Word around the traps is that Labour is working on a significant new wages policy. Good. Kiwis’ pay has been falling away from Australians’ for two decades thanks mainly to the deregulation of the labour market in 1991.
Of course that’s not completely true for unionised Kiwis – teachers, wharfies, oil workers, miners and other Kiwis in highly unionised industries have seen their pay trend upwards year on year despite the deregulation. To the point where labouring in a strongly unionised industry can now make you more money than many people make in unregulated, non-guild professions.
But unions only represent a handful of Kiwi workers and that number isn’t growing. In itself, this wouldn’t be a huge barrier to raising everyone’s wages (in Aussie about the same percentage of the workforce is unionised as here) if it wasn’t for the lack of rules around the labour market.
The big difference between us and our mates across the ditch is that they retained an award system while we gave ours away. For those of you too young to remember, an award system involved employer and union reps from a particular industry meeting and negotiating minimum standards for that industry that applied to every worker in that industry. Which meant sustainable year on year wage growth and businesses competing on how well they did business rather than how much they could cut their wage bill. About 60% of kiwi workers were covered by these awards – enough of the population to ensure everyone’s pay was pulled up.
It’s no coincidence that the wage gap start to grow significantly in 1987. That’s the same year the award system was weakened by the first Act fourth Labour government.
Of course it got worse from 1991 with the introduction of the Employment Contracts Act which abolished the award system altogether and left wage-fixing to a deregulated market – a situation that saw a massive power imbalance open up between kiwi workers’ bargaining power and that of their employers (there’s a brief explanation of asymmetrical bargaining outcomes here).
Sadly, the last Labour government’s Employment Relations Act didn’t really readdress this bargaining imbalance. Instead their response to Kiwis’ lousy pay was Working for Families – a system that has never been anything other than a taxpayer subsidy to employers.
It doesn’t have to be this way and in most OECD counties it’s not. There are many different ways of providing some balance to a labour market. Unlike comrade Trotter I don’t think compulsory unionism is the answer. Instead I think that an awards system could work with the current system of voluntary unionism as long as there was some kind of bargaining fee applied to anyone that wanted to access an award without joining their relevant union.
However I don’t expect Labour will be introducing an award system, rather I think they’ll extend industry agreements in some way. It may be by strengthening unions’ ability to negotiate industry agreements (like the Greens’ policy) or it could be by providing a system for non-union workers to access negotiated minimum standards. Or it could be something I haven’t thought of.
Regardless of what they’re planning it has to be better than the current free market fiasco that is seeing Kiwis struggling away year after year after year.
Update: looks like we’ll find out what the plan is this Tuesday.
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