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Living Wage Aotearoa
New Zealand
THE LIVING WAGE
in the People-Centred,
Smart Capital of
Aotearoa/New Zealand
Addressing inequality starting
with Wellington City Council
This report was prepared for Living Wage
Wellington with the assistance of Prue Hyman,
formerly Associate Professor of Economics
and Gender and Women’s Studies at Victoria
University of Wellington.
1 www.livingwagenz.org.nz 1
Living Wage Aotearoa
New Zealand
This paper has been prepared for Living Wage Wellington, an organisation of Wellington faith groups,
community organisations and unions. Living Wage Wellington is part of Living Wage Aotearoa New
Zealand Inc.
Supporting organisations include: St Andrews on The Terrace, St Peters on Willis, Victoria University
Students Association, Downtown Community Ministry, Wesley Community Action, Newtown
Budgeting and Advocacy Service, Healthcare Aotearoa, Newtown Union Health Service, NZCCSS,
Wesley Wellington Church, Pacific Island Presbyterian Church Newtown, St Joseph’s Catholic Church,
Caritas and Wellington Samoan Ministers’ Association, The New Zealand Council of Trade Unions and
individual unions, including The Service and Food Workers Union, The New Zealand Public Service
Association, FIRST Union and The New Zealand Educational Institute.
2 www.livingwagenz.org.nzLiving Wage Aotearoa
New Zealand
Contents
Executive summary 5
Introduction 7
Why a Living Wage in Wellington 8
Responding to the critics 11
Costs and benefits of a Living Wage 13
Direct cost to Wellington City Council 15
Implementation proposal 17
Proposed resolution 21
References 22
www.livingwagenz.org.nz 3Living Wage Aotearoa
New Zealand
Executive summary
In June 2013 Wellington City Council (WCC) a lead on the living wage. While the region
voted to support in principle a Living Wage leads the country with the highest average
Council and a Living Wage Capital. Councillors hourly wages, it does not have lower levels of
asked council officers to prepare a “Living Wage inequality. It is not acceptable that a significant
Framework” by November 2013, detailing a number of Wellington workers are part of the
phased implementation of a living wage for working poor. WCC can play a vital leadership
directly-employed council staff, staff employed role in addressing poverty and inequality and
by council-controlled organisations (CCOs) and lead the region and the country by showing the
by contractors who deliver council services. way.
A clear majority of the new council committed Adopting the living wage
during the recent local body election campaign fits with WCC’s policies,
to take all possible steps to implement the goals and strategies and its
living wage for all directly employed, CCO and short and long term vision. A clear majority of the
contracted council workers during this term. The living wage has been new council committed
successfully implemented by during the recent local
Living Wage Aotearoa New Zealand defines the
councils around the world.
living wage as “the income necessary to provide body election campaign
International experience
workers and their families with the basic
necessities of life. A living wage will enable
shows initial estimates of to take all possible
the cost are almost always
workers to live with dignity and to participate
higher than the eventual
steps to implement
as active citizens in society.” Independent
research carried out by the Family Centre’s
outcome. There are also the living wage for all
significant benefits, including directly employed, CCO
Social Policy Research Centre has identified the
lower staff turnover and
current New Zealand living wage hourly rate as
absenteeism, and boosted and contracted council
$18.40.
productivity. Becoming workers during this
In the past 25 years, New Zealand has gone a living wage council and
from being one of the most equal countries in
term.
encouraging other employers
the world to one of the most unequal. The call to do the same will improve
for a living wage has emerged from growing the economic prosperity and
concern about poverty and inequality. The quality of life of Wellington.
same concern has led to the formation of living
Since the living wage rate was launched in
wage movements across the world.
February 2013, there have been some critical
There is clear international evidence that high responses, including a recent Treasury Report.
levels of inequality contribute significantly This was based on incorrect assumptions, for
to major problems in society. Many families example that the living wage campaign is a
experience hardship or poverty despite campaign to lift the legislated minimum wage.
having one or two adults in paid work. Of the Living wages are voluntary, and employers who
270,000 children estimated to be living in can and should pay are targeted.
poverty in New Zealand, two in five come from
Critics have also asserted that the Local
households where at least one person is in full
Government Act prevents councils from
time work or self-employed.1
implementing the living wage. A legal opinion
Wellington City is in a good position to take by Dr Matthew Palmer refutes this assertion.
www.livingwagenz.org.nz 5Living Wage Aotearoa
New Zealand
Council officers have quantified the cost of urgency. The living wage can be achieved for
implementing the living wage for directly- contract staff as contracts expire.
employed staff at $575k and the cost for staff Living Wage Wellington proposes that WCC
employed in CCOs at $325k. implements the living wage during this council
Officers have not quantified the cost for the term, beginning on 1 January 2014, making
council workforce employed by contractors. As tangible progress from the start for direct, CCO
council has committed to achieving the living and contract-employed staff earning below the
wage for contract staff, this must be done with living wage.
A worker’s story
A living wage would be life-changing for 22-
year old Esau Taniela. The Parkwise parking
warden earns $14.40 an hour before tax and
works a 68 hour week to bring home $719
while his pregnant partner is working three
jobs.
He says it’s barely enough to pay bills and
rent, let alone provide healthy food for his
family, or savings.
“The most important thing for me is to have a
stable future for my family,” Mr Taniela said.
“I want a future where I don’t have to worry
constantly about the bills – to be happy and
not stressing all the time, and to have enough
time to spend with my partner and our baby.”
6 www.livingwagenz.org.nzLiving Wage Aotearoa
New Zealand
Introduction
The call for a living wage has emerged from and labour market deregulation, cuts to the
growing concern in New Zealand about poverty social safety net and the privatisation of
and inequality. This concern has led to the state assets, increasing unemployment and
formation of living wage movements across the underemployment and a reliance on exporting
world. low-value unprocessed commodities.
The relationship between wages and well-being Major increases in earnings’ inequality are the
is well-documented. Implementing a living wage most significant cause of the overall increase in
brings benefits to workers and their families, household and family inequality. Such widening
communities, along with central and local inequality has been observed throughout the
government. Health and education outcomes world, but particularly in New Zealand, where
and social participation all improve when wages many lower paid workers have seen their
are lifted. incomes fail to keep up with inflation, while top
Living Wage Aotearoa New Zealand (LWANZ) incomes have soared.
defines the living wage as “the income The rapidly increasing income
necessary to provide workers and their families and earnings inequality There is now clear
with the basic necessities of life. A living wage experienced by New Zealand
will enable workers to live with dignity and to in the 15 year period 1985 to international evidence
participate as active citizens in society.” 2000 has never been reversed that high levels of
and has taken the country
The International Labour Organisation
from being one of the most
inequality contribute
definition reads: “The idea of a living wage is
that workers and their families should be able equal to one of the most significantly to major
to afford a basic, but decent, lifestyle that is unequal in the developed problems in society.
considered acceptable by society at its current world. 3
level of economic development. Workers and Wellingtonian Max
their families should be able to live above the Rashbrooke’s recently
poverty level, and be able to participate in published book on inequality describes a New
social and cultural life”. 2 Zealand in 2013 where the wealthiest 1% of the
A detailed study undertaken for LWANZ in 2.9 million adults now own 16% of the $470
2012 by Peter King and Charles Waldegrave million of national wealth – over three times
of the Family Centre Social Policy Research as much wealth as the poorest 50% of New
Unit provided the empirical basis for an Zealanders (5%). 4
hourly living wage figure of $18.40 for New Many families experience hardship or poverty
Zealand, although the hourly wage is not all despite having one or two adults in paid work.
there is to achieving the objectives of a living Of the 270,000 children estimated to be living in
wage. The figure will be reviewed annually, poverty in New Zealand, two in five come from
with the outcome of the first review due to be households where at least one person is in full
announced in February 2014. The full study can time work or self-employed.5
be found at www.livingwage.org.nz
There is now clear international evidence that
Inequality is a growing phenomenon in high levels of inequality contribute significantly
New Zealand that has developed since the to major problems in society. There is a
mid-1980s. Driving factors have included substantial price to be paid in the quality of
the acceleration of globalisation, financial life for all New Zealanders, as well as major
economic costs for us all.
www.livingwagenz.org.nz 7Living Wage Aotearoa
New Zealand
Why a Living Wage in Wellington?
In June 2013, WCC voted to support, in and the “Rest of NZ”: $31.30 compared to
principle, becoming a Living Wage Council and $27.98 for the whole of New Zealand (11.9%
a Living Wage Capital. Councillors supported higher).
a resolution asking council officers to prepare
l Similarly average total weekly earnings
a “Living Wage Framework” detailing a phased
(averaged by number of employees) were
implementation of a living wage for directly-
$1,033,57 compared to $916.48 (12.8%
employed council staff, staff employed by CCOs
higher).
and contractors who deliver council services
and to advise on the impact on council’s The June 2013 New Zealand Income Survey
procurement policy and future tendering shows:
arrangements. l Wellington has highest average and
$250k was budgeted for in median household income out of 12
the 2013/14 draft Annual regions. Nearest is Auckland, which is still
It is not acceptable that significantly behind.
Plan, for implementation
a significant number of the living wage from 1 l Average weekly household income:
of Wellington workers January 2014. Wellington $1794, Auckland $1736, whole
country: $1601. Wellington is 12.1% above
are part of the working A clear majority of the
new council committed the country average.
poor. The Council can during the recent local body l Median weekly household income:
play a vital leadership election campaign to take all Wellington $1529, Auckland $1458, whole
role in making a possible steps to implement country: $1358. Wellington 12.6% above the
the living wage for all country median.
difference to address directly-employed, CCO and
However, although Wellington leads the way
poverty and inequality contracted council workers
with the highest household incomes, the region
during this term.
in Wellington City and does not lead other regions in inequality.
lead the region and Wellington City, as the largest
One useful measure of inequality is the P80/
population centre of the
the country by P20 ratio between the income of households
Wellington Region is in a
four fifths of the way up the income distribution
showing the way. good position to take a lead
scale and those only one fifth of the way
on the living wage.
up. This measure uses household disposable
The region has the highest income and is adjusted for household size and
average hourly wage and average household composition.
income of any New Zealand region.
The 2009 80/20 figures showed Wellington
The September 2013 Quarterly Employment had higher levels of inequality than the rest of
Survey shows: the country but comparable more up-to-date
data is not available. Even if that showed some
l The Wellington Regional Council Area
reduction in inequality, Wellington is unlikely to
average ordinary time hourly wage was
be better than the average for the country with
highest out of Auckland Regional Council
its high levels of inequality.
Area, Canterbury Regional Council Area
Hence Wellington has both the capacity and the
need for a living wage.
8 www.livingwagenz.org.nzLiving Wage Aotearoa
New Zealand
It is not acceptable that a significant number Wellington’s largest employer.
of Wellington workers are part of the working
l Profile communities coming together and
poor. The Council can play a vital leadership role
celebrating the city.
in making a difference to address poverty and
inequality in Wellington City and lead the region l Broaden the positive voices in the capital
and the country by showing the way. city to include ordinary working people and
their families who have benefitted from the
The economic impact of WCC expenditure
living wage and are able not just to survive
in the total economy of the region is
but to participate actively in their city.
highly significant. WCC can help the region
economically by raising the standard of Becoming a living wage council and encouraging
contractors and stimulating demand for goods other employers to do the same will improve
and services at a time when the city, while the economic prosperity and quality of life of
certainly not dying, is struggling to replace the Wellington workers and residents. Paying staff
gaps left by the recession and the depleted a living wage will ensure they can participate
public service. WCC is one of Wellington’s larger in the amenities of the city and have access
employers, either directly or through CCOs to recreational and community facilities. A
and in turn affects other workers’ employment prosperous economic
through expenditure on contracted services. environment depends A prosperous economic
on consumers having the
WCC will spend around $260 million in 2014
spending power to support environment depends
on employees and suppliers. Hence the
economic impact of WCC expenditure in the
local business and the low- on consumers having
paid workers who would
total economy of the region is highly significant.
benefit from receiving the
the spending power to
Paying a living wage to its employees and
living wage typically spend support local business
ensuring its contractors do the same, will create
their entire incomes on retail and the low-paid
winners not only among low-paid working
and basic services.
people, but in the broader community. workers who would
Adopting the living wage
An employer accreditation process will soon be
fits with WCC’s policies,
benefit from receiving
finalised that will issue a license to employers the living wage typically
embodied in its goals and
that meet the criteria for a living wage business,
strategies and its short spend their entire
including that all workers, directly employed
and long term vision. It is
and contracted, are paid a living wage. It is in
consistent with the goal incomes on retail and
WCC’s interests to be one of the first employers
to be accredited, with the accompanying
identified in Wellington basic services.
Towards 2040: Smart Capital
prestige and attention that this would bring.
Vision to ensure Wellington
Becoming a living wage council provides WCC is a people-centred city. The
with an opportunity to: Smart Capital proposal states, “Cities... need to
be active in their efforts to attract new people
l Demonstrate WCC is proactive in making
into the city – to live, work or visit. This means
Wellington a fair and equal, people-centred
a city that is easy to do business in, attractive
city by addressing poverty and inequality.
to new migrants, connected internationally,
l Profile local businesses stepping up to pay and tolerant of diversity.” The living wage will
the living wage. support this goal.
l Highlight the social and economic benefits Wellington is proud to be a Fair Trade and
to the city and the benefits to businesses Anti-Nuclear Capital City and prides itself in
and the council as an organisation and being the “Coolest Little Capital in the World.” It
www.livingwagenz.org.nz 9Living Wage Aotearoa
New Zealand
makes sense to also become New Zealand’s first the development of such a strategy. During
“Living Wage City”. the recent Living Wage Week in the UK,
churches and community organisations took
A recent New Zealand survey shows strong
the opportunity to highlight the benefits of
support for the living wage. Horizon Research’s
the living wage in addressing poverty and
2013 Living Wage Insights Report, based on
inequality. Councils reinforced the benefits
the views of 2,799 respondents, found that
of the living wage, both social and economic,
69.7% expressed support for employers in New
and a significant number of new living wage
Zealand being encouraged to pay a living wage,
employers announced their accredited status.
while 10.6% of respondents opposed this.
Although regulations differ in the UK, there are
Adopting a living wage framework is an
many examples from existing living wage cities
outstanding leadership opportunity for
that are comparable in size to Wellington of
Wellington City. A feature of written
ways that the Council can promote the benefits
proposals for the living wage to councils
of a living wage. Examples are Glasgow,
overseas is a communications strategy and
Preston, Newcastle, Birmingham, Cardiff,
Living Wage Wellington strongly supports
Oxford and the London boroughs of Camden,
working in partnership with stakeholders in
Hounslow, Lambeth and Southwark.6
10 www.livingwagenz.org.nzLiving Wage Aotearoa
New Zealand
Responding to the critics
Since the living wage rate was launched in they will jump the ditch to Australia in search of
February 2013, there have been a number of better-paying work.
notable responses, some supportive and some All the same, the claim that it is not a well-
from a critical standpoint. targeted mechanism to assist those with low
incomes bears further discussion. As the report
The Treasury Report
itself notes, over half of all sole parents with
In November 2013 the Treasury released an dependants earn below the living wage (indeed
analysis of the proposed $18.40 hourly living many below $15 an hour), in 25% of households
wage, which, it argued, is ‘not well targeted at with two adults and dependants the principal
low income families’ and is likely to have negative earner is on less than a living wage, and 21%
economic impacts on employment and inflation. of families earning below the living wage have
The report appears to be based on a number of dependants.
unfounded assumptions: It is also argued that for a
l That the living wage of $18.40 is to replace family with two parents (one Living wages are
the hourly minimum wage (i.e. to effectively working 40 hours at $16 an
raise the minimum wage overnight by $4.65) hour and one working 20 voluntary, and are
l That this minimum wage increase would
hours at $13.75) with two based on adoption by
children, a living wage would
be instituted with no other accompanying
increase their take-home pay
employers who both
legislative, regulatory or policy changes
by only $63 a week.7 The can and should pay.
l That there would be no other behavioural government would be the
changes that would come about as a result of biggest benefactor, with an
such a significant jump. additional $126 per week per
None of these assumptions are correct, nor person in increased tax and reduced benefits.
are they in keeping with the aspirations of A number of points can be made here. Firstly,
LWANZ. Even if these assumptions are accepted, any increase in pay for low-income families is
Treasury’s analysis is seriously flawed. a positive and this family has been left $3,276
First, it is pointed out that the kind of family on better off each year. Secondly, getting employers
which the living wage calculation was based is a to pay a living wage allows us to refocus
minority in New Zealand, and that 63% of earners government spending in way that can target
below a living wage are single adults, and that low-income families even more effectively - that
it is therefore not a well-targeted mechanism. A $126 a week ($6552 a year, per family) could be
single adult on $13.75 with no other government shifted into fixing other parts of the social safety
support will be the greatest benefactor of lifting net, assisting others into work, or paying down
the minimum wage to $18.40, lifting their after- public debt.
tax take-home pay by $150 a week. As Treasury’s report itself argues, “adopting a
This criticism misses the point that most families Living Wage would rebalance the role of the
begin their working life as single adults. A employer and the welfare system towards
helping hand now will reduce the likelihood of work being the primary mechanism for people
them being reliant on state subsidies later and to support themselves.”8 We agree with this
enable them to begin saving towards a house proposition.
and retirement, as well as reduce the likelihood Minimum/living wages and social welfare are not
www.livingwagenz.org.nz 11Living Wage Aotearoa
New Zealand
alternatives but must work together to provide turnover and profit. This notwithstanding, many
adequate living standards. The balance has of the employers that have sought accreditation
shifted too far with inadequate wage levels – the with LWANZ have been small businesses who see
tax and transfer system allows employers to pay the innate value in having a living wage.
wages well below what can be justified by both
fairness and productivity levels. Local Government Act
It has been argued that the Local Government
Since deregulation of the labour market lower
Act 2002 is a barrier to paying council employees
earners have failed to receive the gains from
and/or requiring its CCOs and contractors to pay
their productivity increases. If earnings had kept
a living wage.
up with labour productivity growth since 1989,
the average wage in the private sector would A legal opinion by Dr Matthew Palmer concludes
have been $31.85 in March 2011, but it was only it is not a barrier: “…the Local Government
$23.43. Act does not prohibit a local authority or
Council‐Controlled Organisation from paying
Many economists have rejected the view that
its employees, or requiring its contractors
low pay simply reflects low skill, “an argument
to pay their employees, a living wage. My
of impregnable circularity in which the
opinion is based on material that explains the
outcome, low pay, is used as the only evidence
economic justification of a living wage in terms
for the alleged cause - low skill and personal
of associated productivity gains. Pursuing
inefficiency”.9
such a policy would be consistent with the
Similarly, Auckland Professor purpose of local government which includes
“There is no real of Economics Tim Hazeldine cost-effectiveness and provision of good quality
argues: “We must insist on fair services. In particular, I consider that it would
question about shares. This means reversing be valid for a local authority to exercise its
whether a relatively the past decade’s trend power to set remuneration policy under the
towards a hollowing out of Local Government Act by adopting a living wage
rich country like New the income distribution: top policy.”
Zealand can ‘afford’ to people paying themselves
Relativity issues
pay everybody a living more and paying those at
the bottom less... There is no Some concerns have been raised about the
wage. Indeed, can we real question about whether impact on those workers on higher pay rates
afford not to?” a relatively rich country like than the living wage and whether this will create
New Zealand can ‘afford’ to upward pressure on wages in general to maintain
Tim Hazeldine
pay everybody a decent living or restore differentials.
wage. Indeed, can we afford The PSA is clear that for WCC employees, pay
not to, in the long run?”10 increases to those below the living wage should
It is important to remember how a living wage not mean increases for all other employees of the
mechanism works. Living wages are voluntary, same percentage to maintain internal relativities.
and are based on adoption by employers who Compression of pay scales is accepted, with the
both can and should pay. These tend to be large living wage policy aimed at targeting the lowest
employers, are often multinationals or have paid employees. The PSA says it would continue
overseas shareholders, are profitable despite to advocate cost of living increases at a minimum
their low wages, and have an impact right for its other members. For example, library staff
across the relevant labour market. It is well- just above the living wage level (earning $19-
established that there are a large number of $25 per hour) would expect some increase, but
small businesses in New Zealand that are not in less in percentage terms than those currently
a position to pay a living wage due to their low below the living wage. This position has been
overwhelmingly endorsed by its members.
12 www.livingwagenz.org.nzLiving Wage Aotearoa
New Zealand
The costs and benefits of the Living Wage
Given the many local authorities that have geography at the University, showed that
introduced the living wage around the world, cleaners had higher levels of morale and job
there is a large body of literature on the costs satisfaction, worked more productively, and
and benefits of doing so. completed a broader range of tasks.
International experience has been that initial The authors concluded: “The research has
estimates of the cost of implementing the revealed that the move to be a living wage
living wage are almost always higher than employer and bring the cleaning service in-
the eventual outcome. When Los Angeles house has stimulated improvements in job
introduced the living wage in 1997, it was quality, productivity and service delivery, with
predicted to cost somewhere between US$30- very little increase in costs.”13
40 million. However, the total increase to labour
The second study, conducted by consultancy
costs was $US2.5 million.11
firm London Economics for the Greater London
Baltimore is the longest-running and most- Authority, showed “significantly lower rates
studied municipality with a living wage of staff turnover” leading to “substantial cost
ordinance, from 1994 onwards. The first study, savings on recruitment and induction training”.
by the Preamble Centre for Public Policy,
There were also lower
showed that in the first year nominal contract
rates of absenteeism When Los Angeles
costs rose by only 0.2%, declining by 2.4% once
and sick leave, enhanced
adjusted for inflation. A 1999 study found that
quality of work, and introduced the living
nominal contract costs rose by 1.2% — lower
than inflation for the period — and concluded
widespread efficient work wage in 1997, it was
reorganisation. This was
that the budgetary impact had been minimal.12
alongside significantly
predicted to cost
There are a number of reasons that costs often boosted worker morale and somewhere between
end up much lower than estimated. Firstly, motivation and reputational US$30-40 million.
given that many of the services councils provide benefits for the employers.
are now procured from private firms (who rely It found “evidence of little However, the total
on low wage labour), some of the costs can be or no impact on business increase to labour costs
absorbed by the firms themselves. Secondly, performance of London
there are significant benefits associated with Living Wage implementation.
was $US2.5 million.
implementing a living wage, with regard to
Firms in the finance industry
lower staff turnover, absenteeism, and boosted
in the UK report the types
productivity.
of results discussed above. KPMG, with a UK
Two UK studies demonstrate the positive turnover of £1.6bn and over 5,000 staff in
impacts of paying a living wage. The first was two large London offices, states: “We have
a 2008 study of Queen Mary, a college of the been paying the living wage since 2006 and
University of London, which moved to pay its have found that it really pays off. Since its
cleaners the London living wage, and brought introduction, staff turnover has reduced and
cleaning in-house, ending an outsourced productivity has increased as attitudes are now
contracting arrangement. The study, led by more flexible and positive. Paying the Living
Professor Jane Wills, Professor of human Wage is not just a moral issue – we have found
that it also makes good business sense.”
www.livingwagenz.org.nz 13Living Wage Aotearoa
New Zealand
London’s Conservative Mayor, Boris Johnson, is
a strong advocate of the living wage movement:
“More and more London firms are recognising
the benefits of fair remuneration for all of
their workforce. Paying the London Living
Wage ensures hard-working Londoners are
helped to make ends meet, providing a boost
not only for their personal quality of life but
delivering indisputable economic dividends to
employers too. This in turn is good for London’s
productivity and growth.”
“Paying the London Living Wage ensures
hard-working Londoners are helped to
make ends meet, providing a boost not only
for their personal quality of life but delivering
indisputable economic dividends to employers
too. This in turn is good for London’s
productivity and growth.” Boris Johnson
14 www.livingwagenz.org.nzLiving Wage Aotearoa
New Zealand
The direct cost to Wellington City Council
The literature review on the effects of living restructuring. This is out of a total workforce of
wage policies carried out in August 2013 for the approximately 1300.
Auckland Council by labour economist Professor
The costs should also be offset by the
Tim Maloney of AUT, with Amanda Gilbertson,
considerable benefits. With regard to
reports relatively small impacts overall from
Wellington, these benefits have been reinforced
living wage ordinances and policies with only a
in the officials’ paper to councillors (June
small proportion of most workforces covered,
2013) which refers to the benefits of adopting
but notes that “even small positive benefits for
a living wage for direct employees in terms of
specific groups of low-wage workers and their
“staff loyalty, increased morale, and improved
families may be better than nothing.”
efficiencies. This primarily
WCC officers have quantified the cost of relates to a reduction in
The costs should
implementing the living wage for directly- time spent on recruitment
employed staff and for CCO staff as $900k. as the higher wages tend also be offset by the
Their paper for the 11 June 2013 meeting
to encourage staff to stay considerable benefits –
longer. This is a factor for
of the WCC Strategy and Policy Committee
the Council with a current
“staff loyalty, increased
estimates that there are around 500 directly-
employed council staff receiving less than
turnover of above 30%.” morale, and improved
$18.40 an hour. This includes staff on fixed-term With regard to CCOs, the efficiencies”. Council officers’
or casual contracts. officials reported 312 report
employees earning below
Officials estimate the number of directly-
$18.40 and the breakdown
employed staff and costs of applying a living
of numbers of staff and the
wage at:
costs associated with the living wage as:
l 345 permanent staff: $450k per annum
l 49 permanent staff: $77k per annum
l 30 fixed term staff: $12k per annum
l 263 fixed term and casual staff: $238k per
l 127 casual staff: $75.5k per annum annum
l Subtotal: $550k per annum l Subtotal: $315k per annum
l Total $575k per annum (adjusted for l Total: $325k (adjusted for Kiwisaver
Kiwisaver contributions) contributions).
The paper went on to point to possible savings No costs have been estimated for the council
from a living wage. “There is high staff turnover workforce employed by contractors in the
in roles that currently earn below $18.40: 11% officials’ paper. On this, the paper said: “The
at one year of service; 25.5% at two years of council is therefore not in position to make
service; and 44% in total.” a decision. Nevertheless, the use of such an
The PSA also reports that current turnover of approach would cut across the principle that
directly-employed staff is very high. Between the living wage is discretionary and the decision
June 2011 and March 2013 there were to adopt it should rest with each organisation
463 resignations from council. In addition taking into account their circumstances.
235 positions were disestablished due to Legislation requires Council to deliver services
that are the most cost effective for households
www.livingwagenz.org.nz 15Living Wage Aotearoa
New Zealand
and businesses. Applying a living wage to must also be quantified with urgency to ensure
contractors could expose Council to challenge a fair implementation. There are numerous
because it may not be able to demonstrate that reasons why contract workers must be included.
it is meeting the ‘most effective’ purpose of the Apart from the fairness issues and the need to
Local Government Act 2002.” take a lead in addressing poverty and inequality
in Wellington City, if the living wage coverage
As council has also made the commitment
does not include procured services then it
in principle to achieving the living wage for
will incentivise and accelerate the process of
contract staff, the cost of this implementation
outsourcing core local government services.
16 www.livingwagenz.org.nzLiving Wage Aotearoa
New Zealand
Implementation proposal
Directly-employed staff having been voted by its members, including
WCC should be the best possible employer those paid above the living wage.
offering the best possible jobs by moving all A total of 45 of about 200 library employees are
directly-employed staff above the living wage as paid below the living wage of $18.40. Thirty
soon as possible. of these are located in the Central Library and
Up to 500 directly-employed WCC staff earn 15 at branch libraries. In addition those in
below the living wage out of a total workforce customer service roles, mostly at entry level,
of 1300. They work mainly in libraries, but with the potential to move to other full-
pools, recreation centres, parks and some time or permanent positions in the library,
administration and receptionist roles. The have starting rates below the living wage. For
living wage should be implemented as soon as the newer employees
possible. Should a phased implementation be in this group there have
necessary, this will be completed by June 2016. been little to no recent pay WCC should be the
increases, and progression
The movement of wages to reach the best possible employer
within salary bands is no
living wage should be treated as a separate longer automatic. Cuts in offering the best
process to adjustments for cost of living
or other changes for employees above the
the library budget in recent possible jobs by moving
years have resulted in some
living wage. Performance pay issues should staff having their hours
all directly-employed
not be related to paying a living wage; they reduced, making the hourly staff above the living
should be a separate issue for employment rate even more crucial. The
negotiation. Any proposals to change and wage as soon as
living wage campaign for
enhance job descriptions to accompany the this group has taken on real possible.
wage changes should not a condition of living importance.
wage implementation, but worked through
independently in employment relations Council-Controlled
processes. Organisations
Living Wage Wellington proposes that WCC There are currently 10 CCOs operating
implements the living wage through collective under various ownership models. The eight
bargaining. Currently the PSA has collective 100%-controlled CCOs are:
agreements that cover employees in the
l Wellington Zoo Trust
libraries and in the Building Compliance
and Consents parts of council. The Library l Wellington Museums Trust
Agreement expires on 5 May 2014 and the l Wellington Venues Ltd
Building Compliance and Consents Agreement
on 30 June 2014. Bargaining has recently been l Basin Reserve Trust
initiated for a new collective agreement to l Positively Wellington Tourism
cover these employees, including pay levels.
The PSA has claimed to have pay rates written l Positively Wellington Venues
into the agreement in future, with wage levels l Wellington Cable Car Ltd
to be bargained. The PSA will be seeking to have
l Wellington Waterfront
all starting rates on or above the living wage
as soon as possible, with unanimous support As full council subsidiaries established to run
www.livingwagenz.org.nz 17Living Wage Aotearoa
New Zealand
activities that are key to the city’s success, period where the living wage will not apply.
they must be run in a way that contributes
The parking enforcement contract comes
to the overall wellbeing of all Wellingtonians.
up early in 2014, and would provide a good
Implementing the living wage would involve
starting place to implement the living wage for
working with each organisation to achieve living
contracted staff providing a service to the city.
wage accreditation in this council term within
the overall living wage framework. Some of the contractors, such as City Care,
employ tradespeople, trades assistants and
As a first step, WCC will
labourers and nearly all of these employees
The parking require each directly-
are paid above the living wage with only two
owned CCO to develop an
enforcement contract steps in their collective agreement being just
implementation plan.
below the living wage, affecting only a handful
comes up early in 2014, The PSA notes that many of individual workers. City Care has the contract
and would provide a of its members working for for facility maintenance. It also has a contract
the Museums Trust earn with Capacity for drainage, which is currently
good starting place to below the living wage and outside the scope of this exercise.
implement the living funding is tight. The debate
Catering and security are fairly small -scale
wage for contracted about CCO structure and
operations, with part of security in-house.
whether some, or all should
staff providing a service be brought back in-house, Cleaning is a service where there is a regular
to the city. is beyond the scope of this workforce cleaning WCC premises, including
paper but this may assist in libraries and council service centres as well
ensuring CCO employees as the main Wakefield Street premises. We
are paid the living wage. understand that 25 Spotless cleaners are
employed in total but some are on low, part-
Other ownership arrangements time hours with the overall average probably
Two CCOs have more diffuse ownership about 20 hours a week. They are employed on
arrangements: Capacity (joint-ownership with $14.10 an hour with a handful paid more. We
Hutt Councils) and Wellington Regional Stadium estimate about $113,000 for the direct wage
Trust (joint ownership with Greater Wellington cost of increasing the rate to $18.40, plus ACC
Council). These CCOs would not initially be levies etc.
included in the living wage process but options We understand that in the current tendering
for progressing the issue within the existing process for carparking enforcement, the
ownership models should be identified. prospective tenders are being asked to give
two quotes with and without payment at the
Contractors who deliver services living wage rate. Carparking is currently run by
While we have not been supplied with any Armourguard (Parkwise), which employs the
detail from council officers about the scope workers involved in issuing parking enforcement
of the council contracts and their cost, we tickets, and Tenix Solutions, which deals with
understand from various sources that the payment notices, receipt and enforcement for
main contractors cover cleaning, catering, non-payers. We understand that some Tenix
security, car parking enforcement, roading, workers may be paid below the living wage but
refuse/recycling and facility maintenance. probably no more than 10 maximum with a
We understand that the two largest of these $2.00 per hour gap.
contracts, covering roading and property
The Service and Food Workers Union (SFWU)
maintenance, have been recently let for five-
has members in Parkwise which employs 33
year terms. This means there will be a lengthy
parking attendants who all work 40 hours per
18 www.livingwagenz.org.nzLiving Wage Aotearoa
New Zealand
week or more, some as many as 60 hours. They not be as much as expected.
are paid between $14.08 and $14.40 per hour
Some current contractors may raise arguments
and may get bonuses for issuing more than
against the living wage implementation to
the standard number of parking enforcement
protect the status quo (although some have
tickets in a week.
welcomed it as a way to keep good staff):
We estimate that it would cost some $300,000
l “We will have to pay all
to bring them up to the living wage (plus ACC
of our staff the living In line with the guiding
levies etc). WCC income from car parking is
wage whether they work
on a WCC contract or not principle that all low-
approximately $15 million per annum. On a
quick estimate, paying the living wage could be
because our employment paid workers should
covered by an 8c increase on the current $4.00
arrangements do not
an hour parking charge. WCC has already said
allow for the payment
benefit from living
that consideration could be given to increasing wage implementation,
of different rates.” Even
the charge to $5.00 per hour. Less than 10% of
though it would be good the council will need
this towards the living wage commitment would
if the contractor decides
to spread the living wage to make progress on
seem very reasonable.
Most of the lowest-paid workers are employed to all of its Wellington contracted services
in WCC-contracted organisations, with the workforce, there is
cleaners, catering workers, security and nothing in the law that
from the start of
carparking enforcement workers paid not much prevents a contractor the implementation
above $14.00 an hour. In line with the guiding from paying one wage process.
principle that all low-paid workers should at the WCC and another
benefit from living wage implementation, at another site. In fact,
the council will need to make progress on in both cleaning and
contracted services from the start of the security (including car
implementation process. parking enforcement) the national collective
agreements specifically acknowledge that
The payment of a living wage should be a
this will happen.
condition of all new service contracts delivered
to WCC on an on-going basis and not on l “Other vulnerable workers, such as young
an irregular or one-off basis. The tender people and less qualified people will lose out
documents for the new contracts must also as the payment of the living wage will mean
ensure that the payment of the living wage that staff will need to be more productive
covers service contract work that is sub- and more skilled”. International evidence
contracted by the successful contractor. It suggests this is not a significant problem.
is assumed that WCC will bear the cost of
l “The cost of the contract will dramatically
the movement to the living wage although
increase.” Evidence from the USA experience
competition between contractors to win
with the living wage suggests the overall
the service contracts will also mean that
impact on costs over time is not significant.
some of that cost will be borne by successful
(See section on cost.)
contractors through the reduction of margins
or productivity improvements, or possibly l “The Wellington market is not large enough
price increases where consumers pay for for the tenders to be competitive enough
services, such as parking. While virtually all of so that contractors absorb some of the
the workers in cleaning, catering, security and costs.” If the Wellington market isn’t large
parking are paid well below the living wage, enough, then what market in NZ actually
their numbers are not huge and the cost may is? In any case, WCC could be expected to
www.livingwagenz.org.nz 19Living Wage Aotearoa
New Zealand
include such matters in its negotiations with There has been a suggestion that rather than
tenderers. requiring tenderers to quote on the basis of
paying a living wage, tenderers (such as in
Procurement and tendering processes – impact carparking enforcement) may be asked to put in
of a living wage two quotes – one paying a living wage and one
Council officials will need to produce an analysis without a living wage. The living wage quote
of how the living wage can be integrated into could then be given a preference by putting in
the current procurement policy of WCC. Unlike a tender evaluation process weighting to favour
local authorities in the UK and European Union, the living wage quote over the non-living wage
there are fewer legal constraints on the ability quote. We believe this sends mixed messages
of New Zealand councils to set criteria for to the tenderers, would not allow WCC to ever
contracted services in New Zealand, beyond become an accredited Living Wage Employer
a general obligation to be and would not allow WCC to get the best value
transparent and open in the out of contractors competing for their tenders.
The modest cost
tender processes.
of introducing the Reducing top salaries
There are seven main
living wage is put in contractors delivering
The modest cost of introducing the living wage
is put in perspective alongside the possibility
perspective alongside services currently who
of funding it by addressing top salaries.
would be impacted by living
the possibility of wage implementation. The
Work at Auckland Council produced some
funding it by addressing interesting figures. In the financial year ending
affected areas of service are
30 June 2013 there were 770 staff – 7% of the
top salaries. catering, parking, security,
workforce – earning salaries over $120,000. The
roading, refuse/recycling,
total cost of those salaries was approximately
facility maintenance and
$127 million or 20% of the total salary budget.
cleaning. Given the extent
The proposed cost of introducing a living wage
and size of the contracts and long terms (some
for direct employed staff at Auckland Council
are for five years), the implementation would
was $3.5m, or 0.5% of the total salary budget.
take place over a number of years.
A reduction of the total amount paid to those
l The framework will need to include a on salaries above $120,000 by 3% would, on its
timetable for the contracts that are due for own, more than meet that living wage cost.
tender.
Budget implications and options can be set out
l WCC will signal to current contractors by council officials. Such options could include
its intention to implement a living wage exploring funding the rise in the living wage
as a condition of tender and design through a cap on top salaries (including CEO
an engagement process with current and senior executive packages) to help limit the
contractors so that they are aware and overall cost to WCC of implementation.
prepared for this development.
20 www.livingwagenz.org.nzLiving Wage Aotearoa
New Zealand
Proposed resolution
THAT the Governance, Finance and Planning 3) To ensure that, as contracts for services
Committee recommends that Council agrees: supplied to WCC on a regular and on-going
basis expire, that a clause is inserted in
1) To adopt the following guidelines for
tender documents requiring contractors to
implementation of the living wage at
pay a living wage to all employees involved
Wellington City Council:
in these contracts.
l The living wage will be implemented in
4) To actively support and encourage
this term, beginning on 1 January 2014.
Wellington employers to become living wage
l Tangible progress will be made from the employers.
start of implementation for direct, CCO
5) To Work with Living Wage Wellington to
and contract employed staff earning
prepare an implementation plan.
below the living wage.
6) To prepare a communications strategy
2) To implement the living wage in this term
highlighting the benefits of the living wage
by:
to Wellington City
l Committing to become an accredited
7) To spend $250k in this Annual Plan round
living wage employer by November 2016
on the first stage of implementing the living
l Lifting all directly-employed staff to the wage for all directly-employed staff and
living wage in this term implementing the living wage in parking
l Ensuring staff employed by CCOs are paid services.
the living wage in this term 8) To make provision in subsequent Annual
Plans to progress all stages of the
implementation plan towards the goal of full
implementation by November 2016.
www.livingwagenz.org.nz 21Living Wage Aotearoa
New Zealand
References
1 Household incomes in New Zealand: Trends 7 Their before-tax wages would increase by
in indicators of inequality and hardship 1982 $189, reduced to $153 after tax; which would
to 2012. Ministry of Social Development, www. result in a decrease of supplementary support
msd.govt.nz of $88.
2 Richard Anker, A new methodology for 8 Treasury report, page 5.
estimating internationally comparable poverty
lines and living wage rates, ILO Working
9 Peter Brosnan, and Frank Wilkinson, 1989,
Paper No. 72, 2005, p 5, available at http://
www.ilo.org/integration/resources/papers/ Wellington: New Zealand Institute of Industrial
WCMS_079165/lang--en/index.htm Relations Research, Low Pay and the Minimum
Wage, page 35
3 See annual reports on Household Incomes in
10 Hazledine, T., Taking New Zealand Seriously:
New Zealand: Trends in Indicators of Inequality
and Hardship at http://www.msd.govt.nz/about- The Economics of Decency, (1998) Auckland:
msd-and-our-work/publications-resources/ Harper Collins, page 172
monitoring/household-incomes/index.html
for full documentation of household incomes,
11 Andrew J Elmore, Living Wage Laws &
poverty levels, and inequality measures in New
Zealand). Communities: Smarter Economic Development,
Lower than Expected Cost, , Brennan Center for
Justice, New York, 2003, p. 2).
4 Max Rashbrooke, Inequality a New Zealand
Crisis page 1-2.
12 Christopher Niedt, Greg Ruiters, Diana Wise
and Erica Schoenberger (1999) The Effects of
5 Household incomes in New Zealand: Trends the Living wage in Baltimore (Working paper No
in indicators of inequality and hardship 1982 199) at 6-9.
to 2012. Ministry of Social Development, www.
msd.govt.nz
13 Jane Wills, The business case for the living
wage: The story of the cleaning service at
6 http://www.glasgow.gov.uk/index. Queen Mary, University of London, January
aspx?article=3791 ; http://www. 2009, available at http://www.geog.qmul.ac.uk/
glasgowlivingwage.co.uk/ ; http://vimeo. docs/staff/8041.pdf ).
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uk/index.aspx?articleid=4663 ; http://www.
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preston.govt.uk/yourservices/jobs-and-
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22 www.livingwagenz.org.nzYou can also read
