Working Life: Calculating the Living Wage

This year's re-setting of the Living Wage from $20.20 to $20.55 marked the fifth year since the original living wage calculation of $18.40 and was subject to a five year measurement review.

LWage 1

Social policy researcher Charles Waldegrave, often described as a tireless chronicler of poverty in New Zealand, led the review with associates Peter King and Michaela Urbanova for the Living Wage Movement Aotearoa NZ, of which PSA is an active member.

Living Wage defined

The movement’s definition of a Living Wage is that it represents “the income necessary to provide workers and their families with the basic necessities of life. A living wage will enable workers to live with dignity and to participate as active citizens in society.”

The Living Wage is directed at lifting the incomes of low paid workers in the context of a two adult, two child household where there are 60 hours of employment. This modeling is in line with research in other countries where living wages are important standards for worker well-being.

Five yearly reviews

The original premise for the rate in New Zealand was that it should relate primarily to movements in wages with a five yearly review to allow new data and information to be used to refine its carefully constructed calculations.

‘Needs-based’ estimates for food and rent costs were possible from the outset and through this review an emphasis on direct costs has been extended to estimates for household energy, health, communication and education. Estimates for another six items of spending remain anchored to data in the Household Economic Survey (HES).

A weekly budget

The estimate of a household’s weekly budget needs arrived at by the new review was $1,169 a week or an annual total of $60,784, which in turn required an annual gross income of $64,059 across two adults over 60 hours per week.

The review report of 46 pages has succinct summaries of each itemised expenditure category. Rent is the biggest weekly item at $332, followed by food at $212 and transport at $131.56.

The report points out that participation as active citizens is about more than surviving on the basic necessities, and needs to embrace things like “having a computer in the home and being able to mix with friends recreationally, albeit modestly”.

It observes that New Zealand is a “laggard in wage levels” and cites the 40% of children in poverty who have at least one adult in their family in full-time employment or self-employed as “an important context for a living wage movement.”