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Q+A:Panel response to the Andrew Little interview

Published: 2:45PM Sunday October 06, 2013 Source: Q+A

In response to ANDREW LITTLE interview

SUSAN Welcome to the panel now. Dr Jennifer Curtin from Auckland University; NZ Herald columnist Rod Oram, who hasn't been on the programme this year, so welcome; and Matthew Hooton, political commentator. Interesting interview there, I think, Matthew, with Andrew Little. 'We support the Living Wage Campaign,' but not saying if Labour were to get into power, they'll be leaping in, giving everybody $18.40 an hour.

MATTHEW Well, they're stepping back from the rhetoric of the Labour leadership campaign where the commitment to the living wage was somewhat stronger than that. Now it's surrounded with words like 'over time' and 'support the campaign' and 'progressive' and this sort of thing. So, yes, they are stepping back from it.

SUSAN But he made a fair point, didn't he, that one of the major problems with NZ is our low wage.

MATTHEW Well, I think the most important thing if we'd just discuss this is to understand just how radical the policy as $18.40 minimum wage would be. You know, NZ already has the fourth-highest minimum wage in the developed world by some measures.

SUSAN That is relative to average wage?

MATTHEW No, no. We're the highest in the world relative to average wage.

SUSAN Hang on, I'm going to argue the numbers on that.

ROD ORAM - NZ Herald Columnist

I disagree with that entirely.

MATTHEW Well, you go to the OECD data - that we have the fourth-highest minimum wage in dollar terms in the world.

ROD In the history of the minimum wage in NZ, Matthew, there has been a collapse in the ratio of average wage to minimum wage, and that's the issue here. I'm afraid what's missing through all of this any economic sense. There is an economic imperative to this, because paying a higher wage, if an employer can afford it, is an investment in those people, and there is much better productivity. That's why The Warehouse is moving to it. Furthermore, it's really important to see that this is not moving the minimum wage. It recognises that there are proportion of jobs in the economy which can only just manage the minimum wage, and then it's taxpayers who have to pay the subsidy for that employment through the likes of Working For Families. Living Wage is about getting intelligent employers to invest in their workers so they're more productive, and I'll give you an example. The Selwyn Foundation here in Auckland and across the country is a health care provider. It is very dependent on government contracts for that. But because it moves its new employees through training and qualifications, it very rapidly moves them to over the living wage in a three-year period. That's the sort of approach that works regardless of how tight government funding is. And so it's really important to see it a) as an economic imperative-

MATTHEW Our minimum wage-

SUSAN Let's get Matthew in here.

MATTHEW Our minimum wage is currently 50 per cent of the average wage. It's $13.75 compared with $27 an hour. It is the highest minimum wage in the world as a percentage of the average hourly rate. That is the data. It is the fourth-highest minimum wage in the world in dollar terms, behind only Australia, Luxemburg and Monaco. So just be aware that if you are going to advocate, as Labour sort of was but now isn't, that we should move the minimum wage up even to $15 and then above, it is a very radical policy, and that's fine. Political parties in NZ can advocate radical policies. They may wish to see this similar to 40-hour working week or giving women the vote. They may wish to see this radical policy in that context, but they can't deny, they can't pretend it's some sort of catch-up with the rest of the world, because it's not.

SUSAN Should it be, and we're talking, really, local body here, specifically - we know Wellington's involved. It seems Len Brown over the weekend or at the end of last week said, 'Yes, I believe in it,' but not that that means Auckland will do it in any way, shape or form, can I say, because there's real division there, but is it something local body should be leading, and is it something the ratepayer should be picking up?

ROD It's up to all employees and employers to work out-

SUSAN But I'm asking you specifically about councils.

ROD Yes, there is a great role there, and I would suggest central government could do that as well, or should be doing that as well. But again-

SUSAN So you, as a ratepayer, are happy to pick up I think it's a 1 per cent rates rise it would cause?

ROD Not necessarily, because of the productivity issue. Because all of these calculations, such as Simon Bridges', that this $2.5 billion and 26,000 lost jobs, assumes that nothing else changes. But the whole history of the living wage around the world over the last 25 years is that it increases productivity, and therefore it's payable.

MATTHEW If you increase productivity, then wages can rise, and if people can afford to pay this, that's one thing. But you can't say, as it's sort of implied, that this is costless, that somehow by paying people more that will force greater training in the workplace, that it will add to demand in the economy. You know, if it was costless to do this, everybody would immediately say, 'Let's go to $18.40,' but of course there's a cost. It's estimated to be 26,000 jobs by NZIER. Well, that might be too high; it might be too low, but I don't people can say, 'Oh, well, we can raise the living wage or the minimum wage, and it's not going to cost the economy anything.'

SUSAN Right, let's bring Jennifer in here - you're laughing at these two debating away - around the politics behind this. Because Matthew has a point. We certainly saw in this studio, 'Yep, we're in for the Living Wage' and Andrew Little pulling it back. It's something, I guess, every government would like to do, but there is going to be a cost to it.

JENNIFER Yeah, there is. I think the thing, though, is that councils, the mayors that are running on it, if they get a mandate to do it, then they can take that up. I mean, they're being elected on a campaign for a living wage. I do think also we do see the minimum wage is a different thing to the living wage, and what we know about the Living Wage Campaign overseas is that it's not just unions and Labour Parties that are advocating this. It's a much broader section of society, and organisations that put this in place become accredited. So it becomes a market mechanism, in some ways, as well. That if The Warehouse is paying $18.40 an hour, then perhaps I'm going to shop at The Warehouse because I know they pay the living wage, and not shop somewhere else. So there's other aspects to this campaign that are much more than just economics, and they do give consumers a choice.

ROD And I'll shop at The Warehouse not because they're paying more than $18.40 an hour, but I'll shop at The Warehouse because the staff there will give me better customer service than anywhere else because they are being engaged and trained. That's why I'll go to The Warehouse.

SUSAN Are you nodding in agreement there, Matthew?

MATTHEW If you think that as a result of them getting $18.40 an hour, they will give you- that's your prerogative. You're involved with the campaign, so you probably have the best feeling for it. But the Anglican cleric who put this proposal together, the Reverend Charles Waldegrave, I mean, he's very clear, and that's the point that you were making. The living wage is not just sort of a minimum wage. It allows you to be socially engaged, it allows you to have a computer in the home, it allows you to pay for all the kids' school trips, it allows you to go to the pub once a week, and it is designed to be a wage that allows you-

SUSAN Have a life.

MATTHEW To be engaged. Now, whether that should be the minimum, as it seems like some of our city politicians are saying, or whether there should be a gap between what some people earn and what the so-called living wage is, is to be debated. But, again, you just can't say it's costless, and that seems to be the implication.

SUSAN Quick last point, Rod. Go on.

ROD I'll give you an example, and it's one of the best case studies-

MATTHEW What a wonderful world we live in that it's costless.

ROD Matthew, please, you know, listen for a moment, because you're not very good at that.

SUSAN Ooh.

MATTHEW Rod, it's your campaign, so-

ROD It's not my campaign. There are all sorts of academic studies by serious business schools. One of the most interesting ones is comparing Sam's Warehouse and Costco, two enormous warehouse retailers.

SUSAN In the US.

ROD Costco had 38 per cent fewer employees than Sam's Warehouse, had a radically lower turnover of staff, had radically lower pilfering, radically higher customer satisfaction and profits. That is exactly what happens when you invest in people, and unfortunately, there are some employers out there who are happy to just bob along with the market knowing that the minimum wage is going to be very handily covered by taxpayer subsidy, which is exactly what goes on with Working For Families. This is to say people should earn that living, not have it topped up.

MATTHEW That is an argument for investing in people. You've got things round the wrong way.

SUSAN We will carry on in the break, panel, thank you.

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