Wednesday, May 4, 2016

On not paying the Living Wage

As I've mentioned here before, I'm generally a big fan of paying people a Living Wage: i.e. enough to provide for the basics of food and accommodation, alongside participation in the community.  However, two things have recently given me pause.

Firstly, this documentary on RNZ National, about a company in Southland who hire staff with intellectual disabilities to sort rubbish for recycling.  The company has a minimum wage exemption, enabling them to hire about 30 people to do work that could just as well be done by three people and a fancy machine.  If they had to pay them the minimum wage, the business wouldn't be economic, and they'd buy the machine instead.  But, by getting a minimum wage exemption, they've been able to greatly improve the quality of life of 30 people (all of whom waxed lyrical about the joys of having a job), whilst still getting the job done.  So, by allowing this employer not to pay the minimum wage (which is significantly less than the Living Wage), we, as a society, have greatly improved the quality of life of those people.  We've also, presumably, reduced the amount we need to pay them collectively: topping up their wages surely costs less than paying them a benefit.



That made me think of a programme I'd heard earlier on RNZ National, to which I'd strongly objected at the time.  In this panel discussion, economist Eric Crampton argues that it's not up to business to subsidise a non-productive worker.  He believes that the employer should pay staff what they're 'worth' and, if that's insufficient for their needs, society should make up the difference.  Why should it be the responsibility of business to provide what is essentially a social good?

I didn't like the argument at all at the time, but now I'm a bit more sympathetic.  At least where you can clearly argue that the work of a staff member simply isn't worth a lot to the business, perhaps it's OK to pay them less than they need to survive?  After all, a likely alternative to that is for that person not to have a job at all, and the people at the plant in Southland were pretty clear that having a job is hugely important to their wellbeing.


And yet, how do you determine what someone's labour is worth to a company?  In the case of the people in the documentary, it was clear, as their labour could be directly replaced by a machine with a known price and expected lifespan.  But, in most cases, it's much less clear.  The income of the company comes from the collective efforts of all the workers, and currently we determine how that income is distributed based mostly on what those workers could get elsewhere, rather than on some intrinsic value of their contribution.  With this in mind, Prof. John Stackhouse (one of Martin's lecturers at Regent) basically argues that, so long as there are people in a company being paid above the Living Wage, no one should be being paid below it.  Basically, if your company earns enough from your staff's labour to support them, then it's up to you to support them.  They should only get paid less if there really isn't enough money to go around.

I like that argument, although I don't quite know what effects it would have in the 'real world': it'd lead to a pretty radical restructuring of the economy.  But, if that were to be mandated for in some way (and I'm not at all convinced you could actually legislate for it - you'd need to win people over to it instead), I'd like there to be the ability to make exceptions.  I'd like us to look for creative ways in which all people can be genuinely engaged in the workforce but, where we just can't find them, I'd like to be able to pay people less (with society topping up their wages) so that they can have all the benefits of productive activity.  So, I'd like a Living Wage for almost everybody, but the flexibility to pay staff less either if a whole business is uneconomic (but socially desirable) or if no one would be willing to pay a particular individual that much due to their disability etc.

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