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A pointless symbolic distraction. At best.

Written By: - Date published: 11:24 am, January 23rd, 2009 - 17 comments
Categories: economy, national/act government, wages - Tags:

I’m the last person who’d criticise freezing the pay of our MPs but John Key’s cynical opportunism is at best a piece of pointless and time wasting PR and at worst a signal to attack Kiwi wages.

Now before any of our regular right-wingers claim I’m reading too much into this it might pay to look at a couple of headlines this cheap imitation of Obama has produced:

Key sends clear message for pay restraint

Public servants face pay freeze

These are both predictable media responses and, as they are both gallery pieces, I doubt very much that they weren’t helped along with a quiet off the record chat yesterday.

Now let’s get this straight, when you “freeze” wages in an inflationary environment (which is what we’ve got) then you are reducing them. That’s what National did last time it was in power during a recession and the result was a deepened recession and that famous wage gap John was so fond of talking about prior to the election (which reminds me, has anyone heard anything from this government about closing the wage gap? Or has that gone down the memory hole?). What the government needs to do now is send signals that wages should continue to increase because if they stagnate then we might as well flush all of that stimulus money down the toilet because lowering wages would have a massive dampening effect on the economy that no government-provided stimulation could turn around.

I’m hoping that Key’s announcement was simply an unpremeditated, if cynical, PR sugar fix and the fact his much touted letter to the remuneration authority hasn’t been received yet lends weight to that analysis but there is a chance that the game plan is to back-channel and foster the “wage restraint” argument until it becomes a meme the government is able to talk about itself without sounding like it’s leading the charge to see wages drop.

We’ll just have to wait and see.

17 comments on “A pointless symbolic distraction. At best. ”

  1. TightyRighty 1

    shouldn’t the public service pay increases be no more than on-par with the private sector? i seem to recall a bit of data last year saying that public service pay rises had again outstripped private sector. so therefore if the private sector is facing pay freezes…. you get where im going

  2. Tigger 2

    Ugh, I see ACT joined the bandwagon too. So you all want to hand back your pay increases we gave you last year boys or you happy just to tell the rest of us earning way less than you that we can’t have any more money? Tossers.


  3. Bill 3

    Let’s even assume (not unreasonably) that we are on the cusp of a deflationary environment where a wage freeze would not result in a wage drop.

    What about all that private debt? As banks feel the pinch they will lend at ever greater rates of interest. They haven’t passed on their bailout relief to customers overseas and will always seek to protect and increase their bottom line regardless….until they are nationalised?

    Back on topic, I don’t know the debt ratio off hand, but believe it’s pretty high.

    So wage rises, even in an environment of deflation are going to be crucial because the cost of private debt is that much higher.

    Or have I missed something?

  4. Rodney can afford to have his pay frozen. It’s not like it’s his only source of income…

  5. Draco T Bastard 5

    TR, you’re being an essential RWNJ demanding both a free-market and fixed odds. Wages are set on supply and demand – same as everything else. As unemployment decreased the competition for good workers increased pushing wages up. Amazingly enough, the government wanted good workers and was willing to pay for them.

    National, and businesses want wages to drop so that profits go up (but, as you pointed out, they’ll actually go down). They really do only look at life from their POV and consider anything outside of that to be wrong. From their POV labour doesn’t cost anything to supply which is how we ended up with WFF – businesses aren’t willing to pay cost price. We’ve had this discussion before.

  6. TightyRighty 6

    granted, wages are set on supply and demand, but in recent years we have seen labour being supplied on the backward bending part of the supply curve due to high demand. this supply is starting to come back to the standard up slope as demand starts to dwindle.

    so my question is as stands, why should public sector workers be given price increases when private sector workers won’t be, when private sector workers and employers are supplying the juice to fuel the public sector? i completely agree with price increases when they are possible, i just don’t believe that public sector compensation should out-strip private sector, which it seems to have been doing recently.

  7. Tigger 7

    TR – why should the public service lead an across the board wage freeze? Shouldn’t wages be decided on a case by case basis – not all public servants have had huge increases in the past few years so why treat them all the same?

    And why shouldn’t the public sector pay well? Don’t we want the best people working for us? I’m not saying the pay rates should be wildly different but still…

    And I know a bunch of private sector people who are doing very, very well for themselves, off the money they charge the public sector so private enterprise should stop whining when many of them are making their dosh off the taxpayer…

  8. randal 8

    the national party come to government on the promise of transforming the economy
    lets see some more and better paying jobs instead of waving the big stick at legitimate institutions involved in the democratic process
    otherwise its key the dictator with no ideas and transforming the economy into a lower waged economy

  9. Whero 9

    I’m sure Goober’s beloved underclass will be dancing in the streets!

  10. TightyRighty 10

    Tigger , let me apologise, i didn’t mean to run the whole public service down. The public service doesn’t lead, however higher profile members tend to receive seemingly higher pay rises.

    essential services should continue to receive pay rises, even if rises are only indexed to inflation in the current market environment. so police, nurses, doctors, teachers etc. services where there is a problem attracting and retaining talent in other words, because your right, in those areas it is essential to get the best people.

    non-essential services, and posts where demand for jobs is way higher than supply, i.e mp’s, should not be receiving pay rises.

    The private sector people doing very well charging the Govt and it’s services high prices for services rendered should be quiet. your absolutely right. like that stupid twat from the conferences industry association.

  11. Tim Ellis 11

    lets see some more and better paying jobs instead of waving the big stick at legitimate institutions involved in the democratic process

    Goodness me. Anybody would think that the Remuneration Authority is some really, really important part of our functioning democracy which shouldn’t be tampered with lightly, like say the Electoral Act.

    There seem to be a lot of straw men in here. I haven’t seen John Key instruct or give orders to the Remuneration Authority about something as trifling as MPs pay. I didn’t see him put in place a wage freeze in the public or private sector either. I did see him say that he wasn’t in a position to instruct them on anything, but hoped they would exercise restraint when setting MPs pay.

    The Remuneration Authority doesn’t affect wages for 99.9% of public sector employees. All I read is John Key lowering public expectations that the very substantial income rises that they’ve had over the last few years just aren’t going to continue. There seems to be a lot of posturing here, but in reality I really don’t think that much of what John Key says or does greatly affects whether or not a public sector employee gets a pay rise. That is determined by the market.

  12. Draco T Bastard 12

    so my question is as stands, why should public sector workers be given price increases when private sector workers won’t be,

    Who said they would be?
    AFAIK, There’s no guarantee that they will get pay rises.

  13. Tigger 13

    Tim – Iain Rennie has already come out, clearly trying to impress his new masters, by saying that CE’s and their staff should also expect little or no increase (direct quote from him “We will be looking at wage moderation across the state sector at all angles.”).

    So it’s gone far beyond the Remuneration Authority now. This is is a planned exercise by Key to ensure that the public sector (a) gets a wage freeze which (b) will cause people to leave it so (c) they get to reduce numbers in the sector (lots of those won’t be replaced). The end result is a reduction in public sector numbers, something National campaigned on.

  14. Daveski 14

    Jeez … you guys have adopted well to being in opposition. Whatever they do, criticise. Fair call, it worked over at KB.

  15. Matthew Pilott 15

    TightyRighty – if wages should be set by supply and demand, then I eagerly anticipate your denouncement of the Communist John Key’s meddling with free maket forces by trying to interfere with the market’s wage-setting. Jokes aside, there’s an artificial expectation being set for poor wage reviews in the public sector – this isn’t the case for the private sector, where this stuff will be decided as per normal. Why not just leave it to be managed as normal? (hint – title of this post)

    Tim Ellis, what do you think Audrey Young is basing the following on:

    Prime Minister John Key’s move yesterday to freeze MPs’ pay is intended to send a strong message to the wider state sector that it should expect little or no pay increases in the coming term of Parliament.

    He also hopes that pay restraint in the private sector will help minimise job losses as the economic downturn bites.

    Mr Key would not rule out pay cuts for public servants in the next three years – as has happened in Ireland – but said it was “unlikely” and was not on the Government’s agenda “at the moment”.


    “In taking the action we have taken we are sending a pretty strong signal that restraint is going to be necessary right across the public sector,” he (Key) told the Herald.

    If it’s a straw man you might want to talk to JK about it – he’s the one setting it up. And if he’s setting it up, a straw-man it ain’t.

    Daveski – when they do something good, i’ll be the first to let you know. Ahh, you’re not holding your breath are you?

  16. Tim Ellis 16

    Tigger, Michael Cullen called for wage restraint two and a half years ago. At the time unions said it was hypocritical for workers to get no wage increases while senior executives continued to get large rises. What’s the difference this time?

  17. So i presume Obama announcing pay freezes is equally pointless? Or is that determined leadership.

    [I would argue it’s equally pointless. Remember, question marks go after questions. ‘So i presume Obama announcing pay freezes is equally pointless’ is a statement of your state of mind. ‘Or is that determined leadership’ is a question. SP]

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