Industries quail at pay cost

Wellington Mayor Celia Wade-Brown. Photo / Neil Price

Retail, cleaning sectors unlikely to adopt living wage proposal but mayors more open.

Prices would have to go up by 6 to 8 per cent to pay a "living wage" of $18.40 an hour to workers in the lowest-paid sectors - hospitality and retailing.

Industry leaders said their members were unlikely to adopt the living wage proposal, which could cost $1.6 billion across the two sectors.

But Wellington Mayor Celia Wade-Brown said she "would very much like to move towards a living wage", and Auckland Mayor Len Brown said his council would consider a report published today by the Anglican Family Centre detailing how the sum of $18.40 an hour was calculated.

He said adopting the rate would cost $2.5 million for direct employees of Auckland Council and five of its seven council-controlled organisations. The major councils and universities are the first targets of the campaign, after a living wage of £8.55 ($15.62) was adopted by London Mayor Boris Johnson and a lower rate of £7.45 ($13.61) outside London was endorsed by a fifth of British councils.

The campaign does not seek a law change, but asks councils and other employers to adopt the living wage as a minimum for their own staff and as a requirement in contracts for services such as cleaning and security.

The only major sectors paying median rates below the local $18.40 figure in last year's NZ income survey were retailing, accommodation and food services ($15.14) and agriculture, forestry and fishing ($17.78).

National accounts tables show that raising median wages in retailing, accommodation and food services alone by 21.5 per cent, from $15.14 to $18.40, would cost about $1.6 billion a year. Wage costs across those sectors range from 31 per cent of final prices in hospitality to 37 per cent in supermarkets and other food retailing, so if the full cost of a 21.5 per cent wage rise was passed on to customers the effect would be price increases of between 6.7 per cent and 8 per cent.

However, Hospitality NZ chief executive Bruce Robertson said most restaurants and hotels would not be able to pass on such an increase.

"We have had critical increases in costs which the industry simply hasn't passed on because they haven't been able to in terms of the competitive nature of the industry."

He said more than 60 of his 2500 business members had closed since August and had not been replaced by other hospitality businesses. Paying workers a living wage would add to that toll.

Retailers Association adviser Barry Hellberg said union membership in retailing was minimal and wages in retailing were "a matter of negotiation between the retailer and each individual staff member".

Building Service Contractors president Patrick Lee-Lo, representing cleaning contractors, said labour costs represented 80 to 90 per cent of the $400 million annual turnover of commercial cleaning companies.

Lifting wages by 33 per cent from the current $13.85 an hour to $18.40 would therefore cost between about $105 million and $118 million.