Can “we” afford a living wage?

indexby Philip Ferguson

According to John Key, whose wealth is estimated at over $NZ50 million and going up nicely, no government in New Zealand can afford the living wage being proposed by unions and given a nod by two of the three Labour leadership hopefuls.  He even opposes the folks who clean his office being paid more than $13.50 an hour.  The Living Wage campaign is suggesting that $18.40 an hour is “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.”  (For how the campaign works out the figure, see here.)

In relation to $18.40 an hour, Key argues, “The people who believe that we can do that with no implications for the economy also believe the Easter Bunny will turn up next year and he won’t.”

At the same time, his cabinet colleague Steven Joyce is talking about how wonderful productivity is in the oil, gas and mining sector.  This sector generates $333 for every hour worked.

Moreover, overall productivity in the New Zealand economy grew by around 80% between 1978 and 2009 (the most recent date for which comprehensive figures are available).  At the same time, real wages – what we can buy with our pay – fell by about 25%.

Employers have been on the offensive since 1984, when Labour in government gave them the green light to slash jobs, pay and conditions – and, of course, launched a massive offensive of its own against the working class.  The many defeats suffered by unions, often self-inflicted by union leaderships unwilling to fight, has meant that bosses have been able to increase productivity through the especially brutal form of combining layoffs with making remaining workers work harder, faster and for less.  Wage growth in New Zealand has thus been amongst the smallest in the OECD, while the hours we spend at work are now amongst the longest in the OECD.

While union leaders and anti-poverty campaigners attempt to convince employers to commit to paying at least $18.40 an hour, the expanding wealth of the employing class has been built on paying comparatively low wages.  Many sections of workers in New Zealand suffer a kind of double burden.  On the one hand, the basis of profit is that workers are paid less than the value of the goods and services their labour creates.  That’s just day-to-day ‘normal’ capitalism at work; that’s exploitation in the ‘best of times’.  But in New Zealand over the past three decades (at least) large numbers of workers have seen real wages fall while productivity rises, thus imposing an additional level of exploitation.  Since this has been crucial to the bosses being able to expand productivity, why would they, as a class, stop?

According to Fairfax journalist Tracy Watkins “economists (have) estimated it would cost 26,000 jobs, because of the extra cost to business”.  Leaving aside that it is not “economists” but some economists, or some capitalist economists, this tends to add further weight to our suggestion that NZ capitalists are not about to shift from the current means of increasing surplus-value.

A few ‘philanthropic’ employers might be prepared to rely only on ‘normal’ rates of exploitation – especially if they think the resulting kudos will help them sell more stuff – but, as a class, why would the capitalists undermine their current levels of profitability? (For a more in-depth discussion of productivity and the means employers use to raise it, see our article on capitaism and the retirement age, here.)

Treen 1
From Mike Treen, Exposing Right-wing Lies. Note how stagnant real wages were under the last Labour government, while productivity continued to rise

Meanwhile, what are we to make of the pay promises of David Cunliffe and Grant Robertson?  Cunliffe says he, as prime minister, would immediately introduce the pay rise to the public sector, something he estimates would cost just $25 million a year.  Robertson says he will develop a timeline for a living wage, though when it might be introduced would depend on cost.

But where have these guys been up to now?  Certainly not leading any charges under the last Labour government, which they were part of, for a living wage.  Moreover, the party they are leaders of is absolutely committed to managing capitalism.  So even $18.40 an hour, hardly a wage to provide easy living, would only be on offer if it was ‘affordable’ for the system.  And Cunliffe has only mentioned the state sector.  But what about the private sector, the sector where most surplus-value – the source of profit – is generated?  Are private sector bosses going to be hit by legislation compelling them to make $18.40 an hour the minimum wage they pay?

But even in the unlikely event that Labour did impose an $18.40 an hour minimum wage, two things would happen.  Bosses would put up prices to compensate, so workers might earn more but they’d pay more for the goods and services they needed.  Secondly, ‘normal’ exploitation would continue unimpeded.

From Mike Treen, Exposing right-wing Lies;  again note the actual state of things for NZ workers under the last Labour government, which included Cunliffe and Robertson
From Mike Treen, Exposing right-wing Lies; again note the actual state of things for NZ workers under the last Labour government, which included Cunliffe and Robertson

Moreover, increasing pay and/or reducing the workweek without cutting pay can have benefits for capital.  As Marx noted back in the 1860s, a reduced work-week compels capitalists to innovate.  The workweek shortened quite substantially between the mid-1800s and the mid-1900s, while productivity and surplus-value expanded.  Indeed, capitalism was stronger everywhere in the 1950s than it was in the 1850s.  It’s a measure of the clapped-out state of capitalism today, that in a country like New Zealand the standard workweek is now longer than it was 50 years ago and real wages are less.

Thus, on one thing, Key is right.  His view that what he calls “the economy” – and sometimes even more cheekily “we” – would be negatively impacted by lifting the lowest-paid workers to $18.40 is actually true.*  Where Key is bullshitting, however, is that he uses the term “the economy”, when what he means is the capitalist economy.  It’s not “the economy” or “we” that can’t afford $18.40 an hour; it’s capitalism.  (For a discussion on how capitalist ideology works, see here and here.)  Slump-infested capitalism today has so little on offer to workers than it can no longer reduce the work week, while lifting pay; it can’t even pay a basic level of wage like $18.40 an hour.   Well, if the capitalist economy can’t even afford $18.40 an hour, it’s time to start thinking of creating an economy that can – indeed, an economy that can do much better for the people whose working lives create all the goods and services that make the world go round.  How about a workers’ economy – one owned, operated and planned by workers for workers?

*I’m not suggesting that the minimum wage won’t go up eventually to $18.40; it will.  But, by then, the amount of money workers will need to be paid per hour to live at any sort of decent level will have also risen.  What is not on offer is a living wage.

See also:                                                                                                                                                  Low pay, longer hours and less social mobility – welcome to 21st century New Zealand capitalism        Key’s ‘vision’: managing the malaise of NZ capitalism


  1. You’re advocating Syndicalism, or Guild Socialism. This system has been hopelessly discredited; next to no one, except for a few extremely dedicated people on the far fringes of academia, supports this system.

    By the way? Inflation wipes out real wages. Just sayin’….

    • I’m not advocating “Guild socialism”. I’m advocating getting rid of capitalism. Bosses putting up prices (inflation) is a reason why workers will never get very far by wage rises alone. I did actually mention this.

    • Bosses raising their prices is what causes inflation. Wages almost never keep pace with inflation. Rising wages can, theoretically at least, either be absorbed by bosses taking less profit or by putting up prices. Which option do bosses choose? Well, since they can’t exist without trying to maximise profit, they go for the second option. It’s not because they are bad or greedy – it’s because that’s *what they have to do* in order to continue to exist as capitalists.


  2. What possible alternative can there be to ” a living wage”?

    Any advance on “a dying wage?”

    If you rich folks thing I’m being silly, then what is your serious answer?

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