The effect of ‘fair pay’ agreements

Photoshopped image credit: Technomage

The Government?s Fair Pay Working Group has released its report to government, with Iain Lees-Galloway saying the report addresses New Zealand’s low productivity rates, low wages and low rates of wage growth along with an uneven distribution of wage growth. People on lower wages have seen much less wage growth over the last few decades.

The scope of the report is geared toward people on low wages.  Jim Bolger said guidance was given to the working group to look at the ?working poor? who are struggling to make ends meet.

We can expect when the details are thrashed out that policy will reward those at the bottom of the wage scale and we can also expect a return to collective agreements.

Heather du Plessis-Allan points out that business succeeds by cutting costs, and that includes keeping wages down.  In a highly competitive market a business will be penalised by paying above the average rate but we all know there are ways to get around it. Quote.

It’s how Transit allegedly recently won the contract to run some of Wellington’s buses. It’s accused of undercutting competitors to offer a cheaper contract. How? By paying its drivers less for longer. Many existing drivers quit instead of taking that deal.? End of quote.

As a nation we are not well paid.  Quote.

 Kiwis are underpaid. We’re so cheap to employ, Hollywood once labelled our local Lord of the Rings actors and cast “Mexicans with cellphones”. The average Australian earns 32 per cent more than the average Kiwi. The last time we were paid close to the same as the Australians was the 1970s.

end quote.

It doesn?t help that we have an influx of immigrants who are used to working for rates that New Zealanders will not accept, and who also will work longer hours.

Iain Lees-Galloway said New Zealand is in the unusual position of not having some form of sector level bargaining, also saying that the OECD recommends sector level bargaining, enterprise level bargaining and individual bargaining. If we introduce fair pay agreements and create sector level bargaining, that is exactly the mix that will be introduced.

There will be more power to unions. We already have public sector strikes causing disruption resulting from a Labour-led coalition government, can you imagine just how bad a nationwide strike would be? Quote.

We also can’t allow unions to strike at all during sector-wide negotiations. Can you imagine an entire industry coming to a halt? It’d be carnage. And while the report recommends banning strikes directly related to the negotiations, it still leaves scope for unrelated strikes. Unions could exploit that.

  Heather du Plessis-Allan end quote

As du Plessis-Allan points out, we are fast-forwarding backwards. Until we address low productivity issues, senselessly increasing wages through collective agreements will be inflationary and self defeating if businesses are forced to close.