Living wage pays off for business

23:07, Apr 21 2014
General manager  Jesse Chalmers, right, at the Chalmers Organics factory with worker Siusiu Pusi
HAPPY STAFF: General manager Jesse Chalmers, right, at the Chalmers Organics factory with worker Siusiu Pusi.

Chalmers Organics general manager Jesse Chalmers remembers the moment her factory staff heard the company would pay them the "living wage", giving them an instant 25 per cent pay rise.

"It was not your usual staff meeting, there were wide smiles all around," she said.

Chalmers Organics was one of the first small-to-medium enterprises (SMEs) to adopt the living wage, which pays a minimum of $18.80 an hour for all staff, in response to Living Wage Aotearoa's campaign launched in March last year.

Living Wage Aotearoa encourages businesses to voluntarily adopt the higher minimum wage rate which is deemed to be provide an income enough to allow workers "to not just survive, but thrive", according to the movement's organisers.

Chalmers - the treasurer for the Auckland Greens division (see note at end) - says the decision "had huge impacts for their families and a huge jump in pay for them".

Chalmers Organics staff, at the Henderson tofu factory were largely low-skilled food process workers previously earning $15 an hour, slightly above the minimum wage rate of $14.25.


One year after the living wage was phased in staff turnover was non-existent, morale was up and the workforce is proud to work for the company. "Employees are more engaged and point out inefficiencies, which is vital for a small venture, because we can't afford to invest in bigger systems. We rely on staff," she said.

Productivity has remained "pretty stable, as they were already working very hard," and no redundancies or price hikes were required to pay for the higher wages.

Chalmers said the real savings for business, which she runs with her brother Daniel Chalmers, began to add up through reduced recruitment, training and absenteeism costs.

However, it was important to take a long-term, holistic view, because "undoubtedly, your costs will rise".

"But, we've always had a philosophy that we have responsibilities beyond our bottom line. We wanted to implement something tangible rather than just airy-fairy stuff."

The living wage had also reduced the burden on taxpayers with Chalmers Organics' nine living wage earners no longer requiring government subsidies such as accommodation allowances or tax credits.

She said those social welfare programmes effectively subsidise businesses for paying low wages.

"We didn't want to be a part of the system that creates the ‘working poor', and now our workers don't rely on government handouts, which is very freeing."

Chalmers disagreed that lazy staff members would hang onto a living wage paying job, saying a salary range exists in any industry.

Massey University management professor Jane Parker is researching living wage policies and implementation.

Parker said the living wage was an emotive issue that needed to be explored through sound research, especially when increasing inequality will be a battleground issue in September's general elections.

"A recent Treasury report argues that a living wage will do little to alleviate household poverty while adding to employer costs. Yet employers like the Warehouse Group have linked higher wages to staff retention and development," Parker said.

Parker said her research would increase economic understanding of the issue, but would also study "softer" benefits to employees such as family wellbeing and happiness.

"What we're missing is the empirical research into the process and effects of introducing a living wage. That's what we're trying to achieve with this project."

The increase in the "working poor" is what galvanised long-time union representative Annie Newman into the living wage movement.

Newman said the traditional methods of collective bargaining and minimum wage legislation were no longer as effective in lifting the median wage rates.

She pointed to research showing the minimum wage in 1946 was 80 per cent of the median wage, but has fallen to 53 per cent.

The resulting inequality was not just a social justice issue, she said.

"The UN has found that 285,000 New Zealand children live in poverty. Forty per cent of those children live in households where at least one person works full time. So this is a working and employment problem."

The movement primarily promoted the living wage to the public sector, with the Wellington City Council adopting the living wage to all direct employees by July 1. Plans to include long-term contractors are ongoing, the council said.

The organisation also highlights the wages of workers employed through third parties.

"Sub-contracting services can tie the hands of many employers, but long-term contracts, cleaning for example, do need to be included or else you further emphasise the benefits of outsourcing," Newman said.

Subcontracting was "a way out" for businesses to preach ‘triple bottom line' policies, where social and environmental goals are considered alongside profit, but not walk the walk, Newman said.

Councils were central to the movement because they hold substantial buying power through contracted services, which can influence the labour market.

Living Wage Aotearoa's certification process gives a marketable trademark to boost consumer awareness , but ensures that companies include living wage policies for long-term contractors, such as call centres or cleaning staff, Newman said.

SMEs were not being targeted by the movement, but some approached Living Wage Aotearoa when they heard about the certification process.

"Small businesses are used by politicians and lobbyists as an excuse to do nothing, so them adopting the living wage shows that small businesses cannot be clumped together. Some can pay more and not suffer," she said.

Newman said empirical research, based on the first "Living Wage City" of Baltimore in 1996, found no long- term increase in unemployment occurred when minimum wage rates increased or markets embraced the living wage.

Employers and Manufacturers Association spokesman David Lowe disputes that and said the living wage movement was more "aspirational", than practical.

He said government research had shown increasing wages to $18.80 across the country could cost 26,000 jobs.

He said the $18.80 figure, chosen as enough to feed and house two adults and two children, was "an arbitrary number matching the arbitrary concepts of what ‘poverty' or the ‘working poor' look like".

"For many businesses it would cause more pain than good."

Ratepayer or taxpayer-funded organisations like councils could afford to implement a minimum $18.80 per hour wage, Lowe said.

"Rates and taxes will just go up."

In the private sector businesses would be forced to increase prices for the consumer. "Something's got to give. These same campaigners won't like it when the cost of food or services rise because businesses are paying higher wages."

The focus needed to instead be on higher skilled jobs and higher value exports to increase wages.

Living Wage Aotearoa was attempting to "name and shame certain companies" that it thinks should pay $18.80 an hour, Lowe said.

"The guilt trip is put on them and in many cases, that isn't fair."

One of Living Wage Aotearoa's target groups is the aged care sector, where the average wage for a carer is about $15 an hour.

Newman said New Zealanders need to ask themselves whether "the skilled workers who tirelessly care for our elderly, for their families, deserve a living wage"?

Multinational aged care firms were "very profitable, but then cry poor when we start talking about wages," she said.

Metlifecare chief executive Allan Edwards, who leads New Zealand's second largest aged care provider, said the salary situation was more complex than it appeared.

Metlifecare does not plan to lift staff wages to $18.80 in the near future, but current wage levels were "not good enough", Edwards said.

He blamed government underfunding, not a lack of executive will, for stagnating wages.

The industry could not afford wage increases until government subsidies for elderly care increased.

"We aren't being shamed, instead we are working alongside unions and industry associations to pressure the Government to increase funding in the sector, for the benefit of our patients as well as our employees," Edwards said.

Business owner and Living Wage Aotearoa business certification manager, Diana Yukich said she has no problem with informing consumers about which companies offer the Living Wage , likening it to campaigns such as FairTrade or New Zealand Made.

"Businesses are big enough to take it, if they are getting called out for paying very low wages. I want customers to choose me because of my business practices and values, so ‘yahoo' to me when they do," she said.

Her family's digital printing business Optimix adopted the living wage policy over a year ago and did not have to cut staff.

"Where there is a will to make savings out there, instead of laying off staff, there is a way. In return we have seen reduced absenteeism, higher retention and a better business reputation," she said.

Yukich acknowledges the voluntary nature of the campaign and the $4.45 an hour difference between the legal minimum wage and the campaign's preferred minimum wage.

"It does come down to ethics. Optimix is trying to do better and we get rich off their labour, so we want to help our employees have a good standard of living," she said.

For Yukich the "lightbulb moment" came when she was volunteering in a church foodbank and increasingly saw employed people needing basic supplies.

"We decided we weren't OK with working class people still needing charity. This wasn't about wanting Sky TV or ultra-fast broadband, these workers wanted food security and to move out from living in a garage," she said.

This article has been updated to show that Chalmers is the treasurer for the Auckland division of the Greens. This was not known at time of publication.

Fairfax Media