Wages Aren't Keeping Up with the Cost of Living
The cost of living has gone up sharply. Some of this is due to the Government. The National Government increased GST to 15%. The tax switch in 2010 was a swindle. It was not fiscally neutral (so the tax cuts were more than the revenue increase), failed to stimulate the economy, widened income inequality but also created an inflation spike.
The GST increase was unfair. People on low incomes faced a higher rate of GST increase on their incomes than people on high incomes because they can save less (and may in fact be spending more than they earn), they spend more on necessities, which mostly are liable to GST, and spend less on items that don't attract GST. Even before GST went up the lowest income households spent as much as 14 percent of their income on GST but for the highest 10 percent of households, it was only 4 percent.
Inflation is at 5.3 percent. Food prices rose by 6.6 percent in a year with bread up by 6.7 percent and fruit and vegetables up by 13.2 percent (vegetables alone were up 26.2 percent). Early childhood education costs rose 11.7 percent in the last year, fuelled by cuts in government funding rates.
Wage rises are not keeping up with the cost of living. For those who actually got a wage increase in the last year, median increase was only 2.9 percent. The Government claims that average after tax wages have gone up. But that is only because the tax cuts went mainly to those on or above the average wage. Two thirds of Kiwi workers earn less than the average wage.
The increase in the cost of living has outstripped any gain from the Government's tax cuts for anyone earning less than $80,000 and spending all of their income.
There are nearly 300,000 employees earning less than $15 an hour. The wage gap with Australia has widened and now the National Party says a 30% gap is a ‘competitive advantage’. It looks like the National Government has given up on closing the gap. The minimum wage went up by only 25 cents an hour in both 2010 and 2011, the lowest increase for 8 years.
People are finding it tough. People like Shannon Tarawa in Auckland who in March this year found that his grocery bill was $195 a week. The same items would have cost only $183 a year ago. So his cost of living had gone up by 6.6 percent but in that time he had also lost his job.
We need wages to rise in New Zealand. That is the sort of ‘rebalancing’ we need – not a tax switch for the rich. There are three main things that should be done to lift wages. We need to lift productivity and make sure the benefits are shared. We need to ensure a lot more workers have access to collective agreements and industry standards for their wages and conditions. And we need the minimum wage to rise.
