Prue Hyman’s Column

Prue Hyman asks: ‘Fair pay agreements –- will they be allowed to make a difference?’

In her latest column, Prue says: ‘I’m not sure whether getting former National Prime Minister Jim Bolger to chair the Fair Pay Agreement Working Group was a brilliant move by the Labour-led government or a meaningless gesture.

The Prime Minister has been anxious to ensure she doesn’t frighten the horses too much, saying only one or two such sector-wide agreements would be concluded in the current

Jacinda — is she worried about frightening the horses?

term of government.

Workers and unions have lost out for 40 years

Given that since the Rogernomics ‘reforms’ and the Employment Contracts Act, the rate of unionisation and collective bargaining in New Zealand has plummeted, fair pay agreements would be only a very cautious step towards giving a little more power to the employee/union side in collective bargaining against the employer side.

Over the last forty years or so the labour share of national income has reduced by about 10 percentage points (from 60 to 50%) while inequality of wages and salaries has also grown significantly. Fair Pay Agreements are only likely to put a small dent in these trends, yet employers still create a huge fuss over any policies to protect employees.

Such agreements would be another small step to protect particularly lower-waged workers, along with regular increases in the minimum wage, promotion of the living wage, and implementation of pay equity in female dominated occupations.

All of these are occurring under the current government but only slowly and with minor impacts.

Big increases in employer power

The dismantling of the old systems of awards and agreements, along with general free market economics led to the great increase in employer power and the low level of unionisation which makes it hard for unions to exercise much muscle.

Currently, in New Zealand there are only 1600 collective agreements covering ten per cent of the private sector workforce. The public sector workforce does better, with 456 collective agreements covering 60 per cent of employees.

So what did the Working Group come up with? (see its report at https://www.mbie.govt.nz/assets/695e21c9c3/working-group-report.pdf).

Its stated aim was to support workers and firms to drive productivity growth and share the benefits. That sounds fine in theory, but of course workers have not in recent years been seeing productivity increases fully reflected in their earnings.

Low productivity gains

And New Zealand’s below average productivity growth internationally has been much analysed but barely explained. It is probably more due to poor management than any defects of workers. But if employees feel decently valued by living wages and fair pay agreements, productivity is likely to increase.

The Government’s vision is to use the employment relations framework to create a level playing field where good employers are not disadvantaged by paying reasonable, industry-standard wages. ‘New Zealand must have a highly skilled and innovative economy that provides well-paid, decent jobs, and delivers broad-based gains from economic growth and productivity.’  All fine in theory.

The Working Group was enjoined to make recommendations on the scope and design of a system of sector or occupation wide bargaining to set minimum terms and conditions of employment and achieve these goals.

The Group believes that it could be most useful where competition is based on decreasing labour costs rather than on increasing quality or productivity.

They therefore designed a system where workers can initiate sector- or occupation-wide collective bargaining if one of two criteria were met –- a representativeness threshold or a public interest test.

Representativeness would require a minimum threshold of 1000 or 10 per cent of workers in the nominated sector or occupation, whichever is lower. The public interest test would depend on establishing that there are harmful labour market conditions in the nominated sector or occupation.

While the Working Group recommended that all workers should be covered where an agreement was instituted (including contracted workers), and all employers in the relevant sector, the employers on the group demurred when it came to compulsion for employers to join an agreement.

As ever, employers are reluctant to give up power, arguing the need for flexibility. It is likely to depend on strong union action to establish any agreements and I am not holding my breath about a huge amount being accomplished. But I guess it is better than nothing.

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