A defence of the calculation of the living wage

By Matt Nolan 07/02/2014

Over at The Standard I noticed this defence of the recent living wage calculations from the two critiques that had popped up (which I linked to here).  The key points seem to be:

  1. The living wage concept was being defined in a different way by critics – making the attacks a wee bit of a straw man.
  2. The living wage concept is not being sold as a policy, or as mandatory.  It is about articulating certain fairness principles with regards to need.
  3. A discussion of the costings, countering many of the specific claims.

That is cool, thinking about poverty requires discussions about many of these issues, and I think that this defence was clear and completely legitimate.

In this context, I agree with the authors.  However, there are a few points I would raise – points that I think are especially important when judging Treasury’s analysis, and points I touched on when initially blogging about this.

  1. The Treasury work was largely pointing out that, if the living wage was to bind, the number of people who fall into this “specific group” is quite small (especially relative to the full number of people who earn below the living wage).  As a result, any policy relevance is a bit murky.
  2. Although the authors say the policy is not mandatory, or a call to government, it is being used widely as a call to government to “do stuff”.  It is fine to say something such as “we are trying to ethically motivate firms”, but many people do not take the concept that way.  In this way, Treasury’s response was almost preemptive.
  3. We can have a reasonable debate about relative poverty.  In this way, having Brian and the living wage authors argue about these things is choice – as it makes the value judgments involved in discussing “need” more transparent!
  4. For me I get a bit confused about why we talk about need and poverty in terms of a wage, rather than in terms of minimum income.  If we are interested in poverty and opportunity, it makes more sense to articulate these in terms of bundles of goods and income – and think through that – rather than stating that those who are employed should reach that standard, while those that are not shouldn’t.  This is where I probably disagree with both NZ’s left and right – but not to worry!