Fair Pay Agreements Debate Heats Up

12 July 2019

There is general support for the idea of lifting wages of lower paid employees, but the question is how that should be done.  Business is obviously concerned to avoid a move back to anything like the national awards and centralised bargaining system that prevailed until the introduction of the ECA in 1991.

The CTU argues that FPAs will both reduce wage inequality and increase productivity.

On the issue of productivity, to support its view the CTU has released a BERL report it commissioned which found FPAs would have no economic impact, either positive or negative.  If that's the case why bother?  Forcing up wages wont magically produce real productivity gains. That requires working smarter and producing higher value goods and services.

Even the latest report from the OECD suggests FPAs might have a negative impact on productivity.

Now the New Zealand Initiative has produced a report arguing that centralised bargaining is likely to have a negative impact on productivity.

On the question of income inequality, the New Zealand Initiative says it’s puzzling that the FPA working group report ignores the academic research showing that market income inequality in New Zealand has not in fact got worse - its been about the same for many years, with employees enjoying real pay increases ahead of the rate of inflation. The so-called "hollowing out effect" for employees in the middle of the range is not valid either - it's just that the lower paid have moved faster due to big increases in the minimum wage. 

Finally, if you are really concerned about a return to the 1970s consider the concept being promoted out of Waikato University of enrolling all new employees in unions and then allowing them to opt out if they want (a la KiwiSaver). 

According to National’s Workplace Relations and Safety spokesperson, Scott Simpson, Professor Mark Harcourt and former Labour Party President and MP Margaret Wilson say they have been working on this since just after the Labour Government came into office and have had meetings with senior Government Ministers about their plan.

Scott Simpson says it’s just a sneaky way of making trade union membership compulsory.  While the Government is keen to make clear that compulsory union membership is not in their plans, not everyone is convinced about that.

We will have to wait until we see draft legislation to develop an informed view about the risks and benefits of FPAs.  There will be risks and benefits for unions also, not the least being that if every employee in a particular industry or sector is covered by the applicable FPA whether or not they are a union member, why would they bother becoming a union member.