Living wage folly

As Christchurch City Council faces the prospect of a $4.8 million bill for forcing its companies to pay the living wage, has no-one observed the folly of the scheme?

Calculated to give full-time employees an arbitrary basic standard of living, the degree to which the living wage exceeds the market rate for a job is by definition a form of welfare.

If the council wants to give this much welfare, fair enough, but it could hardly be less well thought out. Firstly, the living wage is intended as a benchmark for fulltime employees, but a huge proportion of the council employees are part-time by choice, often because a partner brings in a good full-time wage. The outcome is welfare for those who don’t need it.

Further, this form of welfare also distorts the labour market for low-paid jobs, where private companies will find it hard to recruit when the CCC and its council-owned living wage employers pay up to 20 per cent more.

But those same living wage employers, faced with having to pay a premium to some of their staff, while their competitors don’t, will inevitably face a decline in business, followed by job losses and/or reduced dividends to the council. Who knows what the total cost to the council will eventually balloon to?

Under pressure, the council has decided to phase in their living wage programme over three years, but a bad idea will not improve over time. Councillors should have engaged their heads instead of their hearts and applied the welfare where it is really needed.

Nigel Ellis, St Albans