Monday, December 30, 2013

Brown's Living Wage policy gets shelved

Len Brown has suffered another defeat. His living wage policy for Auckland Council employees has been indefinitely shelved by his councillors; NBR reports:

A “living wage” policy is no longer on the agenda of the Auckland Council, with a majority of councillors rejecting the move.
It has been greeted with relief by the business community, which opposes paying up as much as $5 an hour more for no extra work.
The Auckland-based Employers and Manufacturers Association says lifting pay rates will be inflationary and have many unintended consequences.
“A living wage is simply a creative way to raise minimum wages,” says EMA chief executive Kim Campbell. “But its knock on effects would be far reaching, and they are widely misunderstood.”.
He says lifting the lowest hourly rate paid to council workers by $5 an hour will effectively mean raising all pay rates by the same amount.

“The tax system would confiscate the benefits for the people it was intended to help as Working For Families payments reduced,” Mr Campbell says. “Other welfare payments such as accommodation allowances would also rapidly disappear as incomes rose.”
A majority of councillors agreed and in a voted 11-10 to block the “living wage” move from being incorporated into the draft 2014/15 annual budget.
The two leaders of the anti-Brown faction, Cameron Brewer and Dick Quax, proposed the move, which means the council will have to do remuneration policy work first as well as comprehensive cost/benefit/impact analysis.

And Auckland ratepayers ought to be grateful to Cr's Quax and Brewer; read on:

Councillor Brewer says the “living wage” policy would have a real impact on residential rates in 2014/15 but this will no longer happen.
“We’re doing the work first and that’s a great outcome and reflects much a better process,” he says. “What’s more, Auckland businesses concerned about the knock-on effects can now stand down and see what council reports and policy work delivers next year. 

Cr. Brewer touches on the major pitfall of the living wage. It is not feasible to simply and artificially increase the wages for some, without expecting there to be impacts downstream. We've costed the effect of a living wage on our own businesses. And even though we only have one staff member earning less per hour than the proposed living wage, the cost for us if we preserved everyone's margins (which exist for a reason) would be in the region of $150,000 per annum. We simply cannot afford that.

We've seen the situation in Wellington where the Council has voted for the living wage. But one of the councillors who supported the proposal, Cr Mark Peck will not pay the living wage to staff in the cafe he owns because he would have to raise prices, and that would drive his customers away. That is madness, but it also illustrates how futile this political campaign is.

The Auckland councillors have made a very sensible and pragmatic decision. And the lame-duck Mayor is the biggest loser, with a flagship policy getting voted down.


bsprout said...

When 50% of New Zealand children experience poverty at some stage in their lives and 25% do not have basic needs met (their own bed, regular meals or shoes), something needs to happen. The recession ended for our very wealthy three years ago and the trickle down hasn't happened.

Why is it not a reasonable expectation for working people to earn a living wage? Why should the Government spend $7 billion a year to top up incomes (working for families etc) and pay a housing supplements for those who can't afford rent in a market where houses are in short supply?

It seems a chicken and egg situation where no one is prepared to lift wages and yet because disposal incomes are limited there is not enough money circulating to lift our domestic economy.

With income inequality increasing far faster in NZ than most OECD countries, surely lifting the minimum wage would make sense especially for the large businesses that tend to pay the lowest wages but can afford to pay more (fast food industry, supermarkets, rest homes etc)?

Keeping Stock said...

Here you go bsprout; I'll adjust my staff's pay so that everyone gets at least the living wage but percentage margins are preserved. But you can choose which staff I lay off to cover the $150k shortfall I will have. And when you've done that, you can tell them, and explain to their partners and children why I had to let them go; fair enough?

bsprout said...

KS, I posed some questions, seeking some sort of answer and you decide that I am asking you to sack a staff member. From what I can tell, most SMEs pay their staff good wages. The employers who pay the least tend to be corporates and large businesses that can afford to pay more but use any opportunity to keep wage costs down. When the Government reintroduced youth rates it was the likes of Countdown that eagerly embraced them despite hefty profits.

Ursula said...

Is it true that organic farmers lead the way by paying the living wage to all people who work on their properties?

Anonymous said...

BS you are simply promoting bs again.

First your measure of poverty is falacious at best. If the minimum wage was $1,000,000 we would still have 50% of children experiencing 'poverty' by your measures.

The problem quite simply isn't wage levels. An MSD report in the mid 2000's (that was shelved because it didn't suit the Liarbour/Greens agenda at the time) showed that welfare was the problem. The report found that families on welfare have worse outcomes than working families on similar incomes. And this was before the GFC.

What you are promoting will simply make the outcomes for families worse with more forced on to welfare - or is that what you really want as it will increase your potential voting block? Suggest you take a long hard look at the outcomes your party is promoting and why they may want them.


Keeping Stock said...

Thank you for providing some facts Paranormal, as opposed to bsprout's rhetoric.

@ bsprout - see above. You simply cannot have some sectors paying a living wage, and others not. In short order, people will migrate to jobs with the big payers, and small to medium sized businesses which are already fighting to keep their heads above water will be unable to attract staff because they cannot compete.

You cannot simply legislate for a high wage economy. Businesses will inevitably hike their prices in order to be able to remain viable, and wages will flow out of people's bank accounts faster than they already do. Instituting a living wage would be hugely inflationary, and will achieve nothing in the long term to ease poverty.