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Auckland Council’s ‘living wage’ policy put on hold

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.

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. 

“As part of the government’s recent Better Local Government reforms to strengthen governance provisions, councillors can now set an overall remuneration policy, which includes setting staff numbers.”

The council’s chief executive will now prepare a detailed the costs and wider implications on the council, the business community and the region of the “living wage” policy.

More by Nevil Gibson

Comments and questions

The current tax structure is flawed.

The main benefactors to low wages are overseas owned businesses. The current tax system subsidises their businesses.

Bring in the living wage, but keep the dole the same. It would encourage more people into work.

Increased wage costs would be the same for everyone, and past on to customers. There would be a one off inflationary adjustment, similar to what happened when GST increased to 15%.

We would then have a more efficient economy, with less subsidised businesses and less government workers needed to redistribute working for families payments.

Or the government could stop setting prices like the soviet union, cut taxes and let people keep and earn the value of their labour. Presently alot of 'low income earners' are net tax recievers because of all the entitlements, therefore it is no surprise that they are willing to and advocate 'higher taxes'.

The benefits could be reformed substantially, for instance the unemployment could become a job seekers allowance similar to the UK wherebye you loose eligibility if you refuse a job/interview. Furthermore its members could be pooled into a temporary worker, workforce like alliance workers, and the revenue of such activities could be used to reduce the schemes cost.

National is not a right wing party. They are an extremist party of big taxes, big spending, big government and small rights. And they are trying to create a vinear of fiscasl responsibility through the sale of state assets to balance the budget without making any real cuts in expenditure. Furthermore they plan on continuing this through the provision of oil drilling.

Meanwhile people continue to move across the ditch to pursue a better life in the more free market Australia and education results are declining! Its time New Zealand moved to a ticket system for things like education and healthcare where such services remain publicly funded but are opened up to the efficincies of a competitive private sector!

What a pity that the little old thing called," The Market", intervenes with your dream.

Great work by Cameron Brewer and Dick Quax!

Wouldnt have either of these politicians near my business.

But maybe you would, to keep sudsidising your profits, and third world agenda for NZ inc.

Good luck with your labour exploitation. Changes are it will catch up with you in the longer term.

Correct decision because it would have cost jobs, and been inflationary/even higher interest rates, but isn't it an indictment of the system that's been created that any talk of higher wages is bad because entitlements/work for families would be reduced.

Richard, since you can see that the cost of the "living wage" would be passed on, why can't you then see that these same increased prices would lead to demands for the living wage to be increased to compensate?

It's a great way to start an inflation spiral, but little else would be achieved.

It would only be a one off inflationary adjustment.

Have you forgotten what the effects of a rise in GST were?

There is not enough of a difference between the dole and the current minimum wage, when you take account of other subsidies available, to encourage people into work.

And why subsidise overseas owned businesses. Money is better circulated locally.

Well if 'living' includes expensive mistresses, hotel upgrades, late lunches then a rates revolt is probably not far behind.

'Living' is an arbitrary and subjective concept, socialists of every colour will love it. Your living is my living, a free ride for all, it'll be Nirvana in Auckland!

Nothing stopping you Richard. You are perfectly free to employ as many people as you like, and pay them as much as you like. Your last sentence has me baffled. I'm just a little unsure of how businesses can be less subsidised, considering they are not subsidised now, and I think you probably mean fewer government workers.

While I disagree with Richard's thrust, I do accept that WFF and other tax credits are a pseudo employment subsidy. They enable people to 'live' on low (or lower) wages by propping them up with a subsidy paid for by tax payers (read: business and people who earn more that $60,000/yr). When the tax system means you get a net take-home-pay cut by working longer or harder (or retraining and getting a promotion), why would anyone seek to advance themselves? And why work at all if you can get a similar take-home, after-tax 'pay' by sitting at home? Cutting taxes is much more efficient that taking from the 'rich', or from the worker, and giving to those who can't or don't want to work. But it will be a brave government that proposes such a plan. Highly, highly unlikely in a democracy where only 10% of voters pay 70% of all income tax and 43% of voters (households) receive more in tax credits or benefits than they pay in tax. (The recent budget tables show that the average income tax paid by the bottom 75% of individual taxpayers is $2,740. The average tax paid by the top 5% is $42,430)