CTU Submission on the 2008 Review of the Minimum Wage

The New Zealand Council of Trade Unions - Te Kauae Kaimahi (CTU) welcomes the opportunity to make a submission as part of the 2007 minimum wage review. The CTU is the internationally-recognised confederation of trade unions in New Zealand and represents 40 affiliated unions with a membership of over 350,000 workers. The CTU acknowledges Te Tiriti o Waitangi as the founding document of Aotearoa New Zealand and formally acknowledges this through Te Runanga o Nga Kaimahi Maori o Aotearoa (Te Runanga) the Maori arm of Te Kauae Kaimahi (CTU) which represents approximately 60,000 Maori workers.

The CTU acknowledges that since December 1999 the Government has taken several important steps in the area of minimum wages. These include lifting the adult rate, lowering the age of application for the adult rate, increasing the rate for 16/17 year olds to 70 per cent, and then 80 per cent, of the adult rate, benchmarking the rate for trainees to no less than the youth rate and to limiting the time spent for a 16 or 17 year old on the youth rate to 200 hours or 3 months whichever is the lesser. The minimum wage has increased by 71 per cent since 1999, in striking contrast to the 14 per cent increase over ten years from 1990.

The CTU encourages the Government to continue to build on this excellent progress. In this context we note the inclusion in the Confidence and Supply Agreement with NZ First and the Co-operation Agreement with the Green Party the commitment that the Government will:

"Continue the practice of annually increasing the minimum wage, with a view to it being set at $12.00 per hour by the end of 2008 if economic conditions permit."¹

While the CTU acknowledges that the Government delivered on this commitment from 1 April 2008 including the removal of youth rates, we regard a lift beyond this is necessary. Collective bargaining density in those sectors where workers are paid at or near the minimum wage is at 4 per cent, we submit that there is a strong case for a two pronged approach to continue to build on the commitment shown to addressing low pay.

These are that firstly, the Government supports an increase in the minimum wage to a level that is two-thirds of the average wage and secondly that the Employment Relations Act must be significantly amended to genuinely promote industry and multi-employer collective bargaining.

Some employer groups may counter that increases impose unbearable costs on employers. But low wages in New Zealand are now more than a social issue or a debate about the balance of competing interests. Low wages are now an intrinsic barrier to the economic transformation of New Zealand. Low wages are embedded in this country. The CTU accepts that for overall wages to rise there will need to be sustained lifts in productivity along with a much stronger distributional impact through collective bargaining than what we have seen in the last 15 years. But the minimum wage represents the wage ‘floor'. It needs to rise to $16.30 to set a clear base. When the new federal minimum wage takes effect on 1 October this year in, the minimum wage in New Zealand will only be 69 per cent of the Australian federal minimum wage. It is time for the New Zealand Government to send an unambiguous signal that low wages will not be tolerated in this country.

Executive Summary

The CTU is seeking an increase in the minimum wage based on indexation to 66% of the average wage. At the present time this equates to $16.30.²

The CTU is seeking the removal of the new entrant rate so that the minimum wage applies fully to those aged 16 years and over.

The CTU is seeking ongoing dialogue in respect to the minimum wage for those aged less than 16 years. We support the review of the employment of children and support the ratification of ILO Convention 138. We propose that the review of the employment of children should recommend sectors and occupational categories where the minimum wage should apply regardless of age.

The CTU is seeking either the removal of the trainee rate or a negotiated trainee scale that applies for up to 12 months only and continues to require 60 credits of training as the basis for a lower rate. We also propose that the Labour Department undertakes research on the extent to which trainees are paid less than the (adult) minimum wage.

The CTU supports the Minimum Wage and Remuneration Amendment Bill and its underlying principle that no one should earn less than a socially-acceptable minimum for their labour. It addresses a growing loophole in the coverage of the Minimum Wage Act, created by a rise in non-standard working arrangements and the propensity of non-standard employment to be precarious and low paid. According to the ILO, "The ultimate test of any minimum wage system is its acceptability and effectiveness at a given period in time and its ability to meet the different needs of all parties concerned".³ On these grounds the CTU believes that current minimum wage protection is excluding an unacceptable number of workers and is increasingly ineffective at extending protection to non-standard working arrangements like contracting.

There should be a government agency charged with gathering more information about low pay in New Zealand. This should also collect and publish information on ethnic, migrant and gender aspects of low pay.

That, as well as the minimum wage, responsible contractor policies represent an important tool in addressing low wages.

More thorough enforcement and stronger penalties should be used to ensure comprehensive adherence to the minimum wage.

Notes 

"Confidence and Supply Agreement with New Zealand First", 17 October 2005

This is based on the average ordinary time wage of $23.63 an hour. Allowing for a 2% increases to the current average wage we are proposing that the minimum wage for 2009 is based on 66.0% of the average ordinary time hourly rate as at June 2008 in the Quarterly Employment Survey .

International Labour Organisation, "Minimum Wage Fixing: A Summary of Selected Issues", Briefing Note No. 14, 1998.