parents, who are primarily women, are low paid, compared to 21.5% of all workers. Māori and Pacific Island children are far more likely than any other ethnic groups to live with only one parent.
Females’ representation in low paid jobs has also increased 9.5% between the periods 1997 – 1999 and 2004 – 2006 which is of concern to NACEW. It does mean, however, that an increase to the minimum wage will have a greater positive impact on these women.
Disabled people are also more likely to be low income earners than people without a disability, and more likely to have no formal educational qualifications (39% compared to 24% on non-disabled adults ) making those that are in the labour force (around 44% in 2001), more likely to be in low paid work.
Almost half of all disabled people earned a total annual income of $15,001 or less in 2001 compared to 35% of people without disabilities. Furthermore, disabled women have much lower personal incomes than disabled men. In 2001, women made up 60% of disabled people who had a total personal annual income of less than $15,001.
Given these statistics, the Council believes an increase to the minimum wage, combined with the Disabled Persons Employment Promotion Repeal Act 2007, would have a positive impact on all disabled people who participate in the labour force, particularly women.
3. New Entrants’ Wage Rate: Do you have any comment on the impact of introducing the new entrants’ rate?
NACEW recommends that the new entrants’ wage rate is evaluated in due course as well as the terms of pay rates of younger workers and their participation in paid work.
4. What impacts have you observed, such as on the employment opportunities and conditions for 16 and 17 year olds, as a result of recent increases in the youth minimum wage?
Refer to question 3
5. Have you noticed that young people are more or less likely to be engaged in training/education as the youth minimum wage increases?
Refer to question 3
6. Objectives of the Minimum Wage: Reducing the Gender Pay Gap. Do you have any comment on this objective?
The majority of NACEW members strongly endorse the introduction of this objective to the minimum wage policy. The minimum wage is recognised as one of a range of mechanisms that increase the likelihood of women receiving equal pay for work of equal value. There is evidence to suggest that there is a positive (though modest) relationship between protective mechanisms such as the minimum wage and reducing the gender pay gap. As Dwyer explains increases in the real value of the minimum wage in New Zealand comprised a fraction of 1% of the total contraction of the gender pay gap between 1997 and 2003.
Training Rates: What impacts have you observed as a result of the introduction in 2003 of the training minimum wage?
The Council has not undertaken any research on this question. NACEW recommends that the government undertake an evaluation of the training minimum wage, including an analysis of the uptake by sex and ethnicity, and the impact on the labour market.
7. The training minimum wage is currently set at 80% of the adult minimum wage rate. Do you consider that the current relativity is appropriate? If not, why not?
See question 6
Other Issues
8. Of the people you represent what proportion are directly affected by the minimum wage?
The Minimum Wage Review 2006 noted that around 53% of all workers earning less than $12.00 an hour were women.
9. What are the gains likely to be from a moderate increase in the minimum wage for your members/workers/business?
See question 12
10. What do you think some of the costs or negative impacts may be for your members/workers of such an increase?
While standard economic models predict that an increase in the minimum wage would have adverse employment effects, the empirical evidence does not appear to support this hypothesis. Council members are aware of a substantial body of international research suggesting that little or no employment losses result from moderate increases to the minimum wage although it is acknowledged that some evidence to the contrary does exist. Dwyer states in her paper The Economic Rationales for Narrowing the Gender Pay Gap that minimum wage increases can decrease staff turnover and increase worker satisfaction and hence productivity.
NACEW acknowledges that the labour market influences wages and that when jobs are in short supply, raising the minimum wage can have the effect of reducing the number of jobs that employers are willing to provide. While this is not a feature in today’s labour market this may have an effect on the number of entry level jobs available, so those attempting to enter the labour market may find it more difficult.
Compared with New Zealand’s low rate of unemployment overall (3.7%), the unemployment rate for persons aged 15 to 19 is 14% for the year ending June 2007 . Research to determine whether there is a link between increases to the minimum wage and youth unemployment and statistics to mitigate such an impact may be useful here. This could clarify the nature of any link, and whether there are groups more at risk and possible solutions. Refer to question 12 for some solutions.
In regards to the overall population, given the low unemployment rates and tight labour market, the Council believes increasing the minimum wage to $12.00 an hour will not have a negative impact on the ability of the majority of women to gain employment.
11. Do you think there are any additional issues relating to minimum wage rates that are relevant to specific groups in New Zealand, for example Maori or Pacific Island?
Maori and Pacific women
Maori and Pacific women earn significantly less than other groups of women. Median hourly earnings for Maori women and Pacific women were $14.79 and $13.64 respectively in June 2006, compared to $16.38 for European women.
12. Are there any other issues, apart from the rate as which the minimum wage is set, which you are concerned about?
Minimum wage rates are only one factor in achieving labour market equity and efficiency in low paid sectors. As McLaughlin states, “Minimum wages need to be thought out in conjunction with other strategies if they are to be effective in contributing to a range of societal goals, which may include both fair pay and economic efficiency.”
A high minimum wage is only part of the solution. NACEW believes other strategies need to be used alongside minimum wage policy to effectively address low pay issues. These include:
- Value of work
- Collective Bargaining
- NACEW’s future priority areas of work, including:
- Reducing occupational segregation
- The equal sharing of paid and unpaid work between men and women
- Learning and training throughout a lifetime (see value of work)
Value of work
Many low paying jobs can be linked back to work historically associated with the servants’ work or women’s work meaning they are undervalued and underpaid. However, valuing traditionally low paying work has been effective in some countries, particularly where there is a coordinated market economy approach. Research has shown it to have a greater impact on affecting equity and efficiency in the low paid sector. Denmark is noted for its achievements in delivering both equity and efficiency through strong coordination mechanisms. This includes union-employer coordination and industry training organisations having active input into labour market policy, training and education policy. Education and training is emphasised at all levels including traditionally low paid industries. This enables a range of collective goods to be provided which are necessary for a high-wage, high-skill, and high-productivity economy. He also notes that Denmark could not compete on a low-cost basis so the emphasis on a highly productive workforce is valued. Retraining workers who have lost their jobs is valued rather than companies moving into low-wage competition. Business New Zealand notes that rather than increasing the minimum wage greater emphasis should be put on education and training and raising workers’ skill levels.
NACEW values the emphasis placed on learning and training through a lifetime to raise the skill levels of all workers. As Dwyer states, “Retraining opportunities are important to bolstering productivity, pay rates, and employment levels.” This will become increasingly important in the future where employment opportunities are expected to become non-standard in nature (part-time, temporary, casual and self employed), and manual labour is expected to decrease.
Further evidence is highlighted in a paper commissioned by NACEW last year, Improving the Quality of Work for Women in the Homecare, Residential and Cleaning Sectors which notes the need for improved wages, employment conditions, and employment structures that are “founded on the principles of fairness, equal opportunity, access to training, good faith and respect.” Making all work valued work will ensure New Zealand has a skilled, motivated and committed workforce that is internationally competitive.
Collective Bargaining
Collective bargaining is an important strategy which can be used in conjunction with the minimum wage to ensure decent wage levels are set. Denmark is a good example of the effectiveness of collective agreements which cover around 70 to 80 percent of their workforce. Earnings dispersion in Denmark is amongst the lowest in the OECD, and also measures well on the number of low-wage workers it has compared to other OECD countries.
There is evidence in New Zealand which shows how the gender pay gap can be reduced through collective bargaining. The nurses and midwives collective agreement was a good example of unions addressing pay and employment equity through collective bargaining and campaigning.
Occupational Segregation
Women are over-represented amongst low income and precarious occupations, such as in the cleaning, residential and homecare sectors. An article by NEON in April this year noted concern for cleaners’ low wages. Wage increases in this sector became near equal to the minimum wage earlier this year which was well below the OECD’s description of a desirable level (two-thirds of the average wage). Although current wages for hospital cleaners, orderlies and kitchen staff have increased to around $14.25 an hour it is of concern to NACEW that in the past seven years, since 2000, standard wage increases for cleaners rose a total of only $3.75.
In 2006, NACEW recommended using government contracting as one area where there may be potential for the government as funder to influence improvements in the quality of work for women currently in precarious working situations or low paid work to address precarious work in the homecare, residential and cleaning sectors. NACEW congratulates the government for its increased funding in these sectors. However, many companies in these sectors are still likely to be competing on wages to offer the lowest bids to win contracts.
The Council sees the reduction of gender-segregated occupations as key to addressing pay and employment equity, and the over-representation of women in low-paid sectors. Addressing occupational segregation is an important strategy which can be used in conjunction with minimum wage policy to address inequities in wage distribution amongst men and women.
The equal sharing of paid and unpaid work between men and women
The 1999 Time Use Survey found that women spend a much higher proportion of their time in unpaid work compared to men. Maori women made the largest contribution to unpaid work outside the household and this was often related to cultural expectations. This was true for Pacific women as well.
As men tend to earn more, family incomes tend to be higher if women, rather than men, take on responsibilities for childcare and other unpaid work. This in turn restricts women’s labour market participation rates and their income over a lifetime. Provisions such as the availability of paid parental leave for either parent go some way to enabling parents, for example, to choose who cares for newborns. Extending this further (to more working families, to cover a longer period of time and at a higher rate of payment) is also important to support parents in the choices they make about who takes primary care and paid work responsibilities. Further, women are more likely than men to return to work on a part-time basis, and consequently, more likely to be low paid.
Given women’s over-representation among low-paid workers, and traditional involvement in unpaid work, it is important to address this very real barrier to men and women achieving more even sharing of care responsibilities.
Addressing this issue and other concerns NACEW has raised, in conjunction with increasing the minimum wage to $12.00 an hour by 2008, will maximise the outcomes for all low paid workers and address labour market equity issues in New Zealand.
Pauline A Winter
Chair of NACEW
