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Government backs away from public service wage announcement

Written By: - Date published: 8:02 am, May 12th, 2021 - 34 comments
Categories: chris hipkins, grant robertson, Unions, wages, workers' rights - Tags:

Some good news from yesterday.  The Government has decided to walk back earlier comments suggesting a wage freeze for teachers and nurses.

Yesterday there was an attempt to discredit the media analysis that had been applied to the earlier announcement and a claim that what was announced was not actually a wage freeze.  With the greatest of respect to my Labour whanau I don’t think this argument can be sustained.

The overwhelming impression created was that public servants earning over $60,000 would not be receiving more pay, at least over and above traditional increases already built into contracts, for instance band payments for teachers.

Chris Hipkins in Parliament basically said this.  From question time on the fifth of May:

Hon CHRIS HIPKINS: … The updated guidance will continue to mean that there should be no pay increases for those earning over $100,000 and senior leaders within the Public Service. Any increases should be targeted to those lower-paid public servants, largely those earning below $60,000 a year, who account for about 25 percent of the public sector. We want those on the lower wages to be the focus of any increases in pay.

Ginny Andersen: How would the Minister respond to concerns about this pay restraint raised by the Public Service Association?

Hon CHRIS HIPKINS: This is ultimately about prioritising Government spending. I would say to the Public Service Association that we’ll continue to work closely with them on issues around gender and ethnic pay gaps, on issues of pay parity, and on issues around terms and conditions, as we have been doing over the last three years, where we’re making progress and we know more progress is required. I’d also say to them that the guidance is consistent with the decision last year by the Remuneration Authority that Ministers and MPs would not be getting any pay rises for the next three years because of COVID-19 and the decision by the Public Service Commissioner, who sets the pay of Public Service chief executives, who will also not be increasing any of their pay.

Hipkins was quoted as confirming that pay increases for those earning between $60,000 and $100,000 would only occur under exceptional circumstances.  If there was confusion about the language then the media should not be blamed.

Yesterday things changed as the Government worked to reinterpret the earlier announcements following meetings with the unions.  Henry Cooke at Stuff has these perceptive comments:

Senior ministers have been blaming the media for the anger from the public sector over the pay restraint announced last week, when they indicated that no public servant earning over $100,000 could expect a pay rise for the next three years, and those earning between $60,000 and $100,000 would only get them in special circumstances.

Hipkins and Prime Minister Jacinda Ardern first disputed that the pay restraint was a “freeze” because those on collective agreements with increases already built-in would still see their salary increase. It was never suggested that the Government would not honour its existing contracts.

Following the meetings with the unions both sides told media that the restraint was not in fact a “freeze” but just an opening position for collective bargaining negotiations, which would be entered into in good faith.

Council of Trade Unions President Richard Wagstaff said there was now room for cost-of-living increases in those discussions.

“It was also agreed that there is scope to discuss cost of living increases in negotiations for all union members covered by collectives, with higher increases for low paid workers and that there is no pay freeze,” Wagstaff said.

Hipkins confirmed this, but said this had always been the case.

“Cost of living increases are in scope to be discussed during negotiations, as they always were.”

This is despite Hipkins saying clearly last Wednesday that pay increases for those earning between $60,000 and $100,000 would only be considered under “special circumstances” – something Finance Minister Grant Roberston called an “exceptions regime.”

“Any pay increase over the next three years will be targeted to low-income public servants, that’s those earning less than $60,000 per year,” Hipkins said at the time.

“For those in between [$60,000 and $100,000,] pay adjustments will be considered in special circumstances, but they will need to work through the Public Service Commission.”

Hipkins was also asked directly about the cost of living going up over the three years of the policy, and responded by noting that public sector pay had outpaced private sector pay in recent years.

I am pleased to see the walk back of earlier comments.  But I am wondering why the ministers involved did not realise that the announcement would be so incendiary.

34 comments on “Government backs away from public service wage announcement ”

  1. Ad 1

    Good comedy, reasonable damage control.

    They'll get back on track with budget day.

  2. Incognito 2

    Sometimes, when I have a rare Machiavellian moment, I think this is a multi-dimensional game of political chess. One reason:

    ACT leader David Seymour has unveiled his 2021 alternative budget, promising $11.2 billion in savings, mainly coming from cuts to public services. Those cuts help to pay for big tax cuts and reduced debt.

    https://www.stuff.co.nz/national/politics/300305224/acts-david-seymour-wields-the-axe-in-his-alternative-budget

  3. Nic the NZer 3

    Why didn't they expect the push back?

    Covid marked an important change in timing. Where previously Labour terms have started with strong economic terms, resulting in govt surpluses (and rising private debt) and National terms often started with a recession and deficit the timing of Covid knocked this pattern.

    Labour had previously taken the timing of recessions as validation of their sound economic management. So they had thought that they had broad public support for the regular practice of public debt paydowns.

    But at this time the economics profession is busy recognising the value of public spending and that the response to the GFC initiated austerity way too early, so the ideology and discussion was not backing them up here (no professors have released a spreadsheet full of errors at this time).

    On some decisions its important to understand which practices are best practice due to science and which are best practice due to ideology.

    • Sabine 3.1

      I think they run these announcement as trial balloons to see how much they can get away with. OR else they really drank a huge jug of 'majority syndrome' and truly believe their own ideas of reforming and think that they were elected to reform rather then just don't rock the boat and start rolling out the covid vaccinations and be nice and gentle.

      I also don't think that pretending it is journalists fault for using the word 'freeze' and then changing it to 'hold' did help them a lot.

      Just another storm in a tea cup.

      Never mind the problems that really ail us as a civil society and country, housing – buying or renting both unaffordable for most, education – schools falling apart, hungry kids, hungry toddlers, and kids not going to school at all, health care – overall, and mental health in particular to name just a few.

      Trial balloons, never mind the damage done.

      • Nic the NZer 3.1.1

        I don't for a moment doubt their sincerity. The well of ideology from which they drink is very deep and revisions are only very recently forming at a surface level.

  4. barry 4

    It was unbelievably hamfisted. How to piss off your base for no obvious benefit.

    • ghostwhowalksnz 4.1

      Teachers, nurses and PSA arent affiliated with labour party as unions. Nor do they provide any money.

      They are professional classes and are just as likely to support National or ACT

      • ghostwhowalksnz 4.1.1

        Data on annual NZ public service :

        In 2020, the average (mean) annual salary was $84,500, an increase of 3.9% from the previous year. Private sector average earnings increased at a lower rate (2.5%) over the same period

        https://www.publicservice.govt.nz/our-work/workforce-data/annual-salary-in-the-public-service

        [image resized]

        • Infused 4.1.1.1

          Were losing people to government who ate paying 30k more and allowing 4 days a week to work from home. It's insane. These guys are all 80k+

        • Craig Hall 4.1.1.2

          There have been a lot of pay equity settlements, adoption of the living wage (whether formally or informally) and the reintroduction of pay scales with guaranteed progression in the core public service as major sources of increases (education and health never lost their scales, but a lot of core government departments scrapped them for performance matrices and other discretionary systems).

          Not to say that other public servants have done poorly, but the increases aren’t especially evenly distributed which is obviously not something that comes out in the averages.

      • Byd0nz 4.1.2

        Well noted. They never seem to kick off under a Nat Gvt.

      • Gabby 4.1.3

        I very much doubt that teachers are as likely to support Nat or At.

        • Gabby 4.1.3.1

          Maybe principals.

          • ghostwhowalksnz 4.1.3.1.1

            They are . Thats why they have no affiliation with Labour party

            Reminder here the top point of full time teachers grade is $90,000- which is really minimum for those who have been teaching for 10 years or more.

  5. Adrian 5

    They don't know how lucky they are. Those threatening to "go to the private sector "may well be in for a surprise. There are bugger all jobs paying over 80k in the private sector that aren't already snaffled up by the serial troughers, leaving nursing or teaching or just sitting on your arse in an office in the expectation that riches await is dreaming, not to mention the lack of protections that PS jobs generally provide.
    And BTW, there is no mention in Hipkins annoucement of May 5th of the word “freeze “, just a vague “should not “. Freeze was entirely a media construction.

    • Enough is Enough 5.1

      If you you do not get a payrise this year, your pay is not frozen, it is cut. $1 buys less than than it did 12 months ago. It will buy progressivley less over the next 3 years.

      If your salary is not keeping up with inflation you are going backwards.

      I never thought I would ever see a Labour government propose something so daft.

      • ghostwhowalksnz 5.1.1

        So we should have monthly pay rises then, because its a 'cut' otherwise to wait till a year has passed.

        Historically wages have risen faster than inflation – the household index one.

        Ive never thought Id see those on very good salarys like the $90,000 for teachers top of band ( thus no 'step raise') expecting to do better as a matter of course than those below $60,000

        • Enough is Enough 5.1.1.1

          No – we should have annual pay rises.

          I don't know why people are framing this as an us v them kind of thing. All workers, regardless of what their income is, should be entitled to see their salaries at the very least keep pace with the increase in the cost of living.

          Yes certainly, increases can be weighted to those at the bottom end of the scale, but to tell people you are not getting an extra cent for three years is demoralising. The uproar from the unions shows how public servants feel about this.

          Austerity comes from the Tory playbook. It never works and it won't achieve anything here.

        • greywarshark 5.1.1.2

          That's silly Ghostww So we should have monthly pay rises then, because its a 'cut' otherwise to wait till a year has passed.

          Why don't you attempt reasoned discussion of your ideas?

          • ghostwhowalksnz 5.1.1.2.1

            It was to show the silliness of a claim that no increase is a 'pay cut'

            Both are pointless claims when in general wages rise higher than inflation 'index'

            look up how the cost of living for households is calculated and it doenst mean say a $65,000 salary with no increase is a reduction at all.

            • Enough is Enough 5.1.1.2.1.1

              It is an effective paycut.

              You might think that is a silly way to describe it, but is that is the outcome of freezing wages over a three year period.

              • ghostwhowalksnz

                The only people having a freeze over 3 years are those on $100,000 plus.

                Plus many public servants are on pay steps which go up regardless of the 'general increase'

                Plus a pay rise of say 2% on $75,000 is $1500 pa when there is not really direct connection to rising costs of $1500pa
                Those on under $50k will certainly need a real increase as those costs will be as much as the 2%

                • Enough is Enough

                  Yep – none of that has anything to do with my post at 5.1.

                  Read again – I was expressly reffering to workers who are not getting a pay rise, so I’m not sure why you are talking about workers who are getting a pay rise.

        • Nic the NZer 5.1.1.3

          You do have a point here. Even a slightly above inflation raise administered anually, can represent a fall of income as that inflation occurred continuously across the whole previous year.

    • Craig Hall 5.2

      There are certainly a lot of jobs in the public sector that are not really replicated elsewhere in NZ, so comparisons can be difficult.

      That said, as someone who works for a union and sees pay data regularly as part of bargaining information, the data we see shows that similar roles are usually paid less in the core government (government departments mainly) than the wider public sector (which includes education and health, among other things), which in turn pays less than the private sector. That doesn't come out clearly in the Stats NZ average and median earnings data because those include the retail and hospitality sectors which are mostly poorly-paid generally, and rare in the public sector.

  6. Margaritte 6

    I am inclined to the view that the media rather overinflated this. Personally I did not have a problem with constraining wage growth of the higher echelons of the public service.

    • Jimmy 6.1

      The media did nothing of the sort. Labour brought this upon themselves. They have quickly gone in to damage control. Richard Wagstaff must be laughing thinking, that was the easiest meeting ever!

    • GreenBus 6.2

      Me neither Margaritte, A 100K is simply unachievable for most and many are highly skilled, but they have no award rates or anything but the employers generosity (ha ha) to set your pay rate. The CPI needs to include housing which would send it into the stratosphere and we would all have better pay. Ha Ha again.

    • Craig Hall 6.3

      If the Pay Guidance itself was clearer, maybe, but to quote it for earners between $60K and $100K, "The default position is that there are to be no increases to bands for lower to middle earners".

      Another quote (principle 4): "Universal across the board pay increases are not consistent with this guidance".

      I think the media calling it a pay freeze was probably a bit hyperbolic, but it was still worded as major restraint.

    • Anne 6.4

      I did not have a problem with constraining wage growth of the higher echelons of the public service.

      yes

      And still don't.

  7. Tricledrown 7

    Labour and National play hardball in pay deals with the public sector.

    Given the economy is tracking well there should be room to move.

    More staff in govt depts not surprisingly especially the health ministry where staff had been cut to bone and the health ministry had only become an advisory service. While DHB's compete and have huge bureaucracies delivering patchy poorly coordinated healthcare.

    Covid 19 showed hospitals and healthcare was in dire straights most hospitals had only a few days of PPE gear in stock and the reserves were mostly expired.Had covid got into our community we would be in a worse position than any other developed country as we had the lowest number of Intensive care beds in the OECD.

    Education another area which has been poorly managed by individual school boards using up resources for advertising while schools rot because of leaky buildings.tommorrows schools has been a disaster.

  8. Sacha 8

    Spinoff's Justin Giovanetti is concise on this: https://thespinoff.co.nz/politics/11-05-2021/ardern-and-robertson-say-public-sector-wage-freeze-is-misreporting-but-is-it/

    “For those in between, pay adjustments will be considered in special circumstances, but they will need to work through the Public Service Commission. This is ultimately about prioritising spending. The policy will help us protect jobs and take pressure off the public sector wage bill,” Hipkins concluded.

    That last point from the minister, uttered in the same breath as his guidance for most public workers, made it clear that the intent is to reduce spending on wages by only allowing adjustments in special circumstances.

    That sounds a lot like a freeze. To suggest that the use of such a word constitutes misreporting is dancing on the head of a pin.

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