Financial institutions urged to adopt 'living wage'

New Zealand's financial institutions are being urged to adopt the 'living wage' to help lift people out of poverty.

The living wage, now $20.50, is calculated to cover a family's basic costs like food, transport, housing and childcare.

The Salvation Army says the minimum wage of $16.50 just doesn't cut it.

"The minimum wage should be the living wage," Alan Johnson of the Salvation Army said.

Wellington City Council, energy company Vector and insurance provider AMP are on board with the living wage for those who are directly employed as well as those who are contractors.

"The cost for us will stretch into the six figures. And obviously that's a significant impact. But I think you would have to say in the financial services industry, surely as an industry we can step up and meet that obligation," Blair Vernon of AMP New Zealand said.

It does mean AMP's family fun day out has been scrapped.

The answer to higher pay has to be higher skills - Kirk Hope of Business New Zealand

Business leaders say only about eight per cent of people are earning below the living wage, and then they're often given financial help by the government.

"The answer to higher pay has to be higher skills and then higher productivity and then higher wages as a result of that. That's what you see in countries around the world," Kirk Hope of Business New Zealand said.

The Government has guaranteed the living wage to core public service employees. The 2,000 lowest paid are now earning over $42,000 a year.

Mr Johnson says the minimum wage is not keeping up.

"I know the Government has set a target of $20 an hour for the minimum wage by 2020. That's great, but by then the living wage will probably be about $22 an hour," he said.

The Finance Minister though points to more productive growth, saying that's the key to higher wages across the economy.

The Salvation Army says the minimum wage of $16.50 doesn't cut it. Source: 1 NEWS