Minimum wages have long been condemned in influential and authoritative circles. The wages have been said to defy economic common sense. The criticism is firmly rooted in laissez faire and modern free market economics, with the wages regarded as impeding the proper functioning and efficiency of the labour market and, in particular, creating unemployment. A modern more finely tuned argument turning on unemployment identifies a disproportionate burden falling on groups such as women, youth, and economic minorities that are already socially and economically marginalised. Yet for all the weight of opposition, the idea of the minimum wage has persisted. More than this, it has in the most important respect succeeded. It was adopted in New Zealand in the 1840s and then again in the 1890s. It remains part of our statute law. By any standards this is a long experience of regulatory intervention. It is surprising then that the reasons for these particular historical developments have not been systematically explained. The absence of the explanation is more than just an issue of unsatisfied curiosity; it is a deficiency at the heart of the critical analysis of the minimum wage. An explanation is significant not only for an understanding of why we have had minimum wages. It also helps lay bare the current rationale for the minimum wage legislation we have today.

The historical development of New Zealand’s minimum wages has in fact involved three main phases. The first had its origins in circumstances and ideas that existed even before the first organised European settlements were established in New Zealand. The second and third more clearly represented specific developments within New Zealand. At the same time, all three phases have features in common. These include, most importantly, matters of working class distress and suffering, and the inspirational work of activists and leaders. Over time the two latter contexts of deprivation and determined work compounded into the formation of a powerful consensus in New Zealand in support of the minimum wage.

The first phase relates directly to a perceived dichotomy that has been particularly strong in relation to New Zealand. This is the contrast between British working class impoverishment, both in the countryside and amidst its industrial landscape, and the prospects for healthy work and prosperity in the colony. The contrast was evident from the outset of the attempt to organise the colonisation of New Zealand by Edward Gibbon Wakefield and included particular reference to the minimum wage. The specific use of this wage – to assist the Wakefield companies in drawing migrants from Britain to New Zealand – has been fully considered elsewhere. An outline is nevertheless useful here to establish some of the foundations of New Zealand’s general experience.

In summary, Britain had a substantial experience of the protection of minimum wages before the nineteenth century. This had roots both in the biblically derived tradition of the just wage and in wage regulation dating back to the Ordinance of Labourers in the fourteenth century. But this protection was withdrawn at the beginning of the nineteenth century in accordance with predominant parliamentary opinion in favour of laissez faire policies. A House of Commons’ committee reported in 1811 for example that ‘no interference of the legislature with the freedom of trade, or with the perfect liberty of every individual to dispose of his time and of his labour in the way and on the terms which he may judge most conducive to his own interest, can take place without violating general principles of the first importance to the prosperity and happiness of the community’.

Parliament rejected repeated pleas and demands from working class representatives for palliative minimum wages before and after the committee’s statement despite the pathetic conditions of various sections of the workforce. These included in particular the handloom weavers, who were being displaced by the transforming British economy. Indications of the consequences include a general increase in the death rate in Britain from about 1820 until the 1840s.

With all attempts to obtain the minimum wage firmly rejected in Britain, the Wakefield companies used the attraction of the wage to supplement their efforts to obtain working class migrants for their New Zealand colonies. Wakefield had already promised in terms of the principles of his grand scheme of ‘systematic colonisation’ to uplift British workers from distress and deliver them to a new land and great prosperity. The minimum wage underwrote the promise and generally enhanced the appeal of his scheme. The wages were subsequently instituted in four of the five small townships settled in his name. The workers understood that the wage provided them with the certainty of deliverance from distress.

This first application of the minimum wage in New Zealand lasted at most only a few years in each of the settlements however. The withdrawal of guarantees by the leaders of the settlements despite vocal and angry opposition from the working migrants followed principally from a misunderstanding of the difficulties involved in seeking to quickly establish commercially productive and profitable colonies. The problems were exacerbated in the case of the Wellington, Nelson, and New Plymouth settlements by the impact of the Anglo-Australian depression of the early 1840s. While there is no doubt that the New Zealand Company ended in a position of complete inability to pay any wages, it was an ironic and sad result for the new migrants who had left Britain in the hope of better lives. Some left for other colonies.

Part of the long term impact of the experience is that it encouraged a predilection among the colonial leadership in New Zealand to avoid any further formal or ongoing commitment to support the poor in need. In lieu, the poor relied mainly on charitable aid and the occasional ad hoc provision of relief work by the government. For most of the nineteenth century following annexation therefore, it is arguable the New Zealand government offered its distressed poor less certainty of support than the often notorious British poor laws.

Yet at the same time the experience also arguably represents an integral part of the history of the New Zealand minimum wage. It connected New Zealand with deep rooted and active British traditions. So too did the better known experience of the eight hour working day. These ideas did travel well to New Zealand despite the distance and any self interested entrepreneurial aspirations held by the migrants. This needs saying because of the apparent lack of references in the available historical record to the minimum wage during the 1860s and 1870s. A likely explanation for this lack is the relative prosperity of these decades even if partly based on some injudiciously used borrowing by Julius Vogel. Protests about minimum wages are less likely when wages are not generally falling or not at very low levels. If this adequately explains the silence, the overall continuity of the historical engagement is largely assured as the idea again elbowed its way to the forefront of the industrial and political stage by the end of the 1880s.

The return of the minimum wage represents the beginning of the second phase of development, again strongly associated with severe social and economic distress, but this time within New Zealand. The distress was the result of a long economic depression that commenced towards the end of the 1870s. Its effect on the colony varied but came to cover the entire colony by the second half of the 1880s and was exceptionally severe by 1887 in Christchurch and Dunedin. The latter had become the largest industrial centre in the colony in the previous decade at least partly on the back of gold mining. During the course of the depression there were some trade union developments and these assisted initial institutional attempts to protect and promote worker rights and conditions. The first notably widespread and effective protest against the difficult conditions, however, was initiated in Dunedin by Rutherford Waddell, a Presbyterian clergyman.

Waddell is best known for his sermon, the ‘Sin of Cheapness’, and his work in inspiring the formation and report of the Sweating Commission. The sermon condemned the low piece rates paid to seamstresses in Dunedin. Waddell argued that the rates were the result of overseas competition, deliberate exploitation of the oversupplied labour market by local businesses, and the ‘rage’ of consumers for cheap goods. An investigation by the Otago Daily Times confirmed the low rates and the local practice of undercutting. This practice involved the replacement of existing workers by new workers if the latter agreed to work at lower rates. Waddell received the support of the local Presbyterian synod, which deplored ‘the existence of the “sweating system” in the Colony’, instructed its ‘ministers and office-bearers to discourage it by every mean in their power’, and enjoined ‘all to bear each other’s burdens and so fulfil the law of Christ.’ Combined, the concern and publicity placed considerable pressure on the local clothing industry to improve rates. It was not entirely successful, however, with a small group of companies refusing to mend their ways.

Waddell and his supporters reacted to the failure of their negotiations with the renegade companies by turning the matter into a national campaign with general aims that foreshadowed the minimum wage structure to emerge under the Liberals. A meeting in Dunedin in June 1889 concluded that the workers needed the protection of unions and legislation, and requested a commission of inquiry to collect data relating to the problem of sweating. Waddell asked the audience if they were prepared ‘to permit in our midst a system that in this young fair land threatens to reproduce before very long those very evils that are eating the heart and soul out of the older countries?’ The following month, he helped form the Dunedin Tailoresses’ Union, which quickly established a ‘log’ of minimum rates. In Parliament, members recorded the colony-wide interest in Waddell’s work and secured the agreement of the Atkinson Government to hold the required inquiry.

The Sweating Commission generally reinforced Waddell’s position. The Commissioners, nine men including Waddell, interviewed government inspectors and a variety of unionists, employers and workers in each of the four main centres and made a number of findings. Among these, the Commissioners agreed that: where unions were formed, workers’ wages did not ‘sink below a living wage’; similarly hours of work were protected; the existing factory legislation was inadequate; children as young as ten were being employed; some workers were working excessive hours; unions made it difficult for employers to replace adult workers with youths; some employers paid youth workers low or even no wages (defining the work as training) and discharged them when wage increases or wages were requested; and some factory accommodation and sanitary conditions were ‘exceedingly defective’. Among their recommendations, the Commissioners included the need to establish boards of conciliation and arbitration and enact new factories legislation. They only disagreed on the degree of the problems. Waddell and two others felt that they constituted sweating similar to that found in London and that to not acknowledge this decreased the likelihood of necessary ‘vigorous action’ being taken to rectify them. The majority regarded the comparison as an exaggeration.

Waddell’s particular interest in promoting unions as vehicles for resolving the issues of inadequate wages was not only furthered by his own actions in support of the formation of the Tailoresses’ Union and the work of Sweating Commission. It was also advanced by a dramatic general growth in unionism especially in the ‘transport-related’ sectors headed by the Maritime Council. This growth had much to do with the inspiration and encouragement of union developments in Australia and Britain. As a result of the expansion, for a brief period of months in 1889 and 1890, and indeed as indicated in the Sweating Commission report, the means of union power and influence seemed well placed to resolve a wide range of issues in favour of workers. But the prospects were quickly dashed with the entanglement of the Council in the Australian shipping dispute, the Maritime Strike, that led to its crushing defeat in October 1890.

The specific idea of unions as the means of rectifying inadequate pay, however, subsequently found new and effective expression with the formation of the Liberal Government following the election in 1890. Waddell, having provided the initial leadership and strongly established the case for action against sweated wages, was now superseded by Ballance, Seddon, and particularly Reeves. The first importance of the election of the Liberals for labour was that it resulted in greater representation. This reflected a longstanding but growing interest by labour and labour affiliated organisations in political representation and the advancement of their interests by political means. The abolition of plural voting, which gave more weight to the already established universal male franchise, aided the expression of the interest. The improved representation also reflected the growth and consolidation of a body of parliamentarians (and candidates outside the Parliament) who held political positions acceptable to labour interests and who were well placed to actively court the labour vote. The developments were given further significance through labour’s loss of industrial influence as a result of the Maritime Strike. Reeves, strongly supported by labour in Christchurch, became its specific representative in the Liberal cabinet. He dedicated himself to legislative reform relating to labour, particularly in relation to compulsory arbitration. The importance of this work on compulsory arbitration for the minimum wage was that it was to allow unions, too weak to obtain wage agreements though direct negotiation and action, to turn to arbitration and force the determination of reasonable settlements. Despite Reeves’s great effort it took some time for these changes to take place.

The first arbitration bill, following the Sweating Commission report, did not come in fact from Reeves but from a Dunedin lawyer and parliamentarian, William Downie Stewart. The Atkinson Government did not support the measure, however, and the bill lapsed. Stewart’s bill also proposed only a voluntary system of conciliation and arbitration. For Reeves, compulsion was vital if the legislation was to be effective. Simply, the main problem conciliation and arbitration was expected to help resolve was disputes between employers and workers that ended in industrial action. Voluntary arbitration offered help to the disputants to resolve their differences but this could be refused by one of the parties. A self perceived strong party thus always retained the practical option of engaging in industrial action to secure their ends regardless of the merits of their case. Compulsion eliminated the disputants’ right to direct action and on the failure of negotiation required the submission of their cases to an arbitrator for a binding decision. In the latter case fairness and interest in limiting public inconvenience and harm were paramount considerations.

Reeves presented his arbitration bills to Parliament each year from 1891 until the measure was finally passed in 1894. Throughout he encountered angry resistance particularly from the appointed members of the Legislative Council, who were able to veto his legislation. In particular they objected to the interference compulsory arbitration would impose on what they regarded as the essential direct relationship between employer and worker. They were also quite clear in their understanding that the system was to set wages. It was said ‘that the whole principle of the Bill is to affect or fix the rate of wages – either to fix the amount a man is to receive for his labour, or to limit the time that he is to work for his wage’. This was beyond reason to the conservatives. From their perspective, the system promised to work against the efficient operation of the market, inevitably favour workers, and adversely affect the viability of businesses.

Questions have been raised about whether Reeves deliberately worked towards this wage fixing object in addition to the main object of preventing strikes. The issue was raised even in the early years of the operation of system and has been elaborated on by Jim Holt, one of the two principal historians of the arbitration system. Holt notes in particular that Reeves ‘had never talked about regulating conditions of labour or eliminating sweating’ when pressing the case for his bills, and had predicted that voluntary settlements would be the general order of the day. Reeves’s main purpose was plainly to prevent destructive industrial action. Holt adds that Reeves, in discussions, had made it clear that he did not intend his legislation to favour employees over employers or to encourage non-union workers to join unions. This is despite the legislation stating that one of its objects was ‘to encourage the formation of Industrial Unions and Associations‘.

It seems most unlikely that Reeves did not see that the system would set wages with some advantage to workers, particularly as both the Opposition and his own supporters recognised this function and outcome. The argument from his supporters sought to allay conservative fears on the issue but only as far as the setting of high rates of pay. The bill was not intended ‘for the purpose of raising wages’ but it would ‘force the common fair wage to be paid’. Emphasising the point, it was stated that the bill was ‘for the regulation of the wages, that is to say, a certain employer will not be allowed to pay his servants at a less rate than the general rate ruling throughout the colony’. In light of the opposition he faced, it is little wonder that Reeves tried to minimise any sense of partisanship in his bill. While he had the valuable support of the labour members of the Liberals, he had to work hard to secure the support of even the rest of his party. Ballance, as premier had been encouraging, but his successor, Seddon, was less so, being primarily concerned not to get too far ahead of public opinion and to ensure his dominance over Reeves, a rival to his premiership in its early days.

While Reeves said little about wage setting, for good reason, he could not have been unaware of the capacity and the likely prospect of the compulsory arbitration system to generate fair standard wages. He also never sought to alter the capacity. More than awareness, this strongly indicates intent or complicity. At the very least, Reeves would not have passively allowed his pet project to go forward to achieve unwanted ends.

There is general acknowledgement that Reeves worked throughout with great imagination and perseverance to set up the arbitration system. It was his triumph. The work finally came to an end in 1894 with the passing of the bill after a further election victory for Liberals and a threat to stack the Legislative Council with Government nominees. We should also conclude that Reeves consciously built on Waddell’s work of raising awareness of the problem of low wages in New Zealand and set in motion a new and effective system that would not only stop strikes but also set minimum wages. In due course, the system performed very much in the way his opponents had feared and his supporters expected. Perceiving that he was unlikely to achieve further significant legislative change, Reeves left New Zealand in January 1896, even before the operation of the system had commenced, to take up the post of New Zealand’s Agent-General in London. The Arbitration Court began its duties a few months later, in May.

The second basis for the Liberals’ minimum wage system, the legislation to govern factories, also had its pre-Liberal precursor immediately following the release of the Sweating Commission report. Like Stewart’s arbitration bill, it too failed to be enacted and the matter was left for Reeves to pursue. Much of the 1891 Factories Act was taken up with issues of better accommodation and sanitation in factories, preventing employment of children, the curbing of long hours, and effective enforcement, and included some new provisions relating to wages, but not minimum wages. The new provisions protected women and young persons from certain deductions from wages and ensured they were paid for holidays. The 1894 Act, mainly a consolidating statute, provided similar measures. The wage provisions were substantially supplemented, however, in the 1899 Employment of Boys or Girls without Payment Prevention Act, which introduced set minimum wages for juvenile factory workers. The legislation followed the provision of evidence to Seddon by his Secretary of Labour, Edward Tregear, that non-payment, particularly of girls in the clothing industry, remained a problem. The evidence was confirmed by select committee investigation. The practice was seen as inequitable and an encouragement both to delinquency (boys in particular preferring ‘larrikinism’ to working for no pay) and to dishonesty (stealing in reaction to the injustice of being exploited). It was also recognised that the legislation would fill gaps where workers were not covered by awards made under the Industrial Conciliation and Arbitration Act. The new statute provided for minimum wages of 4s. and 5s. per week for girls and boys under eighteen respectively. The provision was improved in the 1901 Factories Act, which provided for 5s. for both girls and boys under sixteen and increases of 3s. on the weekly wage from the age of sixteen until twenty per annum. The entitlement was extended to juveniles and young adults working in shops and offices in 1904.

Tregear, Labour Secretary to both Reeves and Seddon, was an outspoken socialist and inclined to overstate matters. Naturally enough, he had a view on what had been achieved with the rebirth of the minimum wage:

To ‘sweat’ and work your people, and especially defenceless children, to death was at the beginning of the last century ‘good business’. Now we have made it disgraceful. To pay a man less than his proper wage used to be smart, but if you knew the way respectable firms implore us not to bring them up for a breach of the Arbitration award, you would recognize how they dread (not the fine) public opinion and how that public opinion has been elevated. Thousands of people here have grown to recognize that ‘it is more disgraceful for an employer to rob his errand-boy of sixpence than for the errand-boy to take sixpence from his master’s till.’

Whether or not Tregear was entirely accurate in his representation of earlier good business or contemporary public opinion, he was undoubtedly proud of what he regarded as the Liberals’ legacy with respect to the minimum wage.

Although the Liberals remained in office until 1912, to a large extent the statutes enacted in the early 1900s completed the framework of their minimum wage system. There existed no mainstream interest or drive for any major extension or change in the way minimum wages might be set. This was tied in with a relative absence of distress and the disappearance of the reforming zeal of the Liberals. International praise also encouraged complacency. But for all this the system was never static, especially in relation to arbitration. Opposition of some form to arbitration was often in evidence from elements within both the employer and the union communities. Holt and others have chronicled in detail various shifting views and the associated demands, changes, action, and reaction, during the Liberal years and beyond. For the most part these battered the system one way and another. But they did so without seriously damaging or altering the overall function in relation to the minimum wage and do not require further reference here. There were, however, some operational refinements to the system that should be noted.

At the very least, Reeves’s supporters had expected the arbitration system to prevent employers from paying less than fair ruling rates. In practice, the object was progressively advanced as the unions applied constant pressure to increase the coverage of the Arbitration Court’s awards. The first struggle was for ‘preference’, which required employers specifically subject to a Court award or agreement to fill vacancies with union men in preference to non-unionists. This was granted in about two-thirds of awards by 1900. The unions also obtained a ruling from the Court in 1897 that allowed relevant awards to cover employers even where they employed no union members. A further demand for compulsory union membership was made but added little to the advantage already obtained from the Court. The membership clauses were in any case later ruled to be unenforceable by the Court of Appeal. Blanket clauses, which ensured award coverage over all employers in particular industries, even those entering the industry after an award had been set, were provided for in the Industrial Conciliation and Arbitration Amendment Act, 1900. The awards also reached out geographically. Initially bound by specific districts, employer and union parties were able to extend the provisions of their award to cover business rivals in other districts. The process of setting up national awards was simplified, for the benefit of both employers and the unions, in the Industrial Conciliation and Arbitration Amendment Act of 1911.

The idea of what a minimum wage might be received close inspection as well. The Sweating Commission report referred to the standards of a ‘living’ wage and a ‘fair’ wage. A term used in 1894 was ‘the common fair wage’. In 1916, the Arbitration Court referred to a ‘reasonable living-wage’. An elaboration of what these terms might mean in practice occurred after the conservative Reform Government included a new formula for setting award wages in the 1920 Industrial Conciliation and Arbitration Amendment Act. The amendment required the Court to balance the need for a ‘fair-living wage’ against a need to ensure that the effect of any award on the ‘cost of production’ would not unduly imperil the ‘economic continuance’ of any industry. The formula had a particular edge to it because the amendment coincided with the advent of depression. Combined, the need to aid industry and the fact of depression threatened wage reductions and required union advocates to change the emphasis of their arguments to the Court. In an era of generally rising prices the advocates had come to rely on movements in the cost of living to justify improvements in wages. This no longer worked. They therefore stressed the provision of a decent living for working class families. This generated two notable responses from the Court on the general substance of the minimum wage concept.

In the first of these, in 1922, the Court accepted the need of families for a ‘reasonable standard of comfort’. It also saw the difficulty however of variable family sizes in computing the need. It suggested that the variability in the number of dependant children would be better dealt with by the provision of child allowances funded by employers, than by complicating its own calculations. In the second response, in 1925, the Court made it plain that award wages would not vary by family size. It agreed that a man represented a social rather than economic unit and that consideration of the family had to provide the core of the living wage calculation. But there could be no place for complication. For the sake of practicality, the worker was entitled to expect his current market rate during times of economic prosperity. But he was also not to receive, in times of economic depression, less than a wage ‘sufficient for the maintenance of himself, a wife and two children, plus an additional payment based on his skill and certain other factors.’ This assumption of family size put to one side the problems of its variations. The heat then came out of the issue somewhat with the enactment of the Families Allowances Act in 1926. With the direction decided, the Court, in 1927, made merely another restatement of the general position. It now said that ‘labour cannot be regarded as a mere commodity, but must if at all possible, be paid a wage consonant with the reasonable requirements of civilized life’.

While the debate over living, family, and civilised wages occurred in and around the Arbitration Court, it does not appear that any similar debate occurred in relation to the minimum rates provided under the Factories Act or the Shops and Offices Act. This reflected a difference in focus. Following on from the Employment of Boys without Payment Prevention Act, the emphasis of the Factories Act and Shops and Offices Act remained on the protection of the wages of juvenile and young adult wages. As such they protected supplementary family wages or the wages of individuals who were less likely to have dependants. While the legislated wages still needed to be fair they did not need to be sufficient in themselves to support families.

Operational refinements also included the important matter of general adjustments to awards and agreements. A significant step towards this change was taken in 1918 in response to union concerns over the failure of awards to keep pace with the cost of living. Still faced with the pressure of conducting the war effort, the Government provided the Court with the power to amend awards and agreements, often set to run for three years, while still current. This allowed the Court, on application from individual unions, to provide a prompt adjustment for price inflation. Subsequently, the Court began to publish half yearly general guides on rate adjustments. Evidently denoting the Government’s satisfaction with the working of the adjustments, the Court’s power to adjust awards during their term, which expired in 1922, was temporarily extended and enlarged by provision of a more extensive authority to issue general orders to alter rates. As above, however, this change was ushered in against the backdrop of depression and, with the likelihood of it being used to reduce rates, was opposed by labour. Rate reductions did result. While the unions argued the need to maintain a decent wage for the family, the employer community argued that businesses would fail and unemployment rise if wages did not fall by a rate of 13s. per week. The Court decided on a reduction of 5s. in line with its own calculation of the fall in the cost of living.

Wages were generally reduced twice before the economy began to rebound in 1923. In essence the experience emphasised the vulnerability of the concept of the minimum wage to legislative change, the general health of the economy, and the demands of the business community. As such it provided a glimpse, in miniature, of events to come in the Great Depression.

The last substantial phase in the historical development of the minimum wage was again rooted in a context of economic and social distress and crisis in New Zealand. It also directly reflected determined action, particularly by the immigrant socialists who emerged during the second decade of the century as the political leaders of labour and who then lead the first Labour Government from 1935 to 1949. They included Michael Joseph Savage, Peter Fraser and Walter Nash, each of whom had experienced significant poverty and hardship in his own personal life. Labour’s major fight in this phase was its unsuccessful opposition against the emasculation of the Liberals’ arbitration system. The attack on the system was carried out by employers and a series of generally conservative Governments – Reform, United (formerly the Liberals) and the Coalition (of United and Reform from 1931) – and resulted in its neutralisation in 1932. The action was reversed four years later by Labour on gaining office. The Labour Government subsequently went beyond restoration and, with the experience of general minimum wage regulation during the Second World War, enacted the Minimum Wage Act in 1945.

The first effects of the Great Depression were felt in New Zealand in 1926 and followed a major fall in export receipts. The actual numbers of unemployed year by year during the crisis are not clear, but available figures on relief assistance indicate at least a threefold rise in unemployment in 1926 over the previous year. This progressively increased into the early 1930s, reaching a peak of nearly 80,000 registered unemployed males in the winter of 1933. The figure did not include youths; females, who constituted about thirty per cent of the workforce; or those who failed to register. The approximate size of the overall workforce was 435,000. Circumstances had already been regarded as ‘acute’ in 1928. They were regarded as ‘chronic’ in 1930. Besides the data, numerous incidents of individual and family suffering based on inadequate relief and wages were noted in Parliament. With unemployment at extreme levels, workers were pressured to compromise their award rates or face the prospect of replacement. Underemployment also dramatically diminished the weekly take home pay. Nash argued that no one would contend that the standard of living provided by the Arbitration Court’s basic weekly wage of £4 0s. 8d was reasonable ‘for a man with a wife and two children’. Regardless, he noted, ‘The average wage on our waterfront, where it is alleged wages are high, is less than £3 12s. per week’. Rates for relief work were of course lower. Savage told Parliament that people were starving in his adopted home city of Auckland.

Further to the depression of the early twenties, the experience emphasised additional important deficiencies in the security offered by the Liberals’ minimum wage system. Under severe pressure some workers would informally give away their legal rights and various groups were not covered at all by awards and agreements. The workers not covered included the thousands of men now placed on relief work. These weaknesses alone, however, did not provide the employers or the incumbent Governments with the full range of rate cuts they wanted. Relatively early into the crisis, they came to target the whole arbitration system. Arbitration wages in general were considered the major labour cost impediment that would stop businesses remaining open and farmers producing competitively priced goods for overseas markets.

Change in the farmers’ previous acquiescence and the urban employers’ current phase of general support for the arbitration system began with a coincidence of economic and industrial events. These were a fall in overseas wool and meat prices and increases in award rates for shearers in 1926 and freezing workers in 1927. The Court did not provide an explanation with its decision on the shearers’ rate increase but did make it plain in the freezing workers’ case that it had considered the financial and broad economic states of the industry as well as the need for a living family wage. Regardless, the farmers did not accept that wages, which directly and indirectly impacted on their costs, could be allowed to go against prices and they launched an aggressive campaign against the Court. In response, the Reform Government introduced an amendment bill in October 1927. Among other matters, it excluded the farming sector and related secondary industries from the coverage of the arbitration system, restated the requirement that the Court consider the economic and financial conditions facing industries when making awards, and provided for the amendment of current awards where such conditions changed. At this early stage the Employers’ Federation, representing urban employers in particular, still disagreed with the need for any significant change to the system. Partly this reflected its value in reducing the incidence of industrial action. Faced with ambivalence the Government drastically reduced the scope of the bill and called an industrial conference for the following year. The conference crystalised the farmers’ position and also revealed a shift by the Employers’ Federation from support to opposition to compulsory arbitration.

The farmers attacked the system at the conference on a number of grounds. These were: the system was cumbersome and inflexible and, as a result, unresponsive to different and often rapidly changing needs; its standard wages discouraged effort and made for low productivity; its processes encouraged the formulation of conflict and hence diverted attention away from joint efforts to constructively improve production; it diminished, through the imposition of the Court and its final decision making power, the direct responsibility of employers and employees for achieving workable agreements; and the system generally favoured workers and their demands for higher wages, thus explaining the otherwise virtuous relatively low level of industrial action.

The key point of their case was that it produced wages that were too high for the industry and the country. The farmers stated that the system obscured ‘the fact that wages depend on the output of industry, and can in the long-run be met only out of the product of industry and can increase only as the product of industry itself increases.’ Put another way, wages had to follow production and profit. As it was, rising wages contributed significantly to the farmers’ costs through their impact on prices in general for goods and services and though direct charges from freezing works and dairy factories. Yet at the same time the farmers faced falling export returns. As a result their profits were squeezed and in turn this led to reduced development in the farming sector and reduced employment. The farmers concluded that ‘Wages should depend on mutual bargaining on both sides, thus registering the condition of supply and demand in the rates actually arrived at.’ As a concession to the prospect of exploitation, they added that there needed to be ‘a physical anti-sweating minimum below which, in the public interest, labour should not be hired.’ The inclusion of ‘physical’ in the phrase suggests a throwback to the mentality of the early to mid-nineteenth century poor law; that is the lowest rate that an unemployed man or woman would take to avoid starvation.

The Employers’ Federation was far less critical of the arbitration system, yet also sought significant change from compulsory to voluntary arbitration. The argument was curiously strained. The Federation contended that the system was generally optional and, implying a small further step, that the time had come to consider experimenting with a system that was ‘wholly’ optional. This flew in the face of the fact that the ability of one party to compel the other to arbitration was central to the operation of the system. Parties avoiding reasonable negotiation could not escape being called to account. The Federation added a sop that conciliation was very effective at producing agreements and that, without compulsory arbitration, the system would encourage greater interest in settling at conciliation hearings. The weakness of the argument has led to a search for real reasons for the Federation’s shift. Holt suggests politics within the employer community: the need to mend fences with rural employer groups; embarrassment at its apparent alignment with union support for compulsory arbitration; and the need to reflect changing views in its urban base.

Labour’s opening salvo to protect wages in the economic crisis in fact predated the 1927 arbitration amendment bill by a few months. It recognised the pressure coming on the Government to consider ways of reducing wages and beat it to the punch. Introducing a minimum wage bill in August, it sought to institute wages of £1 a day for ‘casual adult labour’ and £5 for workers employed ‘by the week’. Remarkably Labour’s opening argument did not resort to appeals based on the distress of the poor. James McCombs, a long-standing moderate in the Labour caucus, instead referred principally to the problem of underconsumption. This followed from ‘inadequate purchasing power’ for the consumption of goods produced, with the result of ‘stagnation in business’. The solution was more money in the pockets of the spending public including, of course, poor workers. The logic was that the ‘money paid in wages’ produced ‘a greater demand for more goods, because of course, wages are spent immediately to buy goods that have to be produced right away.’ This applied most particularly to the poorest workers who had the greatest need to spend any additional income on basic living. McCombs, citing overseas economists, outlined the danger if the issue was not addressed:

‘Depression, unemployment, reduced production, and lowered standards of living are caused fundamentally by the failure of the consumers’ incomes to keep pace with output. Reduced wages means reduced consumers’ income; reduced income means reduced demand; reduced demand means still lower prices, leading to further curtailment of output. Thus society finds itself receding further and further from its economic goal.’

On this basis, McCombs noted that the Government’s inclination to reduce wages was ‘the very opposite of economic common sense’. While by no means a new idea, McCombs referred to a range of current literature and examples to support the case. Harry Holland, the leader of the parliamentary labour party, subsequently covered the argument for the minimum wage based on the suffering of the worker, insisting that ‘there is no man in New Zealand who can maintain a wife and family on less than £5 a week’. He added: ‘I often feel amused when I hear in this House some gentlemen who are drawing their £3 a day laugh sneeringly at the idea of a worker getting £1 a day.’ Savage acknowledged both the need for increased purchasing power in New Zealand and the need to promote the same abroad.

Dismissed as fanciful, the Government easily defeated the bill. Labour subsequently included similar arguments in its attack on the arbitration amendment bill that followed shortly thereafter. The arguments from these debates were repeated and others added as the threat continued. Labour kept up its concerted warnings about the danger of underconsumption. McCombs referred to the contemporary British economist, Keynes: ‘if wages are cut all round the purchasing-power of the community as a whole is reduced and no one is further forward’. Savage asked the Government how the taking of money out of circulation through wage reductions would help manufacturers and retailers. Holland cited the International Labour Organisation and its promotion of the ‘Provision of an adequate living wage’; noted that ‘working people’ had fixed commitments such as mortgages and hire purchase arrangements which could not accommodate wage reductions; and cited examples of the impossible situations they would be placed in if reductions were imposed. Nash referred to statistics which revealed that 13,595 factory workers were already receiving less than £4 a week in 1929. He noted that the situation as he spoke in 1931 was now much worse. He stated the need for ‘a living wage’, not reductions, and that Labour aimed to fix wages ‘at a just and equitable level’. Holland, McCombs, and Savage resented the lack of an ‘equality of sacrifice’. McCombs referred to increased profits by employers. Holland and Savage both implied hypocrisy. Savage remarked that ‘It is a remarkable thing that a man who wants to reduce wages always want to start with the other fellow’ and, with regard to the unemployed, that ‘It is useless talking about the spirit of independence, as some honourable members do, when there is nothing on the breakfast table.’ Holland in particular warned of new levels of exploitation of the low paid. He complained about the ‘possibility of exploitation by tradespeople’ and that ‘when’ the worker’s wage was reduced, the worker would be left ‘at the mercy of conditions’.

Labour’s larger policies also contributed to its defence against reductions in wages. These policies provided alternatives to attacks on wages and working conditions as the means of maintaining and improving the performance of the economy. In this regard, Nash provided a succinct response to the farmers’ case at the 1928 industrial conference. The way forward was improved utilisation of technology to increase production, underpinned by state assistance, and better national planning in relation to the use of resources and development. The government in fact had a duty to rationalise all sectors of the economy to ensure better performance. Further, Labour promoted planned bulk purchase agreements to stabilise and improve export returns. The issue of credit was crucial. While there were divisions about aspects of the policy, Labour promised increased Government control and increased supply of credit. Credit would provide a basis for developing and improving the country’s primary and secondary industries, the provision of guaranteed prices for primary products, and generally facilitate the development of productive employment paying at least a living wage.

The Reform Government took some initial steps of its own in 1926 and 1927 to assist the development of the primary sector, support secondary industries, and improve credit availability, but the work then dried up. To some degree, the employers and the government also recognised the danger of underconsumption. But, the United Government, elected in 1928, and the Coalition Government in its early phase provided very little other than a focus on retrenchment and austerity. The full effect of their attack on wages was felt in 1931 and 1932. In March 1931, the United Government legislated to empower the Arbitration Court to change awards and agreements in accordance with economic conditions. The employers immediately sought wage reductions of 20%. The Court ordered 10% cuts. In March 1932, the Coalition Government drastically cut the Public Works budget forcing workers with the Department to become workers on relief conditions. The following month, arbitration became voluntary. Holt describes the measure as ‘not so much conservative as right-wing and reckless’. There was no provision even for a ‘physical minimum wage’ as earlier suggested by the farmers. Public servant wage cuts of 10% followed.

Some alternative action by the Coalition, particularly from its Minister of Finance, Gordon Coates, followed from 1933 to 1935. This included a partial restoration of public servant wages. There was also increasing recognition after 1933 that the depth of the depression had passed and the economy was beginning to recover. But for many, the Government’s measures remained too cautious and, contrariwise, for some within the Government’s constituency, its measures were too radical whenever they departed from the simple essentials of the unregulated market place. Labour continued throughout to damn the Government and its attacks on wages. The return of sweating was presented as a major issue. Labour’s parliamentarians presented innumerable examples of distress. Labour Department inspectors were variously described as overwhelmed and failing to do their duty of enforcing existing awards and agreements. Continuing past refrains, underconsumption remained a key problem and the minimum wage had to be paid. Nash was also now able to cite the American ‘New Deal’ in support.

Labour overwhelmed the Coalition in the 1935 elections. Savage, parliamentary leader since the death of Holland in 1933, became a revered prime minister. The poor came to adore him. Among its first acts, the new Government restored compulsory arbitration and thus the full Liberal’s minimum wage system that had existed prior to the Depression. Much had been gone through in getting back to this point. All the wages that had been cut, for the public servants, by the Arbitration Court, and directly by employers since March 1931, were also restored.

The Government moved the system forward as well. The Court was given responsibility for setting a basic wage for workers covered by awards within three months of receiving its revived powers. For an adult male this was to be based on the need to maintain a wife and three, rather than, as previously, two children. The Court was then to periodically amend the rate by general orders at intervals of not less than six months. Its first order was a conservative £3 16s. for male workers and £1 16s. for female workers. The Government also began to adjust upwards other minimum rates provided under the overall system that had become devalued. The rates provided under the Factories Act were increased substantially. Starting rates of 10s. a week rising to 30s. were increased to 15s. and £2. Even larger rises were provided for workers in shops and offices, given their previously lower rates. Relief work rates ranged according to the family circumstances of workers. These were moved from 17s. to 21s. at one end of the range and at the other, from 47s. to 66s. 6d. Increased Christmas bonuses had already been provided at the end of 1935. The Government also moved into the farming sector for the first time, providing minimum rates for dairy farm workers by age. The minimum for twenty-one year olds was set at £2 2s. 6d. The Government left the door open for other farm workers to be also covered.

This explosion of work was, in fact, just part of a wider social and economic programme that the Labour Government worked on busily in 1936 and the immediately succeeding years. Despite the commentary of the economic historian Gary Hawke, which emphasises the continuity and extension of existing policies, there was clearly a difference in intensity and orientation between the new Labour Government and the discredited Coalition Government. This was particularly evident in the reinstatement of the minimum wage system, the immediate enhancements to the system, and the effort to return to more realistic living wages for the poorest workers.

All these changes comprised a substantial part of Labour’s contribution to the development of the minimum wage in New Zealand. But Labour also eventually provided a new final element. This, a standard statutory minimum wage, was first delayed by the range of important economic and social issues which demanded the Government’s immediate attention. It was then further delayed by the Second World War, but also effectively rehearsed as part of the management of the economy during the conflict. The wage finally arrived in 1945. Early labour comments about minimum wages had been almost always indistinguishable from arbitration system minimum wages. A likely exception was the inclusion of the object of a ‘Legislative minimum wage’ in the political platform of one of the parties connecting industrial and political labour in 1910. But the Labour Party’s particular interest in the subject became clear with its 1927 bill and was restated in its 1935 election policy document. This promised action to legislate for ‘A Statutory Minimum Wage or Salary based on the sum required to provide every thing necessary to an adequate standard of living.’

Although other measures after the 1935 election were given precedence, there were at least several reasons for Labour to again return to the issue in 1945. In introducing the bill, James O’Brien, the Acting Minister of Labour, noted first that the minimum wage would now cover all workers, not just those under awards and the workplace specific statutes (such as the Factories Act). He also called up the long tradition of the wage back to the Black Death in the fourteenth century. Included in his speech were reflections from Adam Smith and John Stuart Mill and references to the need to fight sweating and ‘bad employers’; the worker’s right to ‘the necessaries of life’; failed attempts to introduce an effective minimum wage in Britain; and mention of the objective in the Treaty of Versailles and by the International Labour Organisation. The Atlantic Charter, which similarly inspired the Labour leadership, could have been easily added.

The Party had also made the promise, although it was now rather old in 1945. A few other related factors seem to be important. The Government had implemented wage and price controls as a means of more tightly controlling the wartime economy. The success of these measures, coupled with fears of a post-war economic crisis, provided encouragement for suitable replacement measures as the Second World War came to an end. The taking of a share in the responsibility for setting minimum wages from the Arbitration Court would have also satisfied a general desire to directly influence and control. In addition, Bassett and King refer to an electoral consideration as Labour sought to meet the challenge of the National Party, which had emerged from the ruins of the old Coalition Government. The matter, as it had been when included in the platform in 1935, remained a potential vote catcher. The new minimum wage was set to remind workers who their benefactors were prior to the expected close run race due in 1946. As a measure of the appeal, the National Opposition, when confronted with the legislation, digressed into complaining about state housing, over-regulation, and inflation, and attempted to complicate matters by reference to profit-sharing and equal pay. But it did not oppose the bill.

The enhanced system was to last largely intact for forty-five years. The arbitration system tended to provide a living family wage for most adult workers. The statutory minimum wage, following the established pattern of the Factories Act, supplied a more basic living wage that reflected the needs of younger individual workers and acted as the final backstop.

Within the life of the last generation, a substantial part of the minimum wage system has been again dismantled. This occurred with the enactment by the National Government of the Employment Contracts Act in 1991. But the statutory minimum wage has been retained. In the process of dismantling what essentially had continued to be the Liberals’ old arbitration system, many of the arguments of the 1928 industrial conference were repeated. And as previously, the powerful combination of interest groups espousing the virtues of the free market economy over government regulation and the fact of political conservatives in office prevailed over other perspectives. The retention of the statutory minimum wage at the same time also resembled the continued operation of the Factories Act and the Shops and Offices Act after 1932. The statutory minimum wage provided a concession to the likelihood, strongly supported by historical experience, that some employers would exploit a fully free labour market and drive wages down to socially unacceptable levels. The danger for National and its allies was that exploitation could generate an effective political reaction to the newly deregulated employment relations framework. This possibility later sparked the introduction of a youth minimum wage in 1994. Nonetheless the fundamental inclination of the business and employer interest groups and the National Government to eliminate regulation remained evident in its failure to maintain the value of the minimum wage against a rising cost of living.

By the seismic standards of the 1935 change in power, the election of a Labour-led Coalition Government in 1999 has since resulted in a modest reversal of the National Government’s policy. This time there has been no restoration of arbitration system. Instead the focus has been on enhancing the statutory minimum wage. This has involved increasing its real wage value, increasing the coverage of the protection, and increasing the regulatory detail of the measure. The policy appears to be a work still in progress.

In general, the minimum wage has been an issue of hard times. Its importance has reflected social and political reaction to poverty and distress. This particularly applied in the Wakefield settlement periods and the Long and Great Depressions. Work did not provide the means of living. This was the case not only for the worker but also those who depended on the worker for their livelihood. The issue remains alive today because of the fear that without the minimum wage, wages will be driven down by exploitative practices by employers, especially in times of general or localised unemployment, and they will again not provide adequate means of living.

The argument against the minimum wage that it exacerbates unemployment has been repeatedly made. Employers cannot or will not continue to employ workers when the cost of their wages eliminates the profit to be made from their labour. For the present, the issue has been resolved in favour of a workers’ right to a living wage. A business must pay a living wage regardless of its ability to make a profit. The matter is not as stark as this equation has sometimes been taken to imply however. To some extent there has to be a question as to whether a business that cannot provide a profit to its owners and a living wage to its workers should continue. But generally businesses are not faced with impossible minimum wages that inevitably force them to shed workers and ultimately force them to the wall. At least for businesses, there are options prior to going out of business of not only downsizing but of refocusing and reorganising. Further, although Governments are now mostly loath to provide direct subsidies to specific businesses during periods of unprofitability, they have provided and still provide assistance by indirect means. These include changes to tax structures, marketing initiatives, and targeted industry development assistance. They could do more if they chose. The impact on businesses of completely supporting a family living wage is also softened by government policies of supplementing wages through the social security system such as targeted family assistance programs. These policies reflect how far the administrative and financial capacities of governments have grown since the first days of the European settlement of New Zealand and, underlying this, the substantial legacies of the early Liberals and the first Labour Government.

Equality of sacrifice was another point made in the historical case for the minimum wage and continues to resonate. In the context of the Great Depression, Labour emphasised the divergent experiences of reduced wages for some workers and not others, and the increasing profits of some businesses. Similar questions are asked today. Opposition to the minimum wage and resistance to raising low wages appears alongside acquiescence and approval of large payments made to workers at the upper end of the labour market and the extraordinary returns of some businesses to their shareholders and owners. A question of equality of sacrifice also arises in relation to the proposition that the elimination of the minimum wage resolves the problem of unemployment, particularly for vulnerable workers. The concern here must be the inequity of relying for a resolution of the difficulty for one disadvantaged group, the unemployed, by increasing the pain for another disadvantaged group of workers, the low paid. The removal of the minimum wage is to remove a barrier to even lower wages. Thus already minimally paid workers receive lower wages, while those currently unemployed receive work but also at wages at very low rates. Application of the principle of equality of sacrifice would suggest a minimum wage and support from the broad community for the unemployed focusing on such issues as immediate income needs, retraining, assisted employment, and relocation.

A further feature that reflects on equality of sacrifice has been the source of the opposition to the minimum wage. The prime opponents have always included employer and business groups and their political representatives. The weaknesses in the advocacy from these sources include: self interest in the debate as direct beneficiaries of lower wages (given labour costs affect the level of returns to the owners of capital); a social and economic advantage in the community that distances the critics from the experience of low paid and unemployed workers and the payment of the minimum wage; and an often linked advocacy of tightly constrained and minimised social support for the unemployed and the poor, even when the administrative and financial capacity of the modern state allows otherwise. The advocates appear not to want to assist poor workers through a minimum wage or by other means. The prime motivation appears to be that little or no support ensures punitive pressure to participate in the labour market. The advocates also obtain a direct benefit from reductions in social support in that they reduce or limit tax obligations. Similar concerns and advocacy prevailed with the enactment of the New Poor Law in 1834.

The history of the New Zealand minimum wage merges easily into the contemporary context. The experience tells us much about why we have the minimum wage and its continued relevance in our modern economy. This includes the unchanging fundamental features of our economic society that produce both the need for basic support and basic contrary emotions and impulses. And yet against these features there has been significant and effective change driven by determined human action.

In that this essay is primarily history, it is only appropriate that the old activists, now long in their graves, should have the last word. Waddell, Reeves, Savage, Nash and the others were the good men who provided the legacy of the minimum wage not because they were pious but because they worked hard in the service of their community and particularly for those least able to help themselves. Indeed Gustafson, Savage’s biographer, provides a detailed portrait of a man who knowingly sacrificed his life in this cause.