New Zealand has a low wages problem.
Last year, two thirds of wage and salary earners had pay rises that were less than the rate of inflation.
New Zealand has boasted one of the fastest growing rates of inequality in the developed world for many years.
The problem of low incomes is as much tied up with housing and rental affordability as soaring house prices. And it is the reason nearly a quarter of a million KiwiSaver account holders of working age are making no contributions towards their retirement savings.
We have another problem, too. Our productivity – the value of what we produce in each hour of work – is low by international standards, and showing no sign of getting better.
It’s time to get serious about lifting incomes in New Zealand. And that’s what Labour’s employment relations policy aims to do.
After twenty years involved in employment relations and wage-setting I have a clear view that the price of a person’s labour (their time, skills, talent, creativity) is best set by negotiation and agreement.
As happens now, some will choose to negotiate on a one-on-one basis. Others, as they do now, will choose to negotiate with their workmates through a union.
And there may be industries where enough employers and enough workers in the industry want to negotiate together to set minimum employment standards for their industry – a fair pay agreement.
This is what happened in the recent pay deal for home care and aged care workers.
The events leading up to the agreement were unusual. Workers backed by their unions spent four years fighting in court for the right to have their pay set on the basis of pay equity principles. Eventually, the government had no choice but to negotiate, and found with the employers and unions in the room together it was possible to reach a sensible agreement on minimum standards for the whole industry.
It means employers in the industry don’t need to reply on holding back wage rates as a way to make their businesses successful.
Compare that to Wellington bus drivers. Their current employer has lost the contract with the regional council to run passenger services to another company that put in a bid based on lower payroll costs.
That means lower incomes for bus drivers.
The drivers’ responsibilities and skills haven’t changed and they’ve had no say in the incomes they are being offered.
A fair pay agreement covering public transport bus drivers in Wellington would prevent bus drivers being forced to accept a drop in income every time the contract for bus services goes to a different company.
No-one is being forced into these agreements. To raise the spectre of 1970s national awards is scaremongering. The Herald criticises our policy but provides no answers to our low wage problem.
Higher wages encourage employers to compete on quality rather than price. Higher wages encourage investment in more technology and productive management. It’s a win-win.
A race to the bottom on wages benefits no-one. We don’t want to be competitive on the basis of low wages. That means Kiwis working harder for less. In fact, you can have a productive and competitive economy that pays workers fairly.
There are plenty of similar economies that boast high wages and high productivity – just look across the Tasman where the gap between our respective weekly average wages has widened by 50 per cent since National came to office.
What Labour wants is to restore balance to employment relationships so good employers are not undermined by bad employers and that workers get a fair return.
We also need to ensure recently hired workers are treated fairly.
National’s ‘fire at will’ 90 day trial periods removed all rights around fairness. It claimed the change would make it easier for employers to hire more workers.
Not so. A recent Treasury report confirms 90 day trial periods have not led to more jobs being created.
I have spoken to many small business owners over the last few years and they tell me they expect workers on trial to be treated fairly, such as getting feedback on their performance.
But they also fear being drawn into protracted, expensive litigation if something goes wrong.
Labour’s replacement law restores fairness. It will ensure employers are able to take workers on a trial basis and put in place a fast, fair, simple referee system for resolving disputes. Claims will be dealt with within three weeks. There will be no cost to the parties and no lawyers will be allowed. Good employers have nothing to fear.
After nine years we need a fresh approach to employment relations that is fair, practical and inclusive. One in which employers and employees have the confidence to face their future together. That’s Labour’s plan.