New Zealand as a low wage economy
16 April 2007
New Zealand remains a low-wage economy, according to figures produced nationally and internationally.
Statistics New Zealand’s last Census shows that around two thirds of New Zealand’s salary and income earners earn less than $35,000 a year, says Business New Zealand employment relations policy manager Paul Mackay.
Self-employed people and those on benefits don’t appear in that statistic, nor does it shed much light on the hours worked to achieve the reported incomes, Mackay says.
New Zealand is a “pretty average player” compared to other OECD countries, in the poverty versus wealth stakes, he says. “But if you take big chunky looks at things, you’d say that a proportion of New Zealanders, and probably an undesirably large proportion, earn a lower income than we would want in a high-income, high-skills, highly-productive economy.”
| Country | Average income male | Average income female |
| New Zealand | $26,960 | $18,379 |
| Australia | $34,446 | $24,827 |
| Canada | $37,572 | $23,922 |
| United Kingdom | $33,713 | $20,790 |
| United States | $46,456 | $29,017 |
The Australian average wage continues to rise relative to New Zealand. Australian workers are paid 30 percent more than New Zealanders on average, a factor which contributes to the skills shortage here as some New Zealanders head there in search of better pay.
Average hourly earnings in New Zealand were $20.04 and median hourly earnings were $17.00 in June last year, according to Statistics New Zealand. Women, Māori, migrants and Pacific peoples figure disproportionately highly in the lower wage brackets.
While New Zealand salary and wage rates including overtime increased 3.2 percent over the year to December 2006, not all sectors of the workforce saw comparable gains. There is evidence that wage inequality is growing: In 2000, a CEO could expect to earn eight times as much as the pay of the average worker. By 2006, the average CEO pay-packet was 19 times the average wage, according to a Sunday Star Times survey.
Workers who are not seeing wage growth in real terms include cleaners, caregivers, call centre workers, teacher aides, hospital aides, clerical workers and workers in the retail and hospitality industries. Up to 100,000 of them are on minimum wage.
The minimum wage rose to $11.25 on April 1. Unions are arguing for a higher minimum wage. They contend that the minimum wage should equal two thirds of the average wage, which is the International Labour Organisation’s (ILO) suggested standard minimum.
The government has indicated that it wants the minimum wage to rise to $12 an hour by 2008, as economic conditions permit. For a person aged 16 or 17 years old the minimum wage rose from $8.20 to $9 an hour from 1 April.
The Business Roundtable has argued in Justin Coutts’ 2004 paper How do we solve the conundrum of minimum wages that as wages rise, the demand for workers falls, so imposing a higher minimum wage would cause a decline in employment.
Coutts’ paper admits that evidence around this is mixed, however. A 36 percent increase in the minimum wage since 2000 has coincided with the lowest unemployment in decades, and a Treasury working paper published in the same year as Coutts’ discussion on minimum wage found that a 69% increase in the minimum wage for 18 and 19 year olds in 2001 and a 41% increase in the minimum wage for 16 and 17 year-olds over a two year period had no adverse effects on youth employment or hours worked. “In fact hours of work increased for 16-17 year olds relative to other age groups.”
Read stories on low paid workers and carers
An in-depth discussion of the minimum wage and comparisons between New Zealand wages and other OECD countries is found in a Department of Labour report, Minimum wage review 2006, from paragraph 43 onwards.
New Zealand’s low wage environment is also examined in an OECD report comparing different countries, Minimum Wages, Minimum Labour Costs and the Tax Treatment of Low-Wage Employment.
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The Council of Trade Unions is coordinating campaigns by separate unions targeting low wages in different sectors. |
