Prime Minister Bill English has made his intentions clear about pay rises for public servants, suggesting the board of the New Zealand Superannuation Fund may not get reappointed after gifting chief executive Adrian Orr a 23.4% pay rise.
Mr English expressed his disappointment in the size of the pay rise and the decision will be taken into consideration when it comes time for reappointments of board members.
Documents revealed he originally declined to approve a proposed increase which could have been as high as 35.6% if Mr Orr achieved his maximum bonus. Ultimately, Mr Orr received a 15.8% increase to his base remuneration. On a total remuneration basis, he received 23.4% increase, taking his taxable income to $1.03 million.
Board chairwoman Catherine Savage says she absolutely stands by the decision.
The fund, started by former finance minister Sir Michael Cullen, is performing strongly and the latest figures show an 18.7% return over the last 12 months. In dollar terms, that is many hundreds of millions of dollars, she says.
However, there will be many who look at what Mr Orr is receiving and think the man is just doing his job and wonder why such a large increase is necessary.
But Mr Orr is not the only public servant to receive a significant salary, as scrutiny of the State Services Commission website reveals.
The chief executive of ACC is on more than $800,000, the University of Otago vice-chancellor earns more than $590,000, the Southern DHB chief executive is likely to be on more than $480,000 and the Treasury secretary is earning more than $640,000.
None of these salaries would be a problem, except for the percentage of the rise received by the likes of Mr Orr. When wage inflation is at one of its lowest points in history, a 23.4% rise is unacceptable, or should be when Statistics New Zealand figures show wage rises of about 1.5% have been the norm for many workers in this country.
In related news, on the same day we learned the real minimum needed for a family to have a decent standard of living is about to rise to $20.20 an hour, according to the Living Wage movement.
The living wage is a non-binding goal designed to put pressure on employers to raise workers' pay above the legal minimum. The living wage is different from the minimum wage, where workers are paid $15.25 an hour, or $31,720 a year.
But even the minimum wage seems too hot for some to handle as a few employers claim they cannot afford to pay even the bare minimum required by law.
The free market is believed to provide a level at which employers and employees can co-exist. But New Zealand is not a country of general high wages. And tax laws are not conducive to people working harder, smarter or longer to get ahead. People move on to the top tax rate at $70,000 which is very low.
And the second-top tax rate of 30% is reached at $48,000 - below the average income. The Government provides help for families on low incomes, allowing them to pay no tax at all. That leaves the burden on the more well-off parts of New Zealand and if $70,000 makes somebody rich, and on the top tax rate, Mr English needs to start rehearsing his arguments for the election campaign.
The Prime Minister also put on notice other government-appointed boards who have taken an independent view about remuneration. He wants to find a more stable process for salary negotiations around significant appointments.
The NZ Super board has created something of a precedent with Mr Orr's salary rise, not so much with the money but with the percentage. When inflation is so low in New Zealand, and unlikely to rise to the 2% mid-point of the Reserve Bank's forecast until next year, 23.4% is far too much.
Reward for good work is an essential part of New Zealand culture but what would a factory worker need to do to earn that sort of an increase?
