Flawed concept a real worry

Last updated 07:29 28/02/2014

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Living Wage chickens are coming home to roost for Wellington City Council, writes Raewyn Bleakley.

News that Wellington Council faces a Living Wage blowout should be a real concern for ratepayers.

It should also be a concern for ratepayers in other cities where councils are considering following Wellington's example.

There is no doubt that the concept of the Living Wage is well intentioned. We all want everyone to be rewarded with higher wages as the economy improves.

But the concept is flawed, and Wellington Employers' Chamber of Commerce expressed its concern when the proposal was made.

Where was the money coming from? What would happen to pay relativities? What was the downstream effect when it was extended to Council Controlled Organisations and council contractors? Should workers get a rise without any increase in productivity? Wage increases should be about performance and productivity. This is not what the Living Wage is based on.

The council, in its wisdom, chose to ignore those questions and went ahead and voted the Living Wage in anyway.

It has been just two months since the $18.40 Living Wage, as promoted by Living Wage Aotearoa, was adopted, but already the whole idea is poised to come back and bite councillors on their backsides. That's because, having signed up to it, they now have no option but to accept whatever figure is calculated - by a political lobby group.

They are locked into a situation where that group is effectively setting the council's wages budget.

It's a crazy situation. But it gets worse.

Further analysis of the report released by Living Wage Aotearoa shows that the methodology used to calculate the increase to $18.80 rate appears to be different to that used to calculate the $18.40. Using the original methodology, a figure of $22.89 an hour is produced.

Surely, if the methodology was sound (as the council has stated), the figure of $22.89 should have been adopted.

The fact that it was not is further evidence that the whole approach is flawed and is a totally unacceptable way to set council pay rates. The question has to be asked why the higher figure was not used. Is it because it was realised it would be unacceptable, even to the councillors who voted for it, thus threatening the very foundation of the whole idea?

Many ratepayers, including those on fixed incomes such as superannuitants, and business people facing tough times, will struggle to pay higher rates to give council staff this level of income.

A rate of $22.89 would see the lowest- paid council employee earning $47,000. This exceeds the starting salary of graduates and many other employees across a range of industries - all to be paid for by ratepayers. How is that justifiable? I have this week written to the council and asked the following questions:

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Will it be moving all staff to the new rate? If so, which rate? If not, how can it claim to continue to have "adopted the Living Wage"?

If it is moving to the rate of $18.80 what are the cost implications of this on top of what has already been publicised?

What pay rises, if any, will be given to staff whose salaries are the same or only slightly higher than the Living Wage rate?

Given that parking services are being moved in-house from July 1, what additional costs will be incurred to include this new group of direct staff?

If the council is not adopting the $22.89 produced by the original methodology, how is this justified, given the same methodology was implicitly endorsed by adopting the concept in the first place?

Ratepayers deserve the answers.

There's no doubt families have had it tough over the past few years. Many of our members who operate businesses have also had it tough - it has been hard for some to stay afloat.

We encourage them to pay workers as much as they can, and that includes the Living Wage. But that's an individual decision for them. The difference is that what the council is using is someone else's money which they are entrusted to spend wisely and legally required to spend in a cost-effective way.

Paying the Living Wage is not a wise business decision and may well be outside the legal authority of the council.

We can best achieve higher wages by growing the Wellington economy. Lifting everyone's wages is something we should all be aiming for, but it's a matter of how we do that and the basis for it. It is not done by a stroke of a pen.

Raewyn Bleakley is chief executive of the Wellington Employers' Chamber of Commerce.

- The Dominion Post

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