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]