A damning critique of the so called Living Wage

Brian Scott has published a critique of the so called Living Wage, and it should be compulsory reading for any politician that has treated the calculations done by Rev Waldegrave as a fit basis for public policy decisions. It is quite legitimate to have a view that wages should be higher, but to insist that the correct level is that calculated by Rev Waldegrave is a surrender to symbolism over substance.

The key findings by Scott are:

  1. Only 12% of low income households are two adults and two dependents, which the Waldegrave calculation is based on
  2. They assume you need 10 hours of childcare a week, even if the are aged over 14
  3. They calculation of level of “basic necessities” is not based on any empirical measurement of the lowest cost of necessities, but merely a proportion of the average expenditure in deciles 1 to 5 (this one is key – it is a calculation based on the Browns should be spending as much as the Jones, and is not a caculation on how much income the Browns need)
  4. The calculation doesn’t account for some sources of household income such as trade-ins, sales, teenagers income (yet does include their costs) and school donation tax refunds
  5. The calculation double counts some expenditure such as childcare costs
  6. The calculation includes as a basic necessity costs such as TV, pets, and video games
  7. The calculation includes insurance for dwellings and mortgages, despite assuming they are renting

Scott’s report should be sent to any politician who advocates that New Zealand’s wages policy should now be based on Rev Waldegrave’s so called calculations.

Scott makes the point that in other countries such as the UK (specifically London) the is based on detailed itemised budgets, and weighted averages of a wide range of household types from single to two adults and two children. That is a far more robust way to calculate it.

He has provided much detail such as how assumptions used are contradictory. They assume one child is in childcare for childcare costs but also assume both are teenagers for food costs (teenagers eat more than pre-schoolers).

The full report is appended below.

Living Wage Critique Version 1

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