Fair share for workers best way to close gap with Aussie

Written By: - Date published: 10:56 am, February 9th, 2010 - 21 comments
Categories: minimum wage, wages, workers' rights - Tags:

30 years ago, according to John Key, wages in Australia and New Zealand were the same. Since then New Zealand wages have stagnated and Australian wages haven grown away from us to the point where they are nearly 40% higher.

The conventional wisdom is that this is due to faster economic growth in Australia, driven by higher labour productivity. But that’s only part of the story.

The gap grew as Kiwi workers’ share of GDP fell, and the share going on business profits grew, much more than what happened in Australia. This is due to policy changes in the 1980s and 1990s that advantaged business and weakened workers’ bargaining power.

What if Kiwis workers had been allowed to keep the same share of the economic pie as workers in Australia have. what if the rightwing neoliberal revolution hadn’t set out to purposely hold down wages and we had followed Aussie’s path instead?

About half the wage gap would disappear if Kiwi workers had the same share of GDP as Aussie ones do. If Key really wants to close the wage gap, he should imitate Australia – better workers’ rights and a higher minimum wage. Unfortunately, National seems determined to head in the other direction. Why anyone believes we will catch Australia by doing the opposite of what they are doing, I don’t know.

[Hat tip to the CTU for data]

21 comments on “Fair share for workers best way to close gap with Aussie ”

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  1. luva 1
    9 February 2010 at 11:08 am

    “This is due to policy changes in the 1980s and 1990s that advantaged business and weakened workers’ bargaining power.”

    Why hasn’t this been corrected in the past 10 years. There has to be a point when we stop blaming everything on reforms that took place 25 years ago.

    Clark and Cullen had their chance and failed as shown in your graph. The lines got closer but no where near enough to consider their policies a success.

    Lets all hope Key gives us some hope in his speech today.

    • Marty G 1.1
      9 February 2010 at 11:30 am

      No, labour didn’t go far enough but they did get workers’ share of GDP rising again.

      I’m happy to see you admit this is a problem and the government, whatever its stripe, needs to correct it.

  2. Matthew 2
    9 February 2010 at 11:34 am

    One of the reasons for the gap will be the difference in the current account deficit between the two countries. The main reason for this is because Australia has had a higher savings rate and its citizens own on balance more of their capital.

    • Clarke 2.1
      9 February 2010 at 1:58 pm

      This is a completely meaningless statement. The size or otherwise of a government deficit has no bearing on either the size of the GDP or on the share of GDP that allocates to capital or labour.

      Back to Econ 101, methinks.

  3. pollywog 3
    9 February 2010 at 11:34 am

    you cant live on hope ! hope doesnt pay the bills !

    solutions not ablutions !

  4. luva 4
    9 February 2010 at 11:35 am

    I completley agree MG.

    I don’t care who gets us back to the top as long as someone does. Only a seriously deranged partisan would like to see National fail here.

    • Pete 4.1
      9 February 2010 at 1:37 pm

      Truth is, I never want to see the government fail if it’s in the interests of the greater good.

      It’s the definition of ‘the greater good’ and different pathways to get there (proven or otherwise) that change the partisanship of the person.

      ‘Aspirational’ is a good word to consider when referring to the present government and National governments (and the fourth Labour government) before them.

      I think you’ve hit the nail on the head here Marty – it’s actually the much-decried Unions that are the difference – indeed, that’s what my friends over the ditch tell me.

  5. ghostwhowalksnz 5
    9 February 2010 at 12:18 pm

    In 1988 I came back from Aussie and got a pay increase with a similar job in Auckland. And that was from Melbourne where you would expect higher than average pay , because of a major metropolis, where pay tends to be higher. The 90s obviously were where everything stood still for nearly 10 years
    captcha catch

  6. randal 6
    9 February 2010 at 12:40 pm

    national is supposed to be the party of business.
    so.
    where is the new business?

    • Draco T Bastard 6.1
      9 February 2010 at 2:30 pm

      National are the party of past and present business and they’ll do everything they can to protect them from new business, ie, the ETS.

  7. Bored 7
    9 February 2010 at 1:21 pm

    Lets get real about the income gap. Its down to Australia being better served with geological resources than NZ for industrial use. We are a farm.

    We will get equivalence, in fact we will have better incomes than Oz in the future because we are a farm, probably a better farm than almost anywhere else when it comes to growing grass all year round. The end of the oil age will mark the end of the the vast economies of scale in mineral extraction and distribution worldwide.

    Meanwhile we need to concentrate on becoming the Lucky Islands, not a parody of OZ. The future is not at all rosy for oil based man, theres no technological fix to carry on BAU. We fortunately have some options, so long as we dont try and mimic a limited future system just to get parity with Oz.

    • gitmo 7.1
      9 February 2010 at 1:31 pm

      I’m in agreement of much of what you say….. people will need to be fed for the foreseeable future and our farms on land and the sea are very very large assets which need to be managed and protected as they’ll be providing a large chuck of our export earnings for many decades to come.

      If we really desperately need to have income equality with Australia we could just join the federation, although I wonder how the Ausi median wage shapes up on a state by state basis ?

      • Lanthanide 7.1.1
        9 February 2010 at 1:47 pm

        Joining Australia would only have the immediate result of us adopting all of their laws.

        We can do that without joining Australia, too. We can even pick and choose from the best ones and modify them to suit our purposes. Marty is making a good point in that we should be adopting some of their laws if we want to catch up with them, not do something different.

        • gitmo 7.1.1.1
          9 February 2010 at 1:57 pm

          Not necessarily they do have variances on a state by state basis in relation to laws.

          Also interesting the skew of wages by state on occupation which I found here.

          http://www.britzinoz.com/page.php?67

          there’s probably better sites … but look at that average for mining in WA.

    • Bored 8.1
      9 February 2010 at 2:36 pm

      Short term fiscal stimulus is an excellent way of kick starting or priming the economic pumps. It may be a good move if you have the financial reserves or you can project forward future earnings required to cover any debt incurred. It may well be the right immediate move for Australia or ourselves.

      My issue is more long term. Australia has as I said mineral reserves to back any debt incurred that in an unconstrained world with abundant energy reserves would be snapped up by industrial demand. Unfortunately longer term energy depletion will preclude this. I suspect the Aussies know this, they are merely postponing the date of payment.

      Still it makes them look a damn sight smarter than us or the rest of the world.

  9. Jcw 9
    9 February 2010 at 5:03 pm

    I’m curious about the data used to produce the second graph. Could a link be provided to the original data? Mainly I’m curious as to why its in USD.

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