Nicola Young on living wage

January 14th, 2014 at 11:00 am by David Farrar

Wellington City Councillor writes in the Dom Post:

Councillors often stress the need for evidence-based, reasoned and clear decisions; correct process; and the need to avoid writing blank cheques but there was little – if any – consultation and analysis of the impact this wages policy would have on Wellington households and businesses. Ironic, considering the council has also committed to the capital being “open for business”.

Mayor Celia Wade- Brown has defended this Alice in Wonderland approach by pointing out the council didn’t consult on the chief executive’s salary either. The reality is that the CEO is paid the going rate in a competitive international market, whereas the “” is an artificial intervention to boost incomes of lower paid workers who happen to work at the council.

The “living wage” proposed by the Living Wage Aotearoa New Zealand Campaign, is higher (relative to GDP per capita) than the United States, United Kingdom, Australia, and Canada. Incredibly, ours is higher than London’s; the 18th most expensive city in the world (Wellington is ranked at 74th in Mercer’s Cost of Living survey).

The Council voted to outsource their wages policy to Rev Waldegrave. Whatever he says they should pay, they will pay it. It is the opposite of evidence based policy.

A review of the research that produced the New Zealand rate of $18.40 by researcher Brian Scott concluded the rate is over-stated and questioned its method and data (as did Treasury). It also questioned whether conclusions reached from overseas research on productivity, morale and poverty could be safely applied to New Zealand’s situation.

Preliminary research by the Auckland Council came to the same conclusion. Not everyone would agree that Sky TV, pets, international travel and video games are “basic necessities”; some expenses – childcare costs, for example – are counted twice and money is allowed for building and mortgage insurance, despite the stated assumption that recipients are tenants.

Good to see politicians taking notice of the Scott analysis.

Wellington may be a comparatively wealthy city, but with an older population; much of the council’s largesse will be funded by pensioners struggling on fixed incomes, well below the “living wage”.

The “living wage” is a one-size-fits-all tool, based on a two-adult, two-child family.

The reality is that almost 80 per cent of those earning less than $18.40 have no children; many are students living at home.

The concept of a single living wage is fundamentally flawed. Each different household composition will have its own level of needed income. A family of four has different needs to a single 18 year old living at home.

Wage policies shouldn’t be based on emotional arguments; it should be based on careful analysis and facts. The lack of consultation, research and analysis of this policy is a failure of governance, and will damage our city’s economy and reputation as a place to do business. The “living wage” policy is a poor solution looking to solve a complex problem.

Well said.

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18 Responses to “Nicola Young on living wage”

  1. scrubone (2,971 comments) says:

    A family of four has different needs to a single 18 year old living at home.

    Quite. Insisting that both need the same level of income to “live” is self-refuting.

    But I’ve noticed that self-refuting is all the rage these days in some circles.

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  2. redqueen (347 comments) says:

    Wellington Council, like most councils (and organisations for that matter), would love a silver-bullet. So yeah, a simple solution for a complex problem is great. Forget the details! Much easier to have a slogan or catchy-name than actually do any analysis or, more particularly, work!

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  3. wreck1080 (3,533 comments) says:

    “The concept of a single living wage is fundamentally flawed. Each different household composition will have its own level of needed income. A family of four has different needs to a single 18 year old living at home.

    I don’t buy this argument, everything is flawed in some way.

    Take interest rates, they apply nationally despite differing requirements in the components that make up our economy.eg Auckland housing market should have higher borrowing rates than in the regions.

    I disagree with having a minimum wage for other reasons though.

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  4. Nigel Kearney (747 comments) says:

    This kind of calculation will always involve making assumptions and some of those assumptions will be open to question. The problem here is not the existence of questionable assumptions, it is that all of them are (almost certainly intentionally) skewed in the same direction.

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  5. Peter (1,471 comments) says:

    A comical aspect is councillor Mark Peck’s stance:

    http://www.stuff.co.nz/dominion-post/comment/editorials/9532362/Editorial-WCC-living-wage-no-panacea

    Newly-elected councillor Mark Peck, one of those who voted for the increase, has already said he will not be offering it to the staff who work in his Wellington cafe.

    There is a good reason for that. His business cannot afford the cost. If he puts up wages, he will have to put up prices, and if he puts up prices, his customers will desert him for less expensive eateries.

    What a guy…..

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  6. PaulP (126 comments) says:

    I agree Peter @11.49am

    As I said on a previous thread about Mark Peck – the WCC “customers” (ratepayers) may do the same thing that Mark Peck is afraid of. Desert the WCC in favour of another supplier (city).

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  7. Albert_Ross (178 comments) says:

    Focusing on the calculation methodology implies that the concept would be OK if you could get the calculation right, perhaps allowing for flexibility so as to enable responsiveness to different individual circumstances.

    But the flaw is actually more fundamental than that – the concept rests on the idea that people should be paid according to what they need, rather than according to the value of the work they do. That simply encourages people to exaggerate their own needs and disincentivises them from seeking to do better-value work.

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  8. Tom Jackson (2,263 comments) says:

    I don’t buy this argument, everything is flawed in some way.

    Yes, looking at her background, this woman is a silly, pompous, spoiled wench who likely has no idea how the other half live. Back in the day a working class man’s wage was intended to support a whole family and was priced accordingly. This was good news for single men and those with no children, but the economy didn’t collapse because of it. Hell some places even had different rates for married and single workers.

    There are many sectors in which people are overpaid (in the sense that they are paid more than they would get through individual bargaining), and this happens for various reasons, not all of them bad. One reason this happens is that people see what others in the same profession have, and demand it, even if their work is not as good or demand for their skills is not as high (universities are rife with this sort of thing). But that’s life. Singling out council workers is just cherry picking, since the majority of people who are overpaid will be members of the university educated middle classes and the boomers. Poorer people tend to lack the cultural capital needed to exploit these opportunities.

    Secondly, we end up paying for them anyway. Every single person on a low wage receives transfer payments from the rest of us in some form or other. Either its WFF or subsidising their health care or other public services that their tax take does not cover. The only difference with the living wage is that it occurs at the front end rather than the back end. You could easily relabel the living wage as a tax employers have to pay for employing people at rates that mean the rest of us end up paying for their health care, etc.

    If we abolished the minimum wage, we would just end up paying more in tax to make up the shortfall because someone has to pay for low wage workers’ kids to go to school, for their health care, police to protect them, etc.

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  9. Tom Jackson (2,263 comments) says:

    But the flaw is actually more fundamental than that – the concept rests on the idea that people should be paid according to what they need, rather than according to the value of the work they do.

    One way or another that happens anyway, so you really have no point.

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  10. KiwiGreg (3,129 comments) says:

    “One way or another that happens anyway, so you really have no point.”

    You’re completely wrong – your argument is that society as a whole ends up “paying the same”. It’s wrong on at least two grounds – first the individuals who end up bearing the costs (for example the young and low skilled who are legislatively priced out of jobs) and second from the fact the economy as a whole is smaller under these policy settings (Greece anyone?).

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  11. ross69 (3,645 comments) says:

    “Young…attempted to delay the implementation of the minimum wage to allow for consultation. Her motion was defeated eight votes to five.”

    Hmmm sounds like sour grapes. Instead of whining about the living wage and saying it’s not applicable, Ms Young should say how it could be improved. Or maybe that is asking too much.

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  12. ross69 (3,645 comments) says:

    Presumably Nicola Young is also opposed to the minimum wage…because it’s a one size fits all.

    I think it’s safe to conclude that Ms Young would like workers to be paid whatever unscrupulous employers think is fair. Yeah let’s take her opinion seriously!

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  13. ross69 (3,645 comments) says:

    One more thing: Young stood as a candidate for National in the Rongotai electorate in 2005 (and lost) and is a Tory. Strange how you failed to mention that.

    http://www.nicolayoung.co.nz/Nicola_Young/Political_history.html

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  14. Paulus (2,299 comments) says:

    That’s what you get voting for a member of the Green Taliban for Mayor, and you will do it again next time
    I am always right because “we” say so.
    Serves Wellington bloody well right.

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  15. SPC (4,679 comments) says:

    The purpose of a living wage is, as applied in places like London, where higher living costs make the minimum wage insufficient.

    The major variable costs are housing and transport.

    However we have wage top ups from the Accommodation Supplement. So higher cost areas can have a higher level of AS. We can also have “lower wage earner” discounts on public transport (CSC holders and students) in higher cost areas.

    If one focused on wages alone – then the amount required for one person to live in a one bedroom flat etc would be the appropriate base for the minimum wage, with a higher living wage based on the same in higher cost areas. This as we use WFF to cover variable family circumstance.

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  16. OneTrack (1,979 comments) says:

    Of course 16 year old school dropouts “deserve” $18.40 an hour. The reverend thinks so. And so does Mayor Celia. Those ratepayers on minimum wage jobs should just harden up, working for council is now where its at. Hmm, wonder if Celia has included the likely wage relativity consequences. Oh, who cares, of course we can afford it – just put the rates up again. High five.

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  17. labrator (1,691 comments) says:

    Either its WFF or subsidising their health care or other public services that their tax take does not cover. The only difference with the living wage is that it occurs at the front end rather than the back end.

    Are you proposing we introduce the living wage and drop WFF, ACC and healthcare subsidies? That’s bold.

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  18. Harriet (4,010 comments) says:

    “….Are you proposing we introduce the living wage and drop WFF, ACC and healthcare subsidies?………”

    Tommy Boy’s reply………….. “yeah…nah” :cool:

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