Minimum wage close to highest since late 1970s

Young workers strike against youth rates. Photo / Dean Purcell

New Zealand's minimum wage is still close to the highest it has been, as a proportion of the average wage, since the late 1970s.

It is also the second-highest of any developed country in relation to the median wage, although well below richer countries such as Australia in dollar terms.

The Council of Trade Unions says it reached as high as 83 per cent of the average wage in the heady days immediately after World War II when everyone was used to a fair share of the cake.

Although it slipped steadily through the post-war decades, it was hiked back up to 60 per cent of the average wage by the Kirk/Rowling Labour Government as late as 1975, and was still at 49 per cent three years later.

The Lange Labour Government raised it again in 1985, but only to 45 per cent of the average wage, and it slipped to a low of 39 per cent by 1997.

Helen Clark's Labour Government lifted it again in stages to 50 per cent of the average hourly wage by 2007. National's increase from $12 to $12.50 an hour last year was enough to hold it at 49 per cent of the average wage of $25.37.

Internationally, OECD minimum wages are quoted as a ratio of the median weekly income of fulltime employees - a lower figure than the average wage because the average is pulled up by high earners above the median, or mid-point.

On this basis, at last count in 2007, New Zealand's minimum wage was 57 per cent of our median income - a higher ratio than in Australia (54 per cent) and ahead of all other OECD countries except France (63 per cent).

Our youth minimum, which is now the same as the adult rate after 200 hours (five weeks), may now be higher even than in France, where teenagers receive only 80 per cent of the adult minimum until they turn 17 and then 90 per cent of the adult rate until they have six months' experience.

However, in dollar terms, an update by Australia's Fair Pay Commission last July found that New Zealand's current minimum of $12.50 an hour had a purchasing power equivalent to only A$11.76 at that time, well below Australia's minimum of A$14.31.

The real value of New Zealand's minimum wage was also below the minimums in France, the Netherlands, Belgium and Britain, but was higher than the minimum wages in Ireland, Canada, the US, Spain, Greece and Portugal.

Meanwhile, teenage employment in New Zealand dropped in both the last two big recessions - from 59 per cent of all 15 to 19-year-olds in 1986 to a low of 41 per cent in 1992, and from 50 per cent in 2007 to just 39 per cent last December.

Although the latest fall may be partly due to the effective abolition of youth rates in 2008, the major factor in both cases was clearly the recession.