Under Pressure: Cost of Living Response

Last week’s budget announcements here in Aotearoa focused a lot of attention on how to provide relief from the cost of living pressures. 

With inflation at a 30-year high of 6.9% the cost of living pressure is real.

It got me thinking about the role we can play as employers. There are competing needs at play here:

1. The micro-level: Paying people more to help them keep up with the higher prices

2. The macro-level: Shortening the inflationary cycle in our economy by dampening down the wage-price spiral

If we simply pay people more and more, we are much more likely to be in this inflationary cycle for longer. We will be chasing our tails and adding to the macro-level pain. The theory is that higher wages get passed on to customers through higher prices and the wage-price spiral accelerates. Still, doing nothing to support people through these tough times isn’t an option either. Inflation hurts people and their families, especially those on low and mid-level incomes.

So, what is the answer? Like anything, I think it’s a combination of things. Here are some ideas I’ve been considering.

1. Lift low incomes

2. Support people to work from home

3. Give people time

Lift Low Incomes

People who will feel the pain most are those with less spare cash. It’s the cost of energy, fuel and food that are rising steeply, which are the real basics. If the non-negotiables are where the inflationary heat is coming from, people on lower incomes need much more support to shoulder that burden. When it comes to annual pay rises, have a look at holding the incomes of the highest paid, so you can use that money to give more to those who really need it.

Doing this isn’t about being Robin Hood, it’s about making sure your people avoid the stress and anxiety that will come from not having enough cash to meet their basic needs.

Support People to Work from Home

If you have a workforce that has the ability to do some of their work from home, supporting them to do that will go a long way. By not having to commute every day people will save money, especially with some additional support, such as:

• Power Payments

While working from home people find their power bills take a hit. Offer to provide a working from home allowance to contribute to some of those additional power costs.

• Broadband Cost-Sharing

Similarly to the power payments, people need reliable broadband to work from home successfully. Offering to go halves on the cost of broadband will provide some further financial relief for people.

• Home Office Equipment

I’ve noticed in my work this year that people need a bit more help with getting set up at home. It’s probably because the hybrid work model of switching between home and the office is well underway now that lockdowns are behind us. People are noticing the jarring difference between their office and home equipment. Offer to buy people the equipment they need to get set up well while working from home.

Give People Time

Rather than get stuck in an endless argument about pay rises for everyone, why not change the discussion altogether? Offer people their time back while keeping their pay constant. You could try this in a couple of ways:

• Annual Leave

Giving people more annual leave is a flexible way of giving people something of real value without inflating wages. 

• Shorten the Work Week

A compelling alternative is to shorten the work week in exchange for productivity gains. Check out the success of the 4-Day Week for some inspiration. The evidence shows, time and time again, that teams find better ways of getting their work done, when it’s a priority. You don’t have to start with the 4-Day Week, reducing from 40 to 32 hours. Why not try reducing slowly, from 40 to 38 or 36 hours?

Whatever we do, let's get creative. Start a conversation with your people and see what will make the difference for them, while holding that tension between the micro and macro-level challenges.