Last week we interrogated the Australian Council of Trade Unions’ call to replace the minimum wage with a living wage. One of the questions raised in that piece was whether it’s possible to apply a one-size-fits-all approach to a living wage across different jurisdictions — which is the question the global living organisational wage project (aka project GLOW) is seeking to answer.

Based out of Massey University in Palmerston North, New Zealand, project GLOW conducts research both in New Zealand and internationally on establishing a living wage that “enables people, organisations and communities to prosper and thrive”.

Stuart Carr — a professor of industrial and organisational psychology at Massey — who initiated the project in 2016, told Crikey, “Prosperity and thriving are gauged on a whole range of indicators, from job satisfaction and enterprise development to life satisfaction and hope for the future”.

Crikey spoke with the academics involved in GLOW to gauge the impact of a living wage on New Zealand.

How does the living wage interact with the minimum wage?

New Zealand was the first country to implement a national minimum wage, in 1894. It has a single minimum wage, unlike Australia, which has a series of industry and profession-based awards and agreements setting thousands of different legal minimum wages. About 75,000 New Zealand workers rely on the minimum wage, or 3.2% of employees, and averages are much higher in sectors like retail and hospitality and for groups such as youth, women, and Maori and Pacific workers.

The Living Wage Movement Aotearoa New Zealand (LWANZ) formed in 2013. The LWANZ uses rates calculated by the Independent Family Centre Social Policy Research Unit, based on the weekly cost of a “basic but decent life style” for a target household of two adults and two children with 1.5 full-time earners.

 The living wage is currently set at $20.20 — $4.45 more than the minimum wage.

“It takes into account income tax, tax-credits and transfer payments in the calculation,” Jim Arrowsmith, professor at the school of management at Massey, said. “However, it begins and ends with money and commodities, rather than asking people directly what their wages, and wage bills, mean for them in everyday life, quality of life, and work life.”

GLOW seeks to interrogate the effect the wage has on “people’s participation in society, capacity to withstand and recover from unforeseen shocks — which the ‘living wage’ is supposed to cover”.

How many businesses have adopted the living wage?

There are currently around 85 organisations in New Zealand (of varying size), accredited by LWANZ, with more progressing towards making the list.

Further, Jane Parker, professor of employment relations at Massey, told Crikey it was likely that many employers use the living wage as a benchmark, without fully committing to being accredited.

“It has also informed pay developments in other ways. For example, The Warehouse Group, NZ’s largest private-sector company, introduced a ‘career retail wage’ which links higher pay to service and training,” she said. “This was stimulated in large part by the living wage.”

Has it choked small business? 

Jarrod Haar, professor of human resources management at Auckland University of Technology, said case analysis so far had found modest employment gains for SMEs who had adopted the living wage, contradicting a 2013 treasury report that suggests the living wage would be bad for employment.

“Although we cannot generalise from one or two cases, these findings do suggest that there is more ‘upside’ to the living wage, for all stakeholders, than some existing positions suggest,” Haar said. 

Further, their research showed offsetting for businesses in other areas.

“Case study research with accredited living wage employers found that there were significant offsetting cost improvements from a living to do with better recruitment, retention, returns from training, productivity and absenteeism,” Parker said. 

 Has it been successful in lifting people out of poverty?

“Our pilot national survey of employees found that there was a ‘tipping point’ (range  would be more accurate) which approximated the LW rate, at which people experienced higher levels of subjective well-being as well as material advantage,” Arrowsmith said. “Our new study, financed by the Marsden Fund, will examine this more systematically to test for possible poverty effects along an entire ‘wage spectrum’.” 

Haar conceded that tax and welfare had to be taken into account if a living wage was to be truly effective.

“A major concern from an employee perspective is disposable income, so tax and welfare systems need to dovetail more closely into pay – for example by reducing the tax wedge and welfare claw-backs for lower income earners,” he said.