Employer perspectives on the living wage and minimum wage during Covid: evidence from New Zealand

ABSTRACT

New Zealand is a relatively low wage economy but living costs are high and rising. One government response has been to accelerate the Minimum Wage (MW) which is now converging on the Living Wage (LW) rate. This paper explores employer attitudes and practices regarding the LW, in the context of the rising MW and Covid disruption, based on a survey of over 600 organisations. Motivation for adopting the LW simultaneously derived from ethical considerations of fairness, especially given higher living costs, and prospective returns such as better recruitment, retention and motivation in the context of tighter labour markets. Implementing the LW had mixed employment effects with benefits more likely to accrue to larger organisations. However, difficulties relating to wage differentials were also more acute in larger firms. Where affordability inhibited the full restoration of wage differentials, which were narrowing in many organisations due to the higher MW or adoption of the LW, this resulted in a perceived inequity for relatively higher paid employees. The findings highlight how perceptions of ‘fairness’ may vary. This could limit the wider adoption or potential gains arising from the LW, and employment relation processes need to be configured to defuse such potential indirect effects.

KEYWORDS:

• Living wage
• minimum wage
• employer attitudes
• low pay
• equity theory
• wage differentials

Disclosure statement

No potential competing interest was reported by the authors.

Data availability statement

The data supporting the results and analyses presented in this paper may be made available on reasonable request from the corresponding author [JA].

Additional information

Funding

This work was supported by Massey University’s Business School and its School of Management;Massey Business School

Notes on contributors

James Arrowsmith

James Arrowsmith is Professor at the School of Management, Massey Business School, Massey University in New Zealand where he teaches strategic and international HRM. He has published over sixty articles in leading international journals in these areas. Jim has led various research projects and acted as a consultant for employers, trade unions, government agencies and the International Labour Organisation (ILO). He is a co-editor in chief of Labour and Industry, associate editor of the International Journal of Human Resource Management and Service Business, and an editorial board member of Human Resource Management Journal, Industrial Relations Journal and Employee Relations.

Jane Parker

Jane Parker is Professor (Employment Relations and Human Resource Management) at the School of Management, Massey Business School, Massey University in New Zealand. She is an Associate Fellow of the University of Warwick’s Industrial Relations Research Unit (IRRU) in England, a member of the International Labour and Employment Relations Association Executive Committee, and co-directs Massey University’s People, Organisation, Work and Employment (MPOWER) Group. Jane has led various national and cross-national projects and consultancies, including for the International Labour Organisation, Pacific Islands Forum Secretariat, and UK ESRC. She is a co-editor in chief of Labour and Industry, and an editorial board member of Human Relations and Employee Relations. She holds a PhD (Industrial Relations) from Warwick.