Living wage a test of small business' mettle

19:26, Mar 17 2013

If small businesses can't afford to pay their staff a living wage, they should probably not be in business at all, a union leader says.

First (Finance, Industrial, Retail, Stores and Transport) Union general secretary Robert Reid said that while the movement supporting a living wage of $18.40 an hour minimum was generally targeted at large corporations and city councils, some undercapitalised SMEs needed to think about their business practices as well.

"Why should a worker suffer for being employed by a business that maybe shouldn't exist," Reid said.

"One which won't invest in technology but thinks it can exist because it pays staff starvation wages."

Reid was responding to earlier comments from Auckland employment law specialist Max Whitehead who said the introduction of the proposed living wage would send thousands of Kiwi business owners fleeing across the Tasman after their small businesses failed.

With most Kiwi SMEs already borrowing to stay alive and many business owners themselves taking home the equivalent of the minimum wage, the proposed living wage would be the last straw, he said.


Reid said there was a danger of having a "race backwards" if key decisions on the country's direction were based only on placating SMEs.

"We are in danger of those business owners then saying they'd be better off if the minimum wage was $10 or $5 or nothing at all." Reid added that several SME owners had already "been among the first" to commit to paying staff the proposed living wage.

One is Jesse Chalmers, owner of West Auckland company Tonzu, producers of organic tofu.

Chalmers said the company's decision to pay several of its staff the $18.40 rate was a mix of ethics and business. The crucial thing was there had to be tangible rewards for the business.

One of the key provable rewards should be a reduction in staff turnover, which was a burden for many SMEs, she said.

"Less tangible but still definitely a reward would be having employees that want to be here and who are proud to work for the company." But the increased wage bill still had to make good business sense, she said.

"As a producer of organic products which are very competitive on price with mainstream products, we have a very close relationship with our finances," Chalmers said.

"We are always looking for saving and efficiencies, less wastage. So that is where the cost of implementing the wage increase would come from.

"It's amazing how, when you really have an incentive, you can always find cost savings."

Tonzu had "eight to nine" staff, six of whom would be affected by the wage increase, which would be implemented over a year and be based on an incentive system.

"We do expect something back from our employees in exchange," Chalmers said. "It's not just a case of you get this for turning up to work."

She did not support across-the-board implementation of the living wage as it would hit a lot of SMEs hard.

It was best floated as an option for owners to consider.

"Some SMEs really struggle with their financial management as it is and these times people are struggling.

"It needs to be done carefully.

"But I think it's important to at least have the conversation," she said.

Westpac chief economist Dominick Stephens said an across-the-board shift to the proposed "living wage" would lead to increased unemployment as businesses increasingly opted for automated technology instead of paying staff, and greater reliance on imports.

"Ultimately, whether you implement these things is a judgment for society to make," Stephens said.

"Do we want a society with a greater reliance in imports, automation and [to] improve the lot of those in employment at the expense of those young people coming in?

"That's for a democracy to decide."

Large increases lifting the minimum wage above where the free market put it - "and I think it [proposed living wage] may be moving toward that" - very clearly affected employment, Stephens said. "It would worsen things for the most vulnerable members of society and improve the lot of those who stayed employed."