Submission. Transport and Industrial Relations Select Committee. Minimum Wage (Contractor Remuneration) Amendment Bill

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1 14 October 2015 Submission to the Transport and Industrial Relations Select Committee on the Minimum Wage (Contractor Remuneration) Amendment Bill In determining fair pay, both the needs and the contribution of each person must be taken into account. Remuneration for work should guarantee people the opportunity to provide a dignified livelihood for themselves and their family on the material, social, cultural and spiritual level, taking into account the role and the productivity of each, the state of the business and the common good. Agreement between the parties is not sufficient to justify morally the amount to be received in wages. Catechism of the Catholic Church (paragraph 2434) Summary Caritas supports this Bill and wishes to see it proceed. The groups of people it is intended to assist are among many of the lowest paid and vulnerable groups of workers. They deserve the protection of the minimum wage. There is a greater need for this Bill than in the past, because more vulnerable workers are now treated as contractors rather than employees. Caritas 2007 research on child delivery workers provides some information about working conditions in that industry. We have heard from adults working in that industry that they also have similar working conditions and pay rates. Arranging work opportunities as contracting rather than employment arrangements should not be an excuse to contract out of minimum wage obligations. We are concerned at the poverty and material hardship experienced by many working families. Approximately 40 percent of children in poverty come from households where at least one parent is in full-time work. The way that particular industries or employers choose to structure their employment relationships does not exempt them, or the government, from the moral and ethical obligations to ensure that people receive just remuneration.

2 Introduction 1. Caritas Aotearoa New Zealand is the New Zealand Catholic Bishops agency for justice, peace and development. We undertake advocacy, education, development and humanitarian work in Aotearoa New Zealand, the Pacific, Asia, Africa and the Middle East. 2. Our position on this Bill is formed by: Reflection on Catholic social teaching on employment, workers rights and the dignity of work, including previous comments made by the New Zealand Catholic Bishops Conference on the minimum wage. The experience of Catholic agencies encountering working families who experience material hardship despite being in full-time work. Position on bill 3. Caritas supports this Bill and wishes to see it proceed. The particular groups of people it is intended to assist are among many of the lowest paid and most vulnerable groups of workers. There is a greater need for the protection in this Bill than was the case in the past. Previously New Zealand s minimum wage legislation has been sufficient to protect the majority of workers, particularly the most vulnerable. 4. We are deeply concerned that significant groups of workers in the occupations listed in Schedule 2 are now treated as contractors rather than employees. We question whether many workers in these situations are truly contractors rather than employees, particularly where they are working very much within rules, timeframes and standards set by their employer. In some cases, it appears that the contracting arrangements may have been specifically arranged to exempt an employer from their responsibilities for meeting minimum employment requirements, including those for minimum wages, tax and ACC deductions, and health and safety requirements. Leaflet/pamphlet and newspaper delivery work 5. In 2007, we documented some instances of contracts with children undertaking pamphlet and leaflet delivery work in our survey of children s working experiences Delivering the Goods (Caritas 2007). Although the contracts we viewed at that time stated that the workers were self-employed contractors, it did not seem to us in fact that they were independent contractors, as they were operating within very clear directions, including very specific days and hours of delivery times. 6. After the publication of our research, we have continued to hear from both child and adult pamphlet and newspaper delivery workers, who have very similar working conditions and concerns. In 2007 we documented very low pay rates of between approximately $1.67 and $6.25 per hour, well below the then adult legal minimum wage of $11.25 or youth rate of $9.00, which was intended also to include equipment costs, sick and holiday leave, tax and ACC levies. We subsequently heard from adult pamphlet delivery workers that they also received these rates, with the justification given that pay rates were so low because this work was intended for children.

3 7. We note this Bill does not address all factors concerning matters arising from the status of many vulnerable low-paid workers being regarded as contractors rather than employees. Neither does it address pay rates for children under the age of 16, which it should. Our recommendation that the best protection for working children is that all workers under the age of 16 should be treated as employees rather than self-employed contractors was taken up as a private member s bill in Despite not proceeding to select committee at that time, this is still our recommendation about the best way to protect children in New Zealand workplaces and working relationships. 8. We support this Bill because vulnerable workers should be guaranteed a minimum remuneration rate, regardless of whether their employment arrangements are set up to treat them as an employee or a contractor. Arranging work opportunities as contracting rather than employment arrangements should not be an excuse to contract out of minimum wage obligations. 9. We appreciate that the range of employment and contracting situations now present among the occupations listed in Schedule 2 may present some difficulties and headaches in implementing this Bill. This results from the many uncertainties present for low-paid workers in their employment and contractual arrangements. The most straightforward way of resolving those difficulties would be to ensure that the most vulnerable workers come under the protection of formally recognised employment arrangements. 10. Employers and industries who choose to structure their workplace relationships in other ways are not exempt from moral and ethical requirement to ensure their workers have enough income to live in dignity. These moral and ethical obligations need the legal recognition proposed in this Bill. The poverty of working families 11. Caritas has just contributed to the Ministry of Business, Innovation and Employment consultation on the minimum wage, and wish to summarise here some of our concerns about the poverty of working families. New Zealand s Catholic Bishops have previously commented that the traditional role of the State in New Zealand in ensuring a basic minimum wage is consistent with Church teaching on the just wage. We would recommend that the Government introduce a minimum wage which is adequate for the needs of workers and their dependents, which enables them to live in health and with dignity, and recognises the right of workers to a just remuneration for their labour Pope Francis teaches that work conditions should prioritise the goal of access to steady employment for everyone and ensuring that people s financial needs are met through work rather than other forms of financial assistance. 2 We recognise the importance of forms of social assistance that ensure family wellbeing, such as family support, in-work tax credits, 1 New Zealand Catholic Bishops Conference: Some concerns about employment, Pope Francis: Laudato Si (paragraphs ) 2015

4 accommodation supplement and other benefits available to working families. However, this does not substitute for examining the justice of low remuneration. 13. In fact, even with additional income top-ups from the government, many working families in New Zealand are experiencing material hardship. The Ministry of Social Development Household incomes 2015 report shows that the current level of the minimum wage is not sufficient to move people out of poverty approximately 40 per cent of children living in poverty are in households in which one or more parents are in full time employment. The report notes that the issue of the working poor remains an issue for New Zealand, and that using material hardship measures gives a similar picture: around half the children in hardship using the standard EU threshold are from working families, and around one third using the more severe threshold. 14. This is in accord with our experience. We have heard from various Catholic social agencies about the increasing number of people struggling to afford the basics despite working full-time. For Social Justice Week this year, Caritas looked at the issue of family poverty in New Zealand and the barriers preventing families from flourishing. We spoke with low-income families and communities across the country about the challenges they face. We discovered the issue of inadequate income surfaced as a common challenge. 15. One social service group we spoke to noted: If you re on the minimum wage it just doesn t stretch far enough, often. And that s the difference between now and probably a few years ago, where most of our people that were coming to agency were on benefits. That s not the case now, there s a lot more people that are in work that are coming for help because they re not paid enough to actually manage really. 16. A young worker we spoke with from Wellington had been working on the minimum wage for over three years. He found that after the birth of his first child, working 40 hours was not enough to support his family. He began working extra shifts for up to 70 hours a week in order to make ends meet. The lack of time to participate in other aspects of his life placed a strain on his relationships and prevented him from taking part in church life and family events. These stories are becoming more commonplace. 17. Low household incomes are not the only outcome of low market wages. Some families working on the minimum wage have to make the difficult call to sacrifice spending valuable time with their family in order to provide food on the table. Rest from work is a right. People need adequate rest time that will allow them to tend to their family, cultural, social and religious life. 18. From the Survey of Family, Income and Employment (SoFIE) 24 per cent of people who were in the bottom decile of income in 2002 were still in that decile in This group has limited access to income mobility beyond the movement of the minimum wage. 19. Wages should provide enough resources not just for survival but also to participate in society. It is important for families to have a just wage that enables them to support their whole family and

5 provide a sense of security for their future. We have submitted to the Minimum Wage review that the ratio between the minimum wage and the average wage should reduce. This is equally urgent for remuneration that currently falls outside minimum wage coverage. Conclusion 20. A minimum rate of remuneration is such a significant contributor to wellbeing that we recognise that it is a matter that cannot simply be left to parties to a particular employment or contracting arrangement. It is a fundamental measure of the justice of work relationships. 21. New Zealand has a proud history, being the first country in the world to legislate for the provision of minimum rates of pay in the 1894 Industrial Conciliation and Arbitration Act. Early 20 th century United States and European theologians considering how to apply Catholic teaching on just wages from Pope Leo XIII s 1891 encyclical Rerum Novarum looked to New Zealand s minimum wage legislation for inspiration and guidance. 22. New Zealand workers in low-paid, vulnerable occupations such as those listed in Schedule 2 of this Bill deserve no less than the minimum wage paid to employees. In fact, since they must cover work expenses such as equipment and uniform, as well as ACC levies and other expenses out of their wages, it cannot be fair or realistic that these costs should be covered out of a pay rate less than the minimum wage. 23. The Hansard record of the debate at the First Reading of this Bill saw many of you around this table acknowledging the intent of this Bill, which is to look after the lowest-paid members of our community. We appreciate that some members of this Select Committee saw difficulties with the particular proposals made in this Bill. As noted earlier, the fact that some of this complications arise because of the way that particular industries or employers choose to structure their employment relationships does not exempt them, or the government, from the moral and ethical obligations to ensure that people receive just remuneration. 24. We urge the Transport and Industrial Relations select committee to take this opportunity not just to debate the particular proposal that is on the table, but to deeply examine how you can ensure that New Zealand s most vulnerable workers receive adequate remuneration so they and their families can live lives of dignity through their work. Arrangements must not be able to be made that allow employers to contract out of minimum wages. All workers deserve this protection.