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.