I see National’s complaining about the wage gap between New Zealand and Australia again. As usual they have no answers on what to do about it other than to blindly hope that tax cuts for the rich will lead to economic growth and somehow it’ll all trickle down into the ordinary worker’s pay packet. Ever feel like someone’s trying to sell you a dud for a second time?
Because as anyone who lived through the 90s can tell you, National has a shameful record on wages, as this graph of median wage growth shows:
The reason for this is simple. When National and its allied employer groups introduced the Employment Contracts Act in 1991 it was deliberately designed to reduce the ability of workers to bargain for better wages through their unions. This was done in a number of ways, but one of the most effective was its restrictions on the ability of unions to negotiate collective agreements across an entire industry.
This meant each collective agreement had to be negotiated on an enterprise (site by site) level, which both moved the balance of power firmly towards the employer and encouraged companies to compete against each other on labour costs. The result was a race to the bottom. Workers lost conditions, wages stagnated or fell for the majority of workers and collective bargaining was largely replaced by the market. Productivity suffered as the low cost of labour made capital investment uneconomical.
So when National talks about the need to lift wages and improve productivity, just remember who it was that slashed Kiwis’ take home pay in the 90s and put us in the position we’re in today. And don’t for a second think they wouldn’t go back there if given half a chance.
The challenge now for Labour is to finish the job they started in 2000 and strengthen the Employment Relations Act to restore effective industry bargaining. Wage growth has improved under the ERA, but it’s not nearly enough if we want to catch up with Australia.
As Council of Trade Unions economist Peter Conway points out, leaving it to the market alone hasn’t worked:
“New Zealand now has a structural problem of low wages, and the 30% wage gap with Australia will only be closed through more widespread industry wide collective bargaining, supported by ongoing improvements in productivity.
‘Wages were broadly comparable with Australia until the late 1980s, but then fell to 60% by 2002, according to Treasury analysis.
‘Similarly, in 1978 New Zealand and Australian workers had about the same amount of capital per hour worked but by 2002, capital intensity in Australia was over 50 percent greater than in New Zealand.
The CTU agrees that lifting productivity is essential to lift incomes on a sustainable basis. However this must be accompanied by effective measures to ensure the benefits are shared, with a strong minimum code and effective industry bargaining.
The next election may well be fought on the wage gap between New Zealand and Australia. It’s up to Labour to show the electorate which party’s really looking out for the interests of working New Zealanders.