The Treasury has released its report to the Minister of Finance on the Living Wage proposal based on an analysis of the Household Economic Survey.

The report shows who works for a wage between the current minimum wage of $13.75 per hour and $18.40 and how much extra income different types of households would receive after taxes and benefits.

The Treasury's analysis concludes that:

The Living Wage proposal is an ineffective way to help families with low incomes, because: Many low income earners are people below the age of 30 who are single or part of a childless couple;

The extra earnings by parents would result in reduced tax credits or benefit payments (as they abate with higher income). If adopted as a minimum wage, New Zealand would be out of line with other countries, and it is likely to reduce employment, particularly of younger people trying to enter the labour market. The overall impact on poverty levels is likely to be small, but it would represent a change of focus from supporting families with children towards supporting young, single people.

The report also provides statistics on the potential impact on different industries should the minimum wage rise to $18.40; analyses the derivation of the $18.40 proposal; and outlines the available evidence on whether a higher minimum wage rate is likely to move the New Zealand economy to a higher average income level.

This advice is part of the Treasury's ongoing research into how to raise living standards. For more information see A Short Guide to Increasing Equity.

28 February 2014 update: Please note that none of the statistics is this report are based on the dataset which contained the disposable income miscalculations reported by the Treasury and Statistics New Zealand on 26 February 2014 at http://www.treasury.govt.nz/publications/informationreleases/disposableincome

Information Withheld

Key to sections of the Official Information Act 1982 under which information has been withheld.

Certain information in these documents has been withheld under one or more of the following sections of the Official Information Act, as applicable:

9(2)(a) - to protect the privacy of natural persons, including deceased people.

9(2)(g)(i) - maintain the effective conduct of public affairs through the free and frank expression of opinions.

In some cases information has been withheld because it is out of scope or not relevant to an Official Information Act request.

In preparing this Information Release, the Treasury has considered the public interest considerations in section 9(1) of the Official Information Act.