The living wage campaign

The Herald reports:

A campaign has been launched for a “living wage” in New Zealand, inspired by policies in United States cities and London.

In New Zealand, Labour Department research shows that 103,800 workers under 25, and 161,000 aged 25 to 64, earned less than $15 an hour in the year to last June.

I have no issue with the campaign. But I caution that not all employees and not all employers are the same. I don’t think a 16 year old earning $14 an hour in an after school job is an issue. I think it is more of an issue if someone is earning that 10 years later. But also wages can only be paid if a company is earning enough income to employ people. An increase in costs can make a company unprofitable. This is why in the main individual employers negotiate agreements with individual employees – because that reflects the position of both of them.

Low wages for the Kaufisis mean the children don’t go to school when there is no money for lunch.

Leo Kaufisi, of New Lynn, earns $14 an hour as a dispatcher for Pacific Inks in Avondale. His wife Lopaini earns the legal minimum of $13.50 an hour as a cleaner.

Four adults and eight children live in the three-bedroom house which they rent for $350 a week – Mr and Mrs Kaufisi, their six children aged between four and 12 , Mrs Kaufisi’s unemployed mother, her mother’s partner, her 12-year-old sister and 10-year-old brother.

Six children sleep in one cramped bedroom.- The other children sleep with their parents.

Mr and Mrs Kaufisi are both working hard to care for their family. I have no problem with taxpayers helping them make ends meet. Sadly the article doesn’t detail what this support is.

I presume the two other adults receive the unemployment benefit. So my estimate of the weekly net income is:

  • Mr Kaufisi $471
  • Mrs Kaufisi $455
  • Family Tax Credit $598
  • UEB (couple) $342
  • Accom Supplement $32

This is a total net income of $1,898. The equivalent gross before tax income (if it was a single earner) is $2,627 a week. That is a gross annual equivalent of $136,604. Now that is for a large family, but it gives a more complete picture than just talking about $13.50 an hour.

Even with family tax credits, Mr and Mrs Kaufisi say almost all their income goes on the rent and on payments to finance companies. These total about $500 a week for furniture and other items including two cars, which were both repossessed recently when Mr Kaufisi’s work permit expired.

Actually the rent is under 20% of the net income, according to my calculations. The problem is the finance company payments.

Having 12 people in a three bedroom house is massively over-crowded. It is not clear if they are in a state house, but it seems to me they would easily qualify.

Mrs Kaufisi said their combined wages now were not enough to live on and she supported the call for a “living wage”.

“With a living wage, maybe we can afford to rent our own place or buy healthy food for my kids,” she said.

I’m not sure higher wages will make a huge difference to their household. I think the biggest issue is only two out of 12 people are earning. Let’s assume that both the Kaufisi’s get paid $17.50 an hour, or $35,000 a year. What would this do to their income:

  • Mr Kaufisi $584
  • Mrs Kaufisi $584
  • Family Tax Credit $524
  • UEB (couple) $342
  • Accom Supplement $0

This is a total of $2,034 a week. That is an extra $136 a week, but only a 7% increase in net income despite it being a 30% increase in wages for Mrs Kaufisi and 25% for Mr Kaufifi.

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