Fixing NZ's low pay problem: Sector-wide collective bargaining recommended

Fixing New Zealand's inequality and low pay could be solved by sector-wide collective bargaining, according to a new report.

The Fair Pay Agreement Working Group has reported back to the Government on how to "design a system of bargaining to set minimum terms and conditions of employment across industries or occupations".

Led by former Prime Minister and National Party leader Jim Bolger, the Fair Pay Agreement Working Group was set up in June last year. Also in the group were BusinessNZ chief executive Kirk Hope, NZ Council of Trade Unions president Richard Wagstaff and E tū assistant national secretary John Ryall.

It looked at: 

  • the criteria and process to initiate bargaining on a Fair Pay Agreement
  • how bargaining participants will be identified and selected
  • what Fair Pay Agreements should cover in terms of scope
  • bargaining rules and dispute resolution processes, and ratification and enforcement of Fair Pay Agreements.

It concluded that European-style collective agreements across entire sectors or businesses, if it was in the public interest, would result in "higher employment, lower unemployment, a better integration of vulnerable groups and less wage inequality than fully decentralised systems" like the one we have at present.

"The group considered that introducing a sector or occupational level bargaining system could be most useful in sectors or occupations where particular issues with competitive outcomes are identified, for example, where competition is based on ever-decreasing labour costs rather than on increasing quality or productivity," the report summarised.

"It could be useful more generally where workers and employers identify opportunity to improve outcomes across a sector or occupation."

Workplace Relations and Safety Minister Iain Lees-Galloway said the Government will "take its time" to review the recommendations.

"The next phase of work will require detailed policy consideration and consultation and we'll take the time to get it right," he said on Thursday morning.

"The coalition Government has committed to improving incomes and working conditions for New Zealanders, focusing first on the wages and conditions of those who earn the least."

Mr Lees-Galloway says employers who pay fairly are being "undercut" by those who don't.

"That's why I directed the Fair Pay Agreement Working Group to recommend the scope and design of a system of bargaining that sets minimum terms and conditions of employment across industries or occupations."

According to the report, productivity of New Zealand workers was on a par with the UK, and only slightly behind Australia and the US, in 1970. Since then, ours has limped ahead slowly, while productivity in other countries has left us in the dust.

Productivity in NZ and comparable nations since 1970.
Productivity in NZ and comparable nations since 1970. Photo credit: MBIE

At the same time, wages have stagnated - growing even slower than our sluggish productivity growth - and inequality has widened faster here than almost anywhere else in the OECD, with most of the gains in wealth going to capital owners, rather than workers.

Productivity vs wages in New Zealand.
Productivity vs wages in New Zealand. Photo credit: MBIE

"New Zealand is out of step with the OECD both in terms of income inequality, and productivity, with Kiwis working longer hours but producing less per hour worked than those in most OECD countries," said Mr Lees-Galloway.

"If we're going to build a modern and fairer New Zealand, we need a productive and sustainable economy that's growing and working for all of us."

Inequality in New Zealand.
Inequality in New Zealand. Photo credit: MBIE

BusinessNZ contributed to the report, but disagreed with the "compulsory" nature of the recommendations.

"Fair pay agreements would limit business flexibility, as a collective covering every business wouldn't be able to meet the needs of individual firms," said Mr Hope.

"Businesses that wanted differently would have to negotiate separate agreements on top of their fair pay agreement, and this secondary bargaining would increase the risk of industrial action, as happened with similar rules in the 1970s.

"There would be risks to productivity because everyone would have to attend paid stop-work meetings to agree on their fair pay agreement. All employer representatives on the working group were concerned that about the consequences and costs of this."