The Living Wage doesn’t work

“Focus on improving skills and paying what a job is worth is best way for businesses to recognise their responsibility to the communities in which they operate – not paying a ?subjective and artificial? Living Wage.”, writes?Michael Barnett, head of the Auckland Chamber of Commerce.

All businesses, including councils hire on merit, so paying a higher rate without asking for better performance is not sound business practice. Private sector businesses would soon go out of business, but councils take the easy option – they simply pass the cost on to rate payers.

“That?s why the ?living wage? is not good business, or good for business. Most businesses recognise this. “It is of concern, however, that Auckland Council and others are leading the charge on this flawed concept – they don?t face up to ?real business? price-cost pressures like other businesses do, and instead are expedient in exploiting the revenue they receive from ratepayers,” said Mr Barnett.

The $10,000 difference between the just under $32,000/year minimum wage and new $42,000/year living wage is a significant extra ?social? cost to make up.

Of course, the Auckland Chamber recognises that low wages can make it difficult for workers and their families. But Government welfare policies exist to address this, including the setting of a ?minimum? wage to prevent unscrupulous employers paying too little.

Councils adopting a ?living wage? approach to lifting living standards are playing populist politics without regard to the evidence of its distorting impacts on the wider economy.

“They would be far more responsible if they focused on encouraging low paid staff to improve their skills and ensure they receive their full government welfare entitlements. Doing that would demonstrate real leadership,” concluded Mr Barnett.

The living Wage is basically an attempt to bring in a higher minimum wage. ?And this has awful effects on the economy. ?It will drive youth unemployment up. ?It will be inflationary. ?And it will cause businesses to ?stop hiring people that need training.

Councils are specifically misguided as their whole reason for existing does not produce any kind of value. ?Its operation is a pure cost, one that has to be paid for by the ratepayers.

And when Phil Goff is already signalling a 16% bump in rates, political indulgences like the Living Wage are nothing but a form of highway robbery.