It's hard to tell what the actual state of play is, but pretty easy to tell what it should be.
People with severe disabilities will often have great difficulty obtaining employment. In cases of intellectual disability, the point of employment is far less about what gets produced and far more about social connection and a feeling of worth for those engaged in activities.
If you apply the minimum wage rigidly in those cases, people will instead be unemployed unless philanthropists are willing to fund sheltered workshops or equivalent roles.
If you allow sub-minimum wages, a lot of people who otherwise would be unemployable will have some chance of finding meaningful activities.
If people are employed at sub-minimum wages, activists will decide that it's awful and unfair and insist that the minimum wage be applied rigidly, and damn companies as selfish if they do not pay $23.15/hr for work that might produce $2/hr of value. It's inevitable. They cannot see the next step, or don't care because it gives them a chance to rail against the evils of capitalism when that employment ends.
Labour had proposed a reasonable solution to that mess: top-up wages. Budget 2023 had had them coming into effect from mid-2025, but I do not know whether or for how long that had actually been funded.
Ending the Minimum Wage Exemption
The Government will end the discriminatory Minimum Wage Exemption (MWE), which allows disabled people to be paid less than the minimum wage, by mid-2025.
“This unfair exemption currently affects about 800 disabled people who are legally able to be paid less on the basis they’re perceived to be less productive,” Priyanca Radhakrishnan said.
“Some disabled people in New Zealand are paid under the minimum wage and that needs to end. We will start this work immediately.
“This Government made a manifesto commitment to replace MWE permits with a wage supplement, ensuring all disabled people receive at least minimum wage.
“Under the Wage Supplement, approximately 800 disabled people will have their wages increased to minimum wage. This will support some disabled people to shift off the benefit into paid employment and decrease their reliance on the welfare system,” Priyanca Radhakrishnan said.
The rhetoric here is a bit nuts; it's playing to their activists around fairness. But the underlying policy would recognise that people with severe disabilities would not find employment if the employer had to pay the minimum wage, and had government wage top-ups making up the difference.
If the state were not topping up wages, it would be providing other benefits instead. So the government isn't out the full amount of the wage top-up. It's out the difference between the wage top-up and the cost of whatever other supported living payments would otherwise have been provided if there were no wage income. I would expect that the EMTR on the wage top up will be pretty high, given the other income-linked benefits that would claw back.
If the state wants the wages of severely disabled people to be high enough to support their living costs, doing it through wage top-ups makes a lot of sense. It keeps people in work and puts the burden of support broadly on the tax base, rather than expecting the employer to bear the burden itself.
The Herald reports that the government is not going to go ahead with the top-up payments, with cost savings to the government reported at around $11m per year - or just under $13,000 if there are 900 affected workers. I expect, but don't know, that that is net of any increase in supported living payments and the like.
Most important is not abolishing the minimum wage exemptions for people would could never find meaningful employment from willing employers at the minimum wage, and it doesn't look like the government is abolishing that. They're also maintaining support to help employers accommodate disabled workers.
Supplemental assistance through supported living payments would have these workers no worse off than disabled people who are unable to work. There aren't good choices here, only trade-offs.
What Labour had proposed was good, but did mean that someone who is completely unable to work would wind up with less money than someone whose work is really more of a social activity than productive. And you might not like that.
National's version has support instead through supported living payments, which means some so-supported workers don't get to enjoy that support through a paycheque, and total support will be at a lower level than what Labour had promised (but had not yet put in place). And you might not like that.
What I worry more about is whether the proposed version will prove politically stable. Most important in a lot of these cases is going to be the fulfilment of being able to go to work, not the paycheque itself. I hope that the next turn of the electoral cycle would have a Labour-led government reinstate top-ups, rather than ban employers from paying sub-minimum wages.
Previously: Karl du Fresne's excellent piece on sheltered workshops.
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