THE PRESS WEDNESDAY, JULY 11, 1979. Price of "living wage” claim

Press, 11 July 1979, Page 18

THE PRESS WEDNESDAY, JULY 11, 1979. Price of "living wage” claim

The notion of a minimum living wage as put forward by the Federation of Labour deserves careful attention and it will no doubt get this from the Court of Arbitration, from the Government, and from the Employers’ Federation. Reasonable support for a family on the income of the main earner in a family group is a proper goal in any society and it should be one to which New Zealand should always aspire. The theory barely needs consideration; it is an assumption, admittedly upset by inflation in recent times, that a wage for full-time work should be a living wage and therefore adequate to support a household. The problem lies in deciding what the minimum wage level should be and in accepting the consequential adjustments to the rest of the economy if the minimum is substantially raised.

In the announcement of its intention to apply for a minimum living wage instead of a general wage order from the Court, the Federation of Labour has not explored the consequences in much detail. It offers, however, one important premise, though it is not specifically stated. The premise is that existing relativities between the wage rates of lower-paid workers must be forgotten. “Each job has merit, each really is important and deserves reward,” says the F.O.L. president, Mr W. J. Knox, in his advocacy of the wage application. The federation is not advocating that the least favoured, least attractive, unskilled job shall command the minimum wage and that all others shall be rewarded on a scale above that figure. As illustrated in the examples given in the announcement, the idea is to consolidate a vast number of wage-earners on the minimum wage.

If the minimum living wage scheme as proposed by the F.O.L. is to be adopted on anything like the basic wage level calculated by the federation, the scheme would have to entail some bar to further adjustments to restore old relativities. Without this restraint the scheme would recreate all the income problems that the federation now wants to dispose of. Employees now paid more than the proposed minimum rate would preserve their relative positions, according to the F.0.L.. but it is clear from the examples provided that former margins would not be retained. Unless the federation is merely producing a rough illustration of what would happen to margins for skill, ttye implication is

that higher-paid workers are expected to sacrifice the margin in their incomes to ensure that the minimum wage can be maintained. If this is not the understanding of the F.0.L., the economic results of a large and immediate rise in the minimum wage would be economically disastrous. Preservation of old relativities by a percentage margin, or in absolute cash differences, would merely inflate prices so that people on the minimum wage would be put at a disadvantage again. Failure to preserve margins would almost certainly inspire skilled workers to look to employers in other countries for greater recognition of their training and services. The federation therefore has to face the considerable task of persuading higher-paid workers to accept the sacrifice of margins to improve the lot of lowerpaid workers.

If two adults in the same family are working, the federation proposes that the tax system "should adjust for the fact that both wages are being earned in the same household.” It is also proposed that adjusting the living wage for family size should be a function of the tax system. These are not novel ideas but they carry the strong implication that the federation expects that the Government would increase tax on a two-income household. Introduction of the scheme as envisaged by the federation would also invite a change of policy on National Superannuation. The basis for superannuation payments could well be altered from the average wage to the minimum wage.

The inflationary effect of the proposal, acknowledged by the federation, would be minimised if unions and employers took a firm line on restraining pay increases for higher-paid workers. Such restraint is an essential part of the idea. Failure to apply such restraint would merely duplicate the present pay patterns at higher rates. No-one would benefit and the entire country would be less competitive in its struggle to maintain and improve its position in world trade. Further devaluation of the New Zealand currency could take care of this, but at the expense of much higher import prices. In some sectors of the economy—those that need imported fuel and raw materials—the result could be crippling. The F.O.L. goal is not without a price, and most of the price falls on wage and salary earners.