How will the minimum wage increase affect ECE?
01 April 2019, by Jitbug
The effects on the ECE sector
Minimum Wage Increase
In 2018 the NZ Government announced the minimum wage will increase to $17.70 an hour in April 2019 - an increase of $1.20 per hour.
With this increase, many ECE owners are left wondering how this additional cost will affect their business.
While there are many owners who began their journey in ECE as passionate educators, ECE centres have been seen as a profitable business model in NZ for some time. As a business model, the minimum wage increase with undoubtedly affect the bottom line of many centres, and could be a determining factor in whether they remain open and profitable, or struggle to survive in the current ECE climate.
The already low pay rates in ECE are a complicated issue that delve deep into funding and political issues and gender-gap pay discrepancies. How do we, as a sector, combat this and support our qualified teachers in receiving fair pay alongside primary and secondary teachers?
What we do know is that the change in minimum wage will mean new processes for ECE centre owners and managers when hiring staff, contract rates and budget adjustments. We offer some practical advice on how to cope with these changes, and our hopes for the sector in the long run.
Current ECE rates and issues
The minimum wage for all workers in NZ will be $17.70 next year. The minimum wage (attestation) of a qualified ECE teacher set by the Ministry of Education is $19.74/hour with a higher diploma of teaching, and $21.65/hour with a 3 year degree.
A survey by NZEI of early childhood educators revealed widespread low-pay across the sector, with some are earning below the minimum wage and others paid below the already low minimum rates for the sector. Some qualified teachers are paid as little as $16.75 an hour, which is below the minimum rate for diploma qualified teachers of $19.74 an hour.
Of the qualified certificated teachers surveyed, 12% are being paid just $1 an hour more than the minimum rates for degree qualified teachers, including those in leadership positions. The minimum rate for a degree qualified teacher is $21.65 an hour.
Passing costs on
Within the ECE sector wages are already the largest outgoing cost.
Qualified ECE teachers are hard-working, highly skilled educators with constant regulatory expectations to remain current with teacher registration requirements and whether or not they are compensated fairly is already debatable. By raising the minimum wage, these teachers will now only be compensated a mere $2.04 more than unqualified support staff.
This leaves us with one conclusion - by raising the minimum wage for unqualified staff, we must also raise the contract rates for our qualified teachers, though this is easier said than done.
With no sign of an increase in funding, these costs may need to be passed on.
1. Raising Parent Fees
Though this is a sensitive subject, there are only two ways of increasing incoming profits and sustaining an ECE centre through a wage increase - with additional government funding or by raising parent fees.
We recommend discussing this across your board of shareholders, within your community and shareholders and undergoing a thorough consultation process. Many families are already struggling with the growing cost of living, and moves that increase ECE fees may back-fire by reducing children’s participation. However, the funding needs to come from somewhere.
2. Check current contracts and update if necessary
The NZEI survey shows that some educators (qualified teachers) are on rates lower than the new minimum wage. We recommend a thorough review of current contract rates, updated immediately. Back-pay may be required for some staff.
3. Consider the living wage
The living wage in NZ is $20.55/hour. A living wage is the income necessary to provide workers and their families with the basic necessities of life. Consider this becoming the baseline for unqualified workers in education in your centre.
4. Budget Adjustments
A minimum wage increase will not just affect unqualified teachers - this will have a rollover effect on kitchen and administrative staff, cleaning, any outsourced positions, relief teachers, and (as discussed above) rates for qualified and experienced teachers. Ensure your budget is up-to-date for the 2019 changes and adjust running costs as needed. Many other businesses may raise their prices to reflect this change - all of which will affect your bottom line.
5. Support the NZEI
Whether or not you are a member of the NZEI, their new ‘Fair’s Fair’ campaign incorporates all within the ECE sector, in their battle for fair wages and pay equity. This is an unprecedented show of unity and one that, with support, is one of the best options ECE has in securing better ongoing funding. Learn more here.
ECE Funding Raise
Ideally, it would be essential that ECE centres had their operational funding increased in Budget 2019 to cover the pay rise.
“Schools and centres run their budgets on a knife edge, so any increase in staffing costs without a sufficient funding increase will mean cuts have to be made elsewhere,” said NZEI Te Riu Roa President Lynda Stuart.
Among 1059 qualified early childhood teachers surveyed by NZEI, the median wage was $25 per hour.
While pay equity and the raising of the minimum wage is vital in decreasing the pay gap in ECE, funding from the government needs to reflect the changes in the living wage. The training and professionalism required for qualified ECE educators need to be recognised.
This rhetoric is growing old - the private ECE sector is underfunded and unfortunately only one of the detrimental effects of this is the low-pay across all educators. Read more here.
A separate survey commissioned by NZEI showed that 80% of participants agreed that early childhood teachers need a pay rise - with 90% of them agreeing that more money should be allocated to increase the salaries of ECE teachers. Participants with children currently in ECE most strongly supported this, with 90% agreeing with this statement.
This tells us that parents strongly back the need for a sector-wide pay increase - not just those at minimum wage.
The minimum wage increase will have a huge affect on ECE centres and the resulting profit for many businesses in the sector. While we know that unfortunately funding rates won’t be climbing anytime soon, centres may be looking into an increase in parent-fees to rectify their costs. An overwhelming number of parents support a pay increase for ECE teachers, however an increase in fees may result in an aversion to participation and a drop in roll numbers overall.
There is no one size fits all bandage for this problem, and besides following due diligence with contract obligations and budget adjustments, each centre will have to adjust individually in a way that best suits them. As a private sector, this is ultimately the responsibility of the owners and governance of each centre, and as we know a government funding increase to support us may be a long time coming.
People deserve the minimum pay rate to rise, and qualified teachers deserve a comparable adjustment. The minimum attestation rate for ece teachers is getting smaller and smaller in comparison to minimum wage work.
Government funding is an urgent matter that needs addressing as soon as possible.
We’d love to hear your take on how you are adjusting and steps your centre has taken to absorb these additional costs. Join us on our Facebook community group with other like minded professionals for supportive discussions on this blog, resources, tips and advice.