Living wage debate reignited

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Auckland Mayor Len Brown’s proposal to implement a living wage of $18.40 for the city’s council staff has stirred up the on-going debate around the issue.

The new pay-rate – which would be phased in over three years from 2014 – would apply to council and council-controlled organisation staff. However, the mayor wants the council to also look at a living wage for staff from contracted organisations.

Unions such as the Public Service Association and Service and Food Workers Union have come out in support of the measure, while the Employers and Manufacturers Association and Auckland Chamber of Commerce derided the move.

Also adding to the debate is the release by the New Zealand Treasury of its report into the living wage; which found that it does not “well target” low income families with children.

But what are the thoughts of those in the HR sphere on a living wage?

Steve Punter, owner of STA training and The People Effect, supports the living wage. Punter provided HRM Online with comments he had posted on a HRINZ LinkedIn discussion on the topic arguing that the it is a social and moral concept “that recognises that if you continue to pay wages that are so low that a week's wages will not even sustain a week's cost of living (let alone provide for any fun or provision for savings) then you will continue to have an underclass of poverty who feel aggrieved, disadvantaged and hopeless.”

“It's simply not good enough to notice people struggling on the minimum wage and walk by thinking 'you poor bugger, I'm glad I'm not where you are'. Our task is to right the wrong,” he wrote.

John McGill, CEO of remuneration and performance consultancy Strategic Pay, said his company did not take a view on the living wage debate as being either good or bad, but there were certain points to consider with the argument.

He said there are some questions around the construction of the figure calculated by the Family Centre Social Policy Research Unit. The "living wage" of $18.40 is calculated as the minimum required to meet the basic needs of two adults and two children where one parent works full-time and one half-time. However in the UK it is worked out on the basis of two adults working full time. If New Zealand were to use the UK basis it would make a difference to the figure. Also the Kiwisaver contribution has been raised to three per cent since the initial report which would also need to be taken into consideration.

McGill told HRM Online it is also important to note a potential ripple effect from any wage movement.

“Moving from the minimum wage of $13.75 an hour to $18.40 living wage, that’s a nearly 34% movement at the extreme,[when] you start doing large increases you will have effects on other related groups in terms of relativity of pay so we would highlight that as a potential issue,” he said.

That effect has been seen in the past when the health sector gave nurses a pay increase.

“The ripple effects were felt over four or five years where other groups that had relativity relationships with nurses pay said ‘well if it’s good enough for them, it’s good enough for us’. The people the nurses reported to suddenly found themselves on similar pay or even a bit less and they complained,” McGill said.

Commenting on this, Punter said those above the living wage are already being compensated more fairly than those below it.

“Yes, I understand that there will be those who 'have a margin' and will want to maintain that, but I would ask those people to understand that bringing people 'up' to a Living Wage is righting a wrong, it's fixing a basic injustice,” he wrote.

The living wage inevitably leads to a lot of emotive comments, particularly around high paid individuals, but McGill suggests it would be worthwhile to focus more on the group that would be addressed by the living wage then get caught up in a debate of the high pay of others.

“People do get very emotional about it I think there are some good issues. I think a lot of things about the original report are good that are worth looking at, and people should read it and its a useful contribution,” McGill said.  “We need to consider it calmly and quietly and if it needs some more work, and I think it does, that work should be done. It may give different results.”

While the debate still rages McGill said it is “critical” HR keep on top of the on-going discussions so when the CEO or board asks for information they can inform them correctly.

“For some organisations it won’t affect them at all, but for some it could be potentially very serious,” he added.

And don’t expect it to disappear of the radar anytime soon, McGill warns.

“It will ebb and flow, I don’t think it will ever go away - low pay is an issue and we need to discuss it and work out what we’re going to do,” he concludes.

To read the Treasury report on the Living Wage click here.

To read the Family Centre Social Policy Research Unit living wage report click here.

Further reading:

Can businesses afford a ‘living wage’?

The Warehouse Group pledges to pay a ‘living wage’

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