An important perspective on Working For Families by one of our supporters…….
Working for Families: Entrenching poverty and low wages
Why the need for ‘Working for Families’?
President Franklin Delano Roosevelt, stated “It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country. By “business” I mean the whole of commerce as well as the whole of industry; by workers I mean all workers, the white collar class as well as the men in overalls; and by living wages I mean more than a bare subsistence level-I mean the wages of decent living.” Franklin Roosevelt’s Statement on the National Industrial Recovery Act (16 June 1933)
New Zealand was the first country to implement a national minimum wage, enacted by its government through the Industrial Conciliation and Arbitration Act 1894 and there can be no doubt that Michael J Savage, in the 1930’s, would have agreed with FDR’s sentiments.
The Helen Clark Government, by introducing ‘Working for Families’ (‘WFF’) instead of increasing the minimum wage, as they should have, produced long-term adverse effects for the weakest in our society.
By creating ‘WFF’ the Government transferred the long established responsibility of employers to provide sufficient income for their workers, to the State. The Government effectively said, “We will lower our expectations of your role and provide the shortfall (or at least part of it) ourselves”.
In so doing the State added to its own costs. It also enabled right-wing parties to claim that there was an increase in welfare and dependency, when in reality it was a subsidy for (mainly overseas) corporates.
Adding to the income gap of the unemployed
By deliberately excluding the unemployed from ‘WFF’, in order to continue to “provide an incentive to work”, the Labour Government not only took on the burden of what should have been the increase in the minimum wage but they prevented those without work from receiving any increase that could have eventuated from such an increase. (Not least because the State would have had the money they were now spending on the low paid available to pay the unemployed).
It would be appropriate to pause for a moment to remember that Government requirement of a low inflation economy has meant that for 30 years the Reserve Bank has endeavoured to keep the unemployment rate at a minimum of 5% (what Monetarists call the “natural rate of unemployment”). Thus ensuring that whatever upskilling, education, or effort was involved, there would always be at least 5% without work.
Entrenchment of the status quo
By creating a welfare buffer for the low paid, the Government has ensured that, even if they gained the power to do so, the lowest paid would find little benefit in increasing their wages because whatever they obtained by way of an increase would be lost through a reduction in ‘WFF’.
Furthermore, job insecurity has increased, because a loss of employment also means a loss of ‘WFF’ so that workers accept worse conditions in order to avoid the bigger drop.
Those who have zero hour contracts, or are in and out of work, are forced to complete many pages of forms each time their income changes in order to claim the correct amount of ‘WFF’. Should they fail to do so (or miscalculate) then they face the prospect of paying back overpayments at the end of the financial year and/or penalty interest. This can result in insecure workers failing to claim income they are entitled to, at the time.
As a result we have both working and non-working poor in New Zealand. The non-working poor are in the direst straits but Governments will not assist them for fear they will lose the incentive to search for the jobs that don’t exist.
Working for Families New Zealand
In 2011 the National Government advised that ‘the cost of Working for Families has grown from about $1.5 billion in 2005/06 to $2.8 billion a year’.(Beehive Fact sheet: Bill English19 MAY, 2011).
We were subsidising employers, not employees, this amount. Much of this subsidy has ended up as profits that are then exported in overseas dividends, further aggravating our balance of payments.
Closing the Gap encourages all socially concerned political parties to prepare to replace ‘WFF’, as quickly as possible, with increased minimum wages. We encourage them to also push, in quick instalments, for FDR’s “wages of decent living”.
We further call upon such parties to make good the 20% cuts that were made to welfare (in the early 1990’s) for those 5% that we condemn to be unemployed, by using the $2.8 billion or so that they are saving.
Such moves could have a significant impact on the numbers in poverty in our country.