Can a ‘living wage’ springboard human capability? An exploratory study from New Zealand

ABSTRACT

‘Living’ wage campaigns are more than calls for higher basic minima rates of pay. They are predicated on the notion that there is a discrete income below which people risk further deprivation, but above which there should be a qualitative upward shift in human capability. Problematically, however, the theory of diminishing marginal returns predicts that the function linking freedom from deprivation with income will form a smooth curve with no clear pivot (i.e. no discrete ‘living’ wage at all). Living wages thus remain controversial in that tests of these competing views are rare. A cross-sectional online survey of over 1000 working adults in New Zealand was undertaken to explore these two competing propositions. Household income was compared with measures of life and work capability. It emerged that the function linking life and work capabilities to household income was ‘spiked’ rather than continuous; the spike traversed scalar midpoints (e.g. from job dissatisfaction to satisfaction), making the shift qualitative (because dissatisfaction is qualitatively different from satisfaction) and the pivot point coincided with more people reporting having enough (versus insufficient) incomes to meet their basic needs. These findings are consistent with the arguments that there is a wage above which workers can begin to develop their capabilities rather than their being no such income point as suggested by the theory of diminishing marginal returns. Its existence has implications for public policy makers, and for wage theory.

KEYWORDS:

• Capabilities
• decent work
• living wage
• New Zealand
• poverty
• work satisfaction

Acknowledgements

We thank Massey University for the Vice-Chancellor Discretionary Fund support of this study, and all of the stakeholders who have helped us along the way. The editor and referees provided valuable comments on an earlier version of the paper, including useful ideas for future research and some verbatim comments on expression and emphasis.

Notes

1. The full survey instrument is available on request

2. For example, we asked for gross wages and household income, which may not have fully captured family tax credits from ‘Working for Families’ in New Zealand.

Additional information

Notes on contributors

Stuart C. Carr

Stuart C. Carr is Professor of Psychology, Industrial and Organizational (I/O) Psychology Programme, Massey University, New Zealand. He coordinates the Poverty Research Group, an international network focused on poverty reduction through decent work, and the End Poverty and Inequality Cluster (EPIC), which includes transitions from precariacy to decent work and living wages. He co-convened a Global Task Force for Humanitarian Work Psychology, promoting Decent Work aligned with local stakeholder needs, in partnership with global development agencies. He was a lead investigator on Project ADDUP, a multi-country DFID/ESRC-funded study of pay and remuneration diversity in developing economies. Stuart is Fellow of the Royal Society of New Zealand and the Society for Industrial and Organizational Psychology.

Jane Parker

Jane Parker is Professor of Human Resource Management (HRM) and Employment Relations at Massey University, New Zealand. She co-directs the Massey People, Organisation, Work and Employment Research (MPOWER) Group which focuses on academic and practical concerns around people and work management. She will co-convene a Living Wage stream at the 2016 British Universities’ Industrial Relations Association (BUIRA) Conference in Leeds in the UK, following a similar role with the Living Wage stream at the 2015 Association of Industrial Relations Academics of Australia and New Zealand (AIRAANZ) Conference in Auckland, New Zealand. Jane has initiated and led a number of International Labour Organization (ILO)-funded empirical projects on employment (regulation) in the Pacific region, including a study of social dialogue and gender equity in Australia, New Zealand and Fiji. She is an associate fellow of the Industrial Relations Research Unit (IRRU) at Warwick University and was formerly the UK national contributing editor for the European Working Conditions Observatory (EWCO) of the European Foundation for the Improvement of Living and Working Conditions.

James Arrowsmith

Jim Arrowsmith is Professor in the School of Management, Massey Business School, and co-director of the research network MPOWER. His principal research interests relate to pay, working time, employee engagement and employment regulation. Jim has led a number of large-scale research projects involving organisations from small firms to multi-national companies and across a range of sectors. He has also been engaged as a consultant for the International Labour Organization over the past 5 years, providing research and policy advice to governments and agencies in Nauru, Tonga and Papua New Guinea.

Paul Watters

Dr Paul A. Watters is Professor of Information Technology at Massey University. His research interests include cyber security, computer forensics, open-source intelligence analysis, anti-phishing, privacy, data sharing and strategies to reduce demand for child exploitation material. He previously worked at the University of Ballarat, the Medical Research Council (UK) and Macquarie University. His work has been cited 1249 times (h-index = 15, i-10 index = 32). Professor Watters has worked closely with government and industry on many projects, including Westpac, IBM, the Australian Federal Police (AFP) and Attorney General's Department.

Harvey Jones

Harvey Jones is a computer programmer/analyst in the School of Psychology at Massey University, New Zealand. Harvey develops and maintains the numerous web sites associated with the School, its staff and postgraduate student research projects, and electronic journals. He also has responsibility for the creation and operation of a multitude of online surveys conducted by researchers. Surveys are currently created using the cloud-based survey tool of Qualtrics. Harvey’s extensive knowledge of the tools and options available within the package enable researchers to deliver clear and accessible surveys to respondents with a variety of question types and logic flow according to needs, and then receive collected data in a format suitable for analysis.