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It will mark change for large parts of New Zealand’s workforce, increasing union power and decreasing labour-market flexibility.
It will make this country less competitive internationally and more expensive. It might well see rising wages for a while, but only as long as the economy can sustain that.
It shows again that this Labour Government backs central control and is willing to enact that belief.
When push comes to shove, the Employment Relations Authority will rule on minimum pay and conditions in some occupations. This is a partial reversion to the old days of the 1970s and compulsory arbitration.
Wages and salaries in pure capitalism should be determined simply by supply and demand and what an industry or employer can afford.
In practice, it never quite works like that, although supply and demand are reasons in many instances.
The minimum wage and the protections of the Employment Relations Act come into play, as they should.
Lack of supply has helped force a minimum-wage industry like fruit picking to finally increase some wages. The shortage of teachers, nurses or whatever is also used in collective bargaining arguments.
Of course, the labour market is much more complex.
How much power does the employee/union or the employer have? It is often claimed the power imbalance is in the employer’s favour. Try telling that to New Zealand Rugby as it tries to persuade the players’ union to back the Silver Lake deal. Employees in a healthy economy also can quit their job for another. It is difficult for employers to dismiss unwanted or unsatisfactory staff.
How is the work perceived? Might predominantly women’s work, for example, have lesser status? Might the educated middle-class and the governing and executive classes have increasing sway?
How exposed is the work to internal and international competition?
Skills required, experience and relativity with other jobs all come into the mix.
As in so many other areas, we muddle along.
In pure socialism, we should all be paid the same as we train and work because all people have equal worth. That, of course, never succeeded in the real world, even in Cuba.
Executive and directors’ pay and the remuneration consultants who advise on it buttress each other. Inexorable leapfrogging takes place. Each board believes it cannot be worth less than its neighbour, and up go the rates.
Similarly, each union coming before the Authority — or threatening to do so — will have excellent arguments why its workers should be paid more. Bus drivers have lives in their hands, can be threatened by passengers and have awful split shifts. Care workers handle our most vulnerable and in close personal ways. Security guards are exposed to trouble and risk. Supermarket checkout staff were our Covid lockdown heroes and must be unfailingly helpful and polite no matter the provocation or hassles.
Well-paid Authority members, not exposed to the harsh realities of having to make money in the open market, will be sympathetic.
Fair pay agreements could well mean the shop assistant in a small Westport store is paid the same as the worker in Queen St, Auckland.
Such broad agreements, while setting "minimum" rates, tend to have a flattening overall effect.
This is seen among teachers. Weaker teachers should be paid less and the best more. But that does not happen.
Because businesses are exposed to profit and loss and potential failure, paying too much for some staff means often there is not the money to pay extra for the high performers.
"Fair pay" agreements will not help New Zealand in its need for increased productivity and higher long-term wages in a competitive world.
At a time when the likes of France are battling to increase labour-market flexibility and competitiveness, New Zealand is heading in the other direction.