Simon Collins

Parents look set to get more taxpayer-funded pay within the next few years after both major political parties yesterday welcomed a proposal to extend paid parental leave to a year.

The Families Commission has proposed a three-stage increase from the present 14 weeks' leave to six months initially, then nine months and finally 12 months by 2015.  The plan, which also includes higher pay rates, would increase the total cost of paid parental leave from $95 million a year at present to $450 million.

Labour Minister Ruth Dyson welcomed the report and said it was a Government priority "to ensure paid parental leave can be accessed by even more working parents".  A 10-year Government plan promised last year to "work towards parental leave provisions that support parents who wish to care for their children in their first year of life while taking a break from paid work".

Her National counterpart, Kate Wilkinson, whose party voted against paid parental leave when it was introduced in 2002, said National only opposed it when it excluded self-employed people, and the party now supported it.

The party's speaker on family affairs, Judith Collins, said she would take the Families Commission proposal to the National caucus.  "It would have to go to caucus and have the costings done and be weighed up against other initiatives, but I'm generally not against it," she said.  "As a working woman myself, I could seriously have done with paid parental leave when I had a little child."

Only the right-wing think-tank the Maxim Institute sounded a contrary note. Its policy manager, Alex Penk, acknowledged that new parents faced financial pressures but suggested they should call on support from extended family and friends rather than taxpayers.  "They are the ones that are closest to the people that need help," he said.  "If we place more responsibility for children within the family, not only is that going to help meet the financial challenges, but in the process it's going to strengthen those intergenerational ties within families."

The Families Commission says New Zealand's current 14 weeks of paid parental leave is less than in any other Western country except Australia and the United States, which do not have it at all. New Zealand's current 14 weeks' leave at the maximum rate of $391.28 a week pays $5478.

A Labour Department evaluation published in May found that 56 per cent of all mothers of babies born in 2004-05 were eligible for paid leave, and a further 6 per cent were self-employed and would have become eligible when the scheme was extended to the self-employed last year.  The other 38 per cent were not eligible because they were not in paid work (26 per cent), had not worked for the same employer for the six months before the baby's due date (7 per cent) or worked less than 10 hours a week (4 per cent).

The Families Commission recommends scrapping the need to work at least six hours a week and extending paid leave to any parent who has worked at least six months in the year before giving birth.  It proposes that 14 weeks' leave for mothers to support their health and breastfeeding, and another four weeks for fathers or the mother's partner to encourage them to help with child-rearing.

A benefit for baby

Baby Kees Hemana, 10 months, would still be at home with his mum if the Government already provided a year's paid parental leave.  Single mother Renee Hemana, 20, went back to work when Kees was just six months old because she could not afford to stay on the domestic purposes benefit. But she didn't really want to leave him until he was at least "a year, if not longer". She says he loves the five hours a day he spends at the Awhina Whanau early childhood centre in East Tamaki, but she misses him. "I miss out on how he's learning and how he's doing every day."

She was still breastfeeding him when she started working from 9am to 2pm at the Plunket Society's Counties-Manukau office, and at first she tried expressing milk and sending it with him to the childcare centre.  She pays $160 a week for childcare, but reckons she is still about $200 a week better off through working part-time with a reduced benefit than she would have been on the benefit alone.

Ten years ago, says Tai Tupa of the Otara Budgeting Service, you had to go into Hobson St in central Auckland to find a moneylender willing to lend to a low-income borrower.
"Now," she says, "there are two or three of them here in Otara, quite a lot at Hunter's Corner and in Mangere town centre and in Manukau.
"Nowadays you can see all those advertisements on TV. They are everywhere. And you can get a cheap car practically anywhere with the finance."

Moneylenders have become as much a part of the culture in South Auckland in the past decade as they have been for centuries in Third World villages in India or in the Pacific Islands, from which many of their South Auckland clients come.
And their clients are often just as desperate as they were back in the villages.

Lata and Kanikita Mohulamu, Mangere parents of seven children aged between 3 and 14, pay a total of almost $800 a week on 11 regular payments including rent, loans for a van, a car, a computer, a vacuum cleaner, a couch and clothes from a visiting clothes truck, plus two general loans from Work and Income and from Instant Finance which they used for the costs of a funeral and to buy food.
Even McAuley High School and De La Salle College take $10 each off the family each week to pay off their school fees.
Kanikita earns $525 after tax in a 40-hour week at Fletcher Aluminium, or up to $800 in a good week with overtime. The family also gets $536 a week in family assistance. But it is not enough, and Lata cries as she explains that she can't afford to buy her 14-year-old daughter a McAuley jacket for the winter. "At the moment my daughter keeps on asking, 'Mum, can I have warm clothes?"' she says. "I say, 'Wait, because I can't afford it at the moment.' I'm feeling sick. She keeps on asking me, 'Mum, I need the warm clothes,' because she walks from home to the bus stop."

Sue Lafaele and Loto Kaio, Otara parents of a 10-year-old boy, pay $676 a week on two cars, rent and two personal loans taken out for two of their parents' funerals and when their power was disconnected.
They both work fulltime - Kaio as a welder from 8am to 4.30pm, Lafaele as a night cleaner at the airport from 11pm to 7am, plus five hours a week for the Service Workers' Union. But he earns only $14 an hour and she gets only $11.30 in her main job, giving them a joint after-tax income of $845 a week.
The higher level of family assistance since April 1 means they are now entitled to $65 a week in family and in-work tax credits for their son. But when they last asked they were told they could get only $7 a week, so they haven't claimed the money. They need the two cars so that Lafaele can get home before Kaio leaves in the morning, and so she can take their son to school and pick him up after school. She sleeps in the evening before going to work.
"I can't sleep during the day. Last year I slept in and forgot to pick up my son. I did it twice, now I don't want to do it again," she says.
The family cut off the gas six months ago and now take cold showers and cook on a barbecue, using electricity only for light and appliances. They have no landline or cellphone. They often live on pork bones. "The only one thing I care about is my son George," Lafaele says.

Unlike middle-class borrowers, who often borrow to bring forward purchases which they could have saved for eventually, this is a world where people borrow simply because they have to. Most have children. In 2000, 27 per cent of Pacific people, 23 per cent of Maori and just 8 per cent of Pakeha were unable to keep up payments for goods on credit in the previous year. Similarly, 24 per cent of Pacific people, 16 per cent of Maori and 5 per cent of Pakeha had got into arrears on their mortgages or rent, and 28 per cent of Pacific people, 23 per cent of Maori and 8 per cent of Pakeha had got behind on power, gas or water bills.
In the past five years, debts owed on goods such as cars, furniture and appliances have displaced rent and power bills as the biggest amounts owed, accounting for 38 per cent of all arrears owed by clients of the Federation of Family Budgeting Services last year. Rent and mortgage arrears were next with 32 per cent.
"The top two used to be accommodation and utilities. Four or five years ago they were by far the top categories," says the federation's executive officer Raewyn Fox.
"For the last two years the greatest percentage of debt has been in the category of retail goods providers including hire purchase and credit cards. We believe that is a direct result of the aggressive marketing of retailers, such as low deposits and six months before you have to start payments on a hire purchase."

Moneylenders have multiplied to meet the demand. South Auckland budget advisers report interest rates commonly around 30 per cent, plus fees, on items such as cars and appliances.
For shorter-term loans, corner shops such as Lelei Finance in the Mangere Town Centre lend money on the security of chattels such as a TV set or tapa cloth at interest rates of 20 to 25 per cent a month. For a six-month loan, Lelei owner Lelei Ufi says the interest would total 120 to 150 per cent.
"That is the rate that most of the pawnbroking business charges to the clients," he says.
An extreme case which bills itself as "New Zealand's largest payday advance company", online lender cantwait.com, charges 10 per cent every seven days for money lent until your next pay day - the equivalent of at least 520 per cent on an annual basis.

Vaiola Pacific Island Budgeting Service adviser Tupe Ieti says the default penalties for failing to meet payments can be horrendous. She had one client who borrowed $500, disputed the terms, and was slapped with an extra $70 on the loan for every week she failed to repay it.
"She borrowed $500 and it got up to $6000. The client was desperate. She was on a benefit," Ieti says. Ieti threatened to take the lender to the Commerce Commission and eventually persuaded the company to wipe most of the penalty charges and accept gradual repayment.
Last week the Government announced further law changes that will require moneylenders to be registered, with penalties for lenders who fail to register or fail to disclose past convictions for dishonesty or fraud.
But there are no restrictions on interest rates and Lelei Ufi says he will continue charging 20 per cent to 25 per cent a month.

Average rents have risen faster than wages in the past five years and are tipped to jump further in the next two years as the rental market catches up with Auckland's soaring house prices.

Property Investors Association vice-president Andrew King predicted yesterday that Auckland rents could leap 20 per cent in the next two years.

The head of the property department at Auckland University, Associate Professor Laurence Murphy, said a 20 per cent increase would be necessary to restore yields on rental properties to the rates prevailing in the early 1990s.  But other experts consulted yesterday were more moderate. All expect more increases, but most do not expect them to reach 20 per cent.

A consultants' report published on Monday forecast continued pressure on the rental market as a spinoff from rising house prices.  Average rents registered with the Government's tenancy bond centre rose in the year to March by 3.3 per cent in Waitakere, 6.1 per cent in Auckland City, 6.9 per cent in Manukau and 8.8 per cent on the North Shore.

Mr King said big rises in house prices had left rents behind.  "The market is out of kilter at the moment. There is a big difference between the cost of home ownership and the cost of renting. In the last three years that has got out of kilter.  "Renting at the moment is much more affordable than owning your own home."

This was driving many young couples to continue renting rather than trying to buy. More renters meant more pressure on rents, which were bound to rise.  "They could go up 20 per cent in the next two years."

An agent for Harveys real estate in Mt Eden, Ann Farquharson, said the rental market had been rising since January after a seasonal lull late last year.  She has rented homes in Mt Eden where the rent for the new tenants rose from $460 to $490 a week in one case, and from $470 to $500 in another.  On average, she said, most rents were going up for new tenants by $5 to $10 a week.

Professor Bob Hargreaves of Massey University said the typical private sector renter would have paid 26 per cent of the average wage to pay the median rent in 1993. By last year, rents had risen to 32 per cent of the average wage nationally and 37 per cent in Auckland.  Overall, rents rose by 86 per cent from 1993 to the first quarter of this year but wages rose by only 50 per cent.

Professor Hargreaves said there was a high correlation between rents and net immigration.  "Rents started to take off again about October last year. Although net immigration has come off a little, it is still quite strongly positive. Net immigration is a very volatile statistic, but provided it stays positive, that's going to keep pressure on rents."  But he said a 20 per cent jump in rents in two years would be almost unprecedented and was unlikely. 

Professor Murphy said the faster increase in house prices meant rents were now returning landlords a yield of only around 5 per cent, compared with 6 to 7 per cent in the early 1990s.  "If you were on a 5 per cent yield and you wanted to shift it up to 6 per cent, back to what it was earlier in the 1990s, you'd have to increase your rent 20 per cent," he said. "On a $350 a week rent, that's $70. 

"Traditionally you would anticipate that the yield should bear some relationship to the interest rate because it's a rate of return.  The fact that it doesn't at the moment reflects the way people finance their [investment properties] to get a tax loss and claim it off their tax, and because people are looking for capital gains.  "But if there was a general feeling that yields were too low, especially now that interest rates have gone up ... it could lead to increases."

More than half of New Zealand's total net worth is now owned by the richest 10 per cent of the population.

A new survey by Statistics NZ shows that the distribution of wealth has become even more unequal in 2003-04 than in the previous survey in 2001, when the richest 10 per cent owned only 48 per cent of the country's total wealth. They now own 52 per cent.

The richest half of the country owned 93 per cent of the wealth in 2001, and now owns 95 per cent. So the share of the poorest half has dropped from 7 per cent to 5 per cent.

But the two surveys cannot be compared directly. The 2001 survey, a one-off exercise for the Retirement Commission, was based on "economic units" where a couple counted as one unit, whereas the latest survey is the first part of a long-term sampling to be repeated up to 2010 and is based on individuals.

The new survey includes details which the previous one did not, revealing that the richest 1 per cent of individuals own 16 per cent of the country's wealth, and the richest 5 per cent own 38 per cent of the total.

The median net worth rises with age. The 15 to 24 age group was worth $2400, the 25 to 34 group $31,000, the 35 to 44 group $82,400, the 45 to 54 group $142,900 and the 55 to 64 group had $170,000.

The median drops back in the 65-plus retirement age bracket to $149,500. Overall the median individual is worth just $69,800.

More than half of all the 6.5 per cent of people with negative net worth are aged 15 to 24. This is probably because of student loans.

As in 2001, the latest survey shows that Europeans have by far the highest median net worth ($86,900), followed by Asians ($21,000), others ($19,000), Maori ($18,000) and Pacific people ($6700).

The manager of Statistics NZ's standard of living unit, Andrea Blackburn, told a social policy conference in Wellington yesterday that about 40 per cent of New Zealanders' net wealth was held in residential property. Data on other assets were not yet available.

She said New Zealand's skewed distribution of wealth was similar to Canada's, but still not as unequal as in the United States.

"It's typical of developed countries," she said.

Read the report

Welfare beneficiaries without children are now worse off in relation to the average worker than at any time in the past 26 years, and probably in the last 60 years.

Auckland University research shows that the net dole for a single adult without children has dropped from a recent peak of 45 per cent of the net average wage in 1986 to 28 per cent today.

The current rate is the lowest since the university data started in 1981, and economist Brian Easton said it seemed to be the lowest since the average wage was created in 1948.

His data, based on the benefit rate for couples, shows that the previous lowest rate for couples was 54 per cent of the net average wage in 1972. The single adult rate is 60 per cent of the adult rate, making it around 32 per cent of the net average wage in 1972, but the tax rate for single adults would have been different from the married rate.

Auckland University doctoral student Gerry Cotterell said benefit rates had continued to fall slightly further behind the net average wage in recent years because they were adjusted in line with consumer prices, not wages.

Since the Labour Government took office in the December quarter of 1999, the average wage has risen by 28.4 per cent while consumer prices rose by 20.1 per cent. A royal commission on social security recommended in 1972 that married benefits should be kept at 80 per cent of the net wages of building and engineering labourers, to ensure that beneficiaries could "participate in and belong to" the rest of society. Benefits were increased the next year in line with the commission's recommendations, but since then have always been adjusted in line with prices, not wages.

The single adult rate was also cut by $14 a week in the "mother of all Budgets" in 1991, and has never been restored. Instead, the gap between real net single benefits and the real net average wage has widened from $300 a week in 1991 to $400 a week today.

Mr Cotterell said beneficiaries could not feel a sense of "participation and belonging" with such a wide gap behind wages. Given economic improvements "surely there is an argument for restoring the rates that existed before 1991".

New Zealand's mayors want the Government to raise the minimum wage to $12 an hour sooner than it plans so as to help young people into skilled trades.

The Mayors Taskforce for Jobs, representing 91 per cent of mayors, says lifting the legal minimum from $9.50 an hour to $12 would encourage "greater investment in skill training leading to increases in productivity".

In a submission to the new Minister of Labour, Ruth Dyson, they say minimum wage increases of 36 per cent for adults, 81 per cent for 16- and 17-year-olds and 126 per cent for 18- and 19-year olds since 1999 "have not resulted in constraints on job creation or fewer opportunities for young people".

But three of the 10 groups that have made submissions on this month's annual minimum wage review - Business New Zealand, Federated Farmers and the supermarket industry - are urging Ms Dyson not to increase the minimum wage at all.

A fourth group, the Retailers Association, supports "a modest increase" in the adult rate in line with other recent wage increases, but opposes any further increase in the youth rate for 16- and 17-year-olds, currently $7.60 an hour.

The Government agreed with New Zealand First and the Greens after the election to raise the adult rate to $12 by the end of 2008 "if economic conditions permit".

The Retailers Association says such a big increase would cost its members $760 million a year by 2009, assuming that shopkeepers would have to pass on the full $2.50 an hour increase to all their workers to maintain relativities with those now on $9.50.

"The majority of our members are affected by the minimum wage, either because they employ junior staff at weekends and after school, or they employ extra staff during the busy Christmas and Easter periods," the association says.

"Such an increase in wage rates will have a severely detrimental impact on operating costs for this sector, which ultimately has flow-on effects to the wider society - consumers in terms of increased prices, employees in limitations of opportunities particularly for part-time and student workers, and unnecessary economic impacts with additional inflationary pressure."

It said the average wages paid to entry-level shop assistants in February were $10.56 an hour for those aged 18 and over and $8.56 for 16- and 17-year-olds.

In contrast, the national average wage for the whole economy in September was $21.13 an hour.

The National Association of Retail Grocers and Supermarkets says its stores give many youngsters their first jobs. But such openings could be lost if the minimum wage were to be increased.

The association says higher minimum wages may cause supermarket owners to take 20-year-olds in preference to 18- and 19-year-olds because of their greater maturity and better work ethic.