Direct Request (CEACR) - adopted 2012, published 102nd ILC session (2013)

Minimum Wage-Fixing Machinery Convention, 1928 (No. 26) - New Zealand (Ratification: 1938)

Article 3 of the Convention. Developments on minimum wage fixing. The Committee notes the Government’s explanations concerning the most recent changes to the minimum wage. In particular, the Committee notes that in 2008, the youth minimum wage for 16- and 17-year-olds was abolished and the “new entrants” minimum wage was introduced to apply to 16- and 17-years-olds except for those employees who have completed 200 hours or three months of employment, whichever is shorter. Both the new entrants’ minimum wage and the training minimum wage are set at 80 per cent of the adult minimum wage. The Committee also notes the Government’s indications that under the 2008 minimum wage legislation, the objective of the annual minimum wage review is to set a wage floor that balances the protection of the lowest paid with employment impacts in the context of current and forecasted labour market and economic conditions and social impacts. At the same time two assessment criteria are also considered: first, the extent to which any change to the minimum wage would produce gains that are more significant than any losses, and secondly, whether a change to the minimum wage would be the best way to protect the lowest paid in the broader package of income and employment-related interventions.

As regards the effects of the new entrants’ rate on youth unemployment, the Government refers to the conclusions of a Department of Labour Report according to which the new entrants’ minimum wage was largely not used by businesses as firms generally pay the majority of 16- and 17-year-old workers the adult minimum wage. The report also concluded that the policy change led to a rise in average hourly earnings for this group which lowered the proportion of 16  and 17-year-olds in employment by between 3 and 6 per cent. However, it is estimated that the minimum wage increase accounted for between 20–40 per cent of the fall in employment, the remaining 60–80 per cent being attributed to the deteriorating economic conditions.

In addition, the Committee notes that a new amendment to the minimum wage legislation is currently under consideration which would repeal the new entrants’ rate and would introduce the possibility of setting one or more “starting-out” rates of wages payable at not less than 80 per cent of the adult minimum wage for young people aged 16, 17, 18 or 19 years. The Committee requests the Government to indicate the aims and purpose of the new draft legislation, give a detailed account on the consultations with the social partners regarding the proposed changes and keep the Office informed of any further developments concerning its adoption.

Moreover, the Committee notes the comments made by Business New Zealand (BNZ) according to which there is growing employer concern that increasing government involvement in wage fixing is adversely affecting employment opportunities, setting pay rates which some employers are not able to afford. The BNZ also considers that the Court of Appeal’s decision in Idea Services v. Dickson – which recognizes that sleepovers constitute work and therefore the care workers concerned must be paid at least the minimum wage for every hour worked – will result in reduced employment opportunities in the disability care sector as employers in the industry seek to adjust to the new payment requirements and the increased cost may well necessitate a return to greater institutionalization. The Committee requests the Government to transmit any comments it may wish to make in response to the observations of the BNZ.

Article 5 and Part V of the report form. Application in practice. The Committee notes that the adult minimum wage is currently set at 13.50 New Zealand dollars (NZD) per hour while the new entrants’ and the trainees’ rate is set at NZD10.80 per hour. It also notes the statistical information provided by the Government according to which 64,000 employees, or 3 per cent of the total workforce, are presently paid at the minimum wage rate, around 58 per cent of those minimum wage employees are between 16 and 24 years old and 61 per cent are women. Moreover, the Committee notes that in the period 2008–11, the Department of Labour has dealt with around 600 complaints of non-compliance with the minimum wage legislation each year. The Committee requests the Government to continue supplying up-to-date information on the practical application of the Convention.