We need to debate Fair Pay Agreements, nationally

After an infamous “Year of Delivery” without, well, much delivery, the government is now getting into its stride and announcing significant economic and social reforms left, right, and centre. This turn of phrase is a good description of Labour’s recent industrial policy announcements too.

In the space of a few days, we had public sector pay freezes (right) and the announcement of fair pay agreements (left), and a subsequent thawing of the freeze (centre).

The underlying logic

The moves seemed capricious and void of any coherent principles driving the policy changes. But there is an underlying logic here, one that elevates ideology over evidence.

Three-quarters of public servants, including nurses, police officers, teachers, and customs officials, many “everyday heroes” of our pandemic response, learned that they will not receive any increase on their wages for three years.

Those earning under $60,000 would not be affected. This move seemed not only unfair, but also contrary to Labour’s values and a slap in the face to their traditional voter base.

The freeze was eventually thawed after discussions with Unions.

U-Turn by government

The government backed down, agreeing to keeping cost-of-living increases on the table and reducing the review period to one year. It was a communications bungle at best. At worst, a failed attempt to court the right-of-centre voters that voted for Labour at the last election. Perhaps this Government has such a commanding lead in the polls that it doesn’t need to hold to its traditional values.

But ultimately it has. Amidst the media storm over the pay freeze, Workplace Relations and Safety Minister Michael Wood announced the introduction of “Fair Pay Agreements” in the attention dead-zone of a Friday afternoon.

This is the realisation of a 2017 election promise to introduce sector-wide collective bargaining. While aimed at lower-paid sectors like cleaners or security personnel, it will impact everyone else. A union can start the Agreement process if 10 percent or 1000 workers call for it—there is no opting out for those who don’t want it. If negotiations between employers and unions break down, the Employment Relations Authority will set the terms.

Ideological solution

The problem with Fair Pay Agreements is that they are an ideological solution seeking a problem, and a blunt one at that. When compared with the median we have one of the highest minimum wages in the world, and, over the past 30 years, our wages have kept up with productivity unlike many other developed nations.

Our productivity has, however, been underwhelming, and this legislation is aimed at improving it. But that aim could be easily lost in a power struggle. The current regime, while imperfect, has served us well, affording the flexibility to weather the pandemic storm.

While the pay freeze fiasco soaked up most of the headlines, Fair Pay Agreements deserve much more attention. It is arguably the biggest change to industrial relations in a generation. It is clear that unions are winners here. But the evidence is out on how the rest of the economy will fare.

Let us have that debate.

Kieran Madden is Research Manager at Maxim Institute, Auckland.

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