The 2018 rate: It’s $20.55

The 2018 Living Wage is $20.55 per hour, up from $20.20 in 2017-18. That’s what workers need to earn to live a basic yet decent life. The new Living Wage will come into force on September 1st.

The Family Centre Social Policy Research Unit has completed the first full review of the rate since the original Living Wage was announced in 2012, when it was $18.40 per hour.

The new independently calculated rate results in a marginal closing of the gap between the Living Wage and the government’s statutory Minimum Wage (of $16.50) from nearly 30% to 24.5%. The new Living Wage of $20.55 over 40 hours of work means a total gross income of $42,744.00 or over a household income of 60 hours, $64,059.

Moving from a strong focus on expenditure, new sources of data this year mean the calculation reflects more of the needs of workers to survive and participate in society, including food and rent costs, energy, health, communication and education. Other estimates are necessarily based on Household Economic Survey data (Statistics NZ) and inflation adjusted for 2017.

The Government’s families package boosts the Family Tax Credit and raises the abatement threshold, which along with accommodation supplements, reduces upward pressure on the level of the Living Wage.

Maopa Vea

Maopa Vea is a cleaner at Manukau District Court on the Minimum Wage of $16.50, with a twin boy and girl, aged 5 years old. Maopa believes her employer, the Government, could do more:  “We deserve to be paid the Living Wage rate. Another 3 or 5 more years or never… Just be fair and do the right thing.”

The Living Wage calculation is based on a model of a two adult, two child household where there are 60 hours of employment. This modelling is similar to four other jurisdictions where living wages are important standards for worker well-being.

The Living Wage is 73 percent of median disposable household income in New Zealand and 61 percent of the mean disposable income for households with two adults and two children respectively. This estimate ($20.55) is $4.05 above the new (1 April 2018) minimum wage, or $162 per week. The difference between the two wage settings is 24.5 percent of the minimum wage. This produces a disposable household income that appropriately sits between median household income and the poverty thresholds.

The positive impact of the Families Package on lowering the expected level of the living wage for 2018 is quite apparent. If it was not forthcoming, then the hourly rate with the more precise calculations would be $22.45 instead of $20.55. The difference is almost $2 an hour.