KEY POINTS:
When Fa'afetai Afoa's son finished his last year at school he wanted to go on to study at the Manukau Institute of Technology.
His mother, a 52-year-old widow, had to ask him not to. She needed him to get a job to pay her bills. Afoa earns $10.40 an hour as a cleaner at the Manukau Superclinic, less than half the average wage.
But she is one of 119,000 workers whose wages will rise on April 1 when the legal minimum wage goes up from $10.25 to $11.25 an hour - the biggest jump since 1985.
Unions such as Afoa's Service and Food Workers Union have pushed strongly for the increase and want the Government to go on to implement its election promise to raise the minimum to $12 an hour by the end of next year "if economic conditions permit".
But some economists warn that the higher minimum will force employers to lay off workers like Afoa, or cut her hours, to pay the higher rate to those who remain.
Others point out that taxes and clawbacks of family support and other benefits will reduce the effect of the gross pay rise for many low-paid workers.
"The minimum wage is a blunt instrument and there needs to be a more balanced debate around increasing it," says Auckland University of Technology economist Gail Pacheco.
Gillian Bremner, of Presbyterian Support Otago, one of the few church-based groups still providing rest homes for the elderly, says the Government has been irresponsible in raising the minimum wage without giving more money to state-funded sectors such as health and aged care, which employ many of our lowest-paid workers.
"We should not have to go cap in hand and ask for money to pay for something that the Government has imposed as a policy decision," she says.
Most of the churches that owned rest homes have sold in the past few years to big companies such as Guardian Healthcare and Eldercare, whose commercial incentives dictate minimum wages but maximum revenue.
Service and Food Workers northern regional secretary Jill Ovens says the workforce at Auckland's Roskill Masonic Village, for example, was de-unionised when the Freemasons sold the village to the Selwyn Foundation in 2005. Key union delegates were laid off.
But Fa'afetai Afoa's experience at the Manukau Superclinic, established by former Counties-Manukau District Health Board chief Lester Levy, shows that service workers such as cleaners are now low-paid even in parts of the core public health system.
Afoa's immediate employer is Australian-owned Spotless Services.
"Lester Levy separated the Manukau Superclinic off from the collective agreement that covered Middlemore Hospital and hired them all on commercial cleaner rates. They are on way lower conditions," says Ovens.
Afoa has been there for five years, working 30 hours a week because she can't get a fulltime job.
She has an older son, aged 23, who lives with his girlfriend. And until her younger son finished school before Christmas she received family support for him. That has now ended.
"I asked my son to leave school and help me and pay my bills for the house and the telephone because my pay rate is so low," she says.
At $10.40 an hour, she earns just $312 a week gross or $254 after tax. She pays $131 a week in rent to Housing New Zealand, takes a half-hour walk to work in the morning and catches a bus home. She needs to feed herself and her son and donates money to her church. Her phone has been disconnected.
Her son has found a part-time job packing in a warehouse.
"He can't find a fulltime job," Afoa says. "He wants to take a course to give him more possibilities to get a good job, but I stopped him because I need to pay my rent."
On April 1 the new minimum wage will lift her pay to $337.50 gross, or $274 after tax, a net gain of $20 a week. She believes it may be enough to let her son get the education he wants.
Her team leader, Julia Luteru, 50, is marginally better off. After almost 12 years of service she earns $11 an hour. She works eight hours a day in the cleaning job from 7am to 3pm, then goes downstairs to do four more hours until 7.30pm as a kitchenhand for another contractor, British-owned Medirest, at $10.82 an hour.
That gives her a total weekly income of $656 gross, or $522 net, for 60 hours' work.
Her husband had an accident at work and has been on accident compensation for several years. Two adult sons living at home are working, and there is a 16-year-old schoolboy who sees his mother when she gets home, exhausted, about 8pm. The family is paying off a mortgage on their Takanini home. "The pay is not enough," she says. "If I got enough from this company [Spotless] I'd stop the other job." On April 1 her net income will rise by $14 to $536 a week.
Across Manukau at the Christian Healthcare Trust's Lansdowne hospital and rest home in Howick, caregivers Epi Ma'u, 43, Mangalika Gallage, 45, and Michelle Bailey, 24, work for $12, $11.42 and $10.98 an hour respectively. The trust's human resource manager, Yvonne Bruce, says these rates are above industry norms.
Ma'u, who has children aged 17, 14 and 11, has been working five 10-hour shifts a week and is about to change to six days a week on shorter shifts because of a new roster.
"Sometimes I feel sad when the kids say, 'Mum, are you working today? What time are you finishing?' " she says.
"But I have no choice. I have to pay the school fees. If I don't work long hours I don't get the money to pay the mortgage, pay my bills and feed the kids."
Her husband earns $19 an hour as a machine operator for Coca-Cola, working 40 hours a week. On their combined gross income of $1360 a week they qualify for partial family support payments of $79.62 a week, giving them a total net income after family support and tax of $1156 a week. They will get no gain from the increase because Ma'u already earns more than the new minimum. She has been at Lansdowne for a decade. She could possibly get higher pay somewhere else, but stays because she loves her patients.
"When you get to know them you feel like they are your own parents or your own nana or granddad. They're our second family."
In their different ways, these women are typical of many low-waged workers. The Labour Department says 61 per cent of those earning between $10.25 and $12 an hour are women; 14 per cent are Maori, 9 per cent Pacific Island and 65 per cent European. Half work part-time.
Young people are over-represented. Of those whose pay will rise under the new minimum wages - including a new youth rate of $9 an hour - 42 per cent are under 25. But 58 per cent are 25 or more.
On the other hand, Pacheco found that the health and community sector, where both our groups of women work, accounts for only 10 per cent of workers earning at or just above the minimum wage, in fifth place behind retailing (29 per cent), hospitality and manufacturing (13 per cent each) and farming, forestry and fishing (also 10 per cent).
This pool of low-paid workers has grown since the system of national wage awards, which Pacheco counts as the world's first minimum wage law in 1894, was abolished in 1991.
Adjusted to 2006 prices, the average wage was static for 20 years at $18.50 an hour in 1976, $18.58 in 1986 and $18.64 in 1996, before rising to $22.36 by last year.
The gap between rich and poor has widened. Real incomes in 2004 were still lower than in 1992 in the four poorest tenths of households, but increased spectacularly up the income scale to a 39 per cent increase in real terms for the richest tenth of households.
A New Zealand researcher at Britain's Cambridge University, Colm McLaughlin, says wages in the main low-wage sectors of retailing and hospitality have fallen behind other sectors since the early 1990s because they are almost completely de-unionised. Fewer than 4 per cent of their workers now belong to unions.
"The part-time and casual nature of these industries also makes union organising more challenging. The other key feature is the large number of small workplaces where workers are on individual contracts."
The minimum wage has done little to help until recently. Introduced during conscription of labour in World War II, it fell from 83 per cent of the average wage at the end of the war to a low of just 29 per cent in 1984, and was 41 per cent when the current Labour Government took office in 1999.
Labour has lifted it to 48 per cent at present, rising to 53 per cent after April 1 and 54 per cent if it goes through with a rise to $12 by the end of next year.
A Royal Commission on Social Security recommended in 1972 that the minimum should be pegged at 66 per cent of the average. The Council of Trade Unions has adopted that goal.
The council's economist, Peter Conway, says a higher minimum can be justified on both social and economic grounds.
Socially, it makes it more worthwhile for people to move off benefits into work, aims to "alleviate poverty", pays women fairly compared with men, and allows parents such as Luteru and Ma'u to spend more time with their children.
Conway says a higher minimum forces businesses to invest in skills and technology to raise their workers' productivity, and hence the nation's living standards.
"Although our rate of productivity growth is about 2.6 per cent a year, it would take us 70 years to catch up with Australia at the rate we're going," he says. "We have to do that faster."
McLaughlin, who has studied systems in Ireland and Denmark, says the Government should bring business and unions together in a "social partnership" to raise industry-wide wages, rather than having contractors such as Spotless and Medirest undercut each other by pushing wages downwards.
"Could it happen? There is no doubt there would be massive resistance on the employer side to giving up some control over wage bargaining," he says.
"The question is, though: How badly do they want to address the issues of skill shortages, high turnover and poor productivity?"
Pacheco disagrees.
She has developed equations, based on a long list of variables, to explain changing wages and employment over the past decade.
She found that although a 10 per cent increase in the minimum wage reduces poverty in households with minimum-wage workers by 9.3 per cent, there are so few minimum-wage households that the national poverty rate would fall by only 0.5 per cent.
"Consequently, the use of the minimum wage as a targeted anti-poverty tool seems questionable," she says.
Worse, she found that raising the minimum could throw some low-waged workers out of work as employers cut costs to fund the higher wages.
A 10 per cent minimum wage rise would reduce employment of minimum-wage workers under 30 by 8.4 per cent, although once again there are so few minimum-wage workers even in this age group that the overall effect on employment would be insignificant.
"The minimum wage is earned by all sorts of people, like 16-year-olds doing part-time work, so I think it's a really blunt instrument," she says.
"If they are really trying to help particular families, for example where the main breadwinner is the minimum-wage worker in the household, then there are more targeted tools to help those families, such as tax credits."
At the Institute of Economic Research, economist Patrick Nolan warns that higher minimum wages will not even reach many low-wage workers because of tax and welfare clawbacks.
For example, a sole parent working 20 hours a week whose pay increases from $10.25 to $11.25 an hour would end up 26c a week worse off than before because of the accident compensation levy on the extra income and a dollar-for-dollar clawback of the family tax credit which tops up sole parents working at least 20 hours a week to a minimum after-tax income of $340 a week.
Business New Zealand says unions are deluded in thinking that you can raise productivity simply by legislating higher wages.
It advocates an alternative of boosting training opportunities for young people and cutting taxes for businesses.
Afoa and Luteru's employer, Spotless, defends its wages as "industry rates".
"Rates of pay vary within any site. Staff are rewarded on the basis of performance, not length of service," says the company's human resources manager, Linda Hart.
Yvonne Bruce, at the Christian Healthcare Trust, says looking after the elderly is a hard job and "we'd pay more if we could". But the whole aged-care sector is constrained by the bed rates it gets from taxpayers.
Bremner says Health Minister Pete Hodgson has acknowledged that bed rates will have to rise, although he told her, "It won't be as much as you want."
In the end, the right level of the minimum wage is a matter of judgment. At one extreme, a minimum wage of $50 an hour would throw just about everyone out of work. At the other extreme, a zero, in what is still a largely de-unionised workforce, might force companies such as Spotless and Medirest to compete for contracts by driving wages down to levels that many citizens might find disturbing.
Labour's rider that it will raise the minimum to $12 next year only "if economic conditions permit" indicates that it is cautious.
If Pacheco's equations are right and raising the minimum would reduce employment of minimum-wage workers, all other things being equal, then Labour will want to lift the minimum only if other things are not equal - in other words, if the economy is growing fast enough to create as many new jobs as the ones wiped out by the higher minimum wage.
This year the Government has accepted advice from the Labour Department that "an increase of up to $11.25 could be made with confidence in the current economic and labour market environment".
Next year, with the Reserve Bank looking to prick the house price bubble that has sustained consumer spending, that environment may not be quite so rosy.
