CPAG background paper: Children and the Living Wage

Child Poverty Action Group (CPAG) says that care must be taken not to undermine the needs of families by promoting a Living Wage (LW) as a ‘one-size-fits-all’ solution.

A new background paper written for CPAG by Susan St John and Yun So, Children and the Living Wage explains why families in Aotearoa New Zealand need a much more robust system of tax credit supports as well as higher wages.

The Living Wage Movement Aotearoa (LWMA) has rightfully responded to the disastrously inadequate standard of living afforded to low-income families on the minimum wage. Rather than advocating for an improved minimum wage the LWMA encourages employers to pay a living wage that will enable an adequate standard of living.

The living wage rate (LWR) calculation is based on a standard family model of two adults and two children, where the family has an average of 60 hours of work for 52 weeks of the year, paid at the current (2016) LWR of $19.80 an hour.

“If the family can’t work these hours, maybe because there is a very young child, the LWR will not be enough,” says CPAG researcher Yun So.

Higher wage rates alone cannot compensate for the additional needs of families of different composition. This is why it is important to improve and extend the Working for Families (WFF) tax credit scheme. In this way families of different composition are protected.

“Unfortunately, over time as the LWR is adjusted for growth in average wages, the value of the tax credits for children has been allowed to erode by deliberate cuts to WFF that affect low-income working families.” says Associate Professor Susan St John, CPAG’s economics spokesperson.

Playing into this scenario is the unfortunate view of some that WFF is ‘just a wage subsidy’ and allows greedy employers to pay less.

CPAG is calling on the Government to face up to the very real problems of WFF.

“The WFF tax credit system needs to be fully restored and enhanced in tandem with higher wages.”

The paper is now available to download from CPAG’s website.