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Wages still growing strongly

Written By: - Date published: 1:48 pm, November 3rd, 2008 - 31 comments
Categories: election 2008, labour, national, wages, workers' rights - Tags:

Despite the recession, wages have continued to grow at a record rate and, crucially, faster than inflation. The average hourly rate was up 5.5% over the past year. The percentage of the economy that goes to workers (rather than to the capital owners) continues to increase.

This is the outcome of running a low unemployment policy. Low unemployment is self-reinforcing because employers know it will be hard to get new staff later if they lay-off people now. That keeps people in work during tough periods; unemployment remains below 4% for now. Low unemployment also means employers have to offer better wages and conditions to attract and retain workers.

Contrast that with the history under National. The unemployment rate was kept high, benefits were cut, and the minimum wage was allowed to drop all in a successful effort to keep wages down and leave more profits for National’s business backers. Bill English said that the idea of unemployment below 6% was a “hoax“. Wages fell for most workers and the share of the nation’s wealth going to workers fell.

31 comments on “Wages still growing strongly ”

  1. Don’t you mean:

    “The labour cost of running a business is still going up, even in our tough times. New Zealand businesses are sick of pissing away their profits to people who believe they’re owed a job and if we’re going to stop the flow of valuable business overseas we have to nip this in the bud with a party vote for National!”

  2. vinsin 2

    Solid argument, that’s exactly what i thought when i read the post.

  3. Scribe 3

    Low unemployment is self-reinforcing because employers know it will be hard to get new staff later if they lay-off people now.

    True. Which is why your rhetoric around National’s probation period is nothing but scaremongering. Employers aren’t going to “fire at will” because it doesn’t make sense from a financial or productivity standpoint.

    Sorry to say (for your sake) that you are contradicting yourself on this.

  4. Daveski 4

    Funny you should mention the 5.5% increase in hourly rates and note the 3.6% noted in the Stuff article for salary and wage earners. Any reason?

    Surely, the greater focus should be on growing the cake rather than the who gets what share. I realise that this is entirely inconsistent with your view of the capitalists. The fact that they put up the capital that creates jobs, growth, and improves the lot of the workers is always overlooked by the left.

  5. vinsin 5

    Scribe are you kidding me? Employers – a lot of them anyway – have a probation period – normally two months – before their employees get a pay rise – albeit small. Imagine if you didn’t have to pay someone an extra dollar per hour and could have a revolving door of new probationary workers, imagine the amount of money you’d save as a small business or even a large business – doesn’t this sound like something that would make fiscal sense? Lower wage bills equals more profit. This is why National’s probationary policy is prone to exploitation and is disgusting as it removes away any kind of dignity from a worker and puts all the power into the employers hands.

  6. randal 6

    who said the cake hasn’t grown as well daveskee
    or is it newzealand sux again just to confuse people?

  7. ak 7

    Chris S: Don’t you mean……we have to nip this (rising wages) in the bud with a party vote for National!’

    You’re right. I’m sure that’s what Steve meant.

    Could you please put this on a National party billboard?

  8. Scribe 8


    Have you ever employed anyone? The cost of the process would far outweigh any savings that could be generated from a revolving door policy that no employer would want.

    You are right that lower wage bills equals more profit. But high staff turnover equals fewer profit.

    captcha: clapping No

  9. Billy 9


    You are talking nonsense. No employer is required to give an employee a pay rise after a probationary period. Most do not at present. So it would not be necessary to sack people after the probationary period to avoid giving a pay rise. You could simply not give the employee the pay rise.

  10. Sue 10

    “Surely, the greater focus should be on growing the cake rather than the who gets what share.”

    The old growing the cake argument, eh? If I had a dollar for every time I’ve heard National, Act and their buddies trot that one out, I’d have a very big cake indeed. This was the supposed rationale behind the reforms of the eighties and nineties and all I saw was a lot of fat profiteers getting more cake and a lot of workers getting laid off.

  11. Chris G 11

    yeh growing the cake is a shit house call. Historically proven to be a farce and used by tories to entice the workers.

    Good post and link, Steve.

  12. Billy 12

    The unemployment rate was kept high…

    Are you suggesting that this was a policy? If so, got a link for that, SP?

    You guys were lucky enough to be in power during the best set of economic circumstances in a generation combined with a structural environment created by 15 years of sensible policies.

    That’s why unemployment is low. Not because of anything Labour has done.

  13. Ianmac 13

    Isn’t news that wages are going up good news? Isn’t there a long loud cry that we are too far behind Australia?

  14. Matthew Pilott 14

    Employers aren’t going to “fire at will’ because it doesn’t make sense from a financial or productivity standpoint.

    Scribe, it’s not a contradictory statement, because National have shown no intention of maintaining a low level of unemployment. Unless they do, then it’s a justified statement. Remember that National have plenty of reasons for wanting higher unemployment.

    The fear is that unscrupulous employers will find an easy way to abuse such a system – and given that we already have legal avenues for probationary periods, the main condition of which is justified dismissal, I don’t see why we need a new law to specifically allow unjustified dismissal.

    P.S great call on the ‘fewer profit’, nice to see mocking National’s ‘less bureaucrats’ is universal!

  15. Daveski 15

    Common sense only applies to the EFA not the chilling effect to employment proposed by the probationary period.

    Sue – the problem you have is that many of the reforms that were unpopular in the 1980’s and 1990’s are at the heart of why NZ is so well positioned to survive the credit crunch. Indeed, many left wing observers here despair the lack of willingness by Labour over the last 9 years to change anything of substance.

    Sue/Chris G – tell me how we can improve our productivity and our standard of living without growing the pie. Historically, the workers haven’t done that well growing the economy when they take over. Rather than spout trite pro-worker slogans, it would be better to work out how to encourage investment and growth and ensure both workers and employers benefit.

  16. Scribe 16


    Remember that National have plenty of reasons for wanting higher unemployment.

    Care to list them?

    And I’m glad someone intelligent mentioned the “fewer profit” first. I feared it might be lost on some people.

  17. sweetd 17

    Has this been posted to try and soften the unemployment stats due out this week. I hear they are quite bad.

    [lprent: Thought you’d gone away vowing never to come back. I even gave you a good riddance. Pity you can’t stay away…]

  18. vinsin 18

    Billy I’m not talking nonsense I’m drawing from almost twelve years of working in minimum wage jobs for small businesses and large retail chains. Almost every single job i’ve had bar working for foodtown had a period of training which was paid at a lower rate and then a probationary period which varied after which a pay rise would be given. I’m not saying this is the law but this is my experience. The point i was making however was that the Probationary period has – like any other policy – the potential to be exploited, the example i brought up is just one of them but i’m sure there are many more possibilities. Any policy that gives such a mandate to those who hold the money that pays for employees food, is one that is dangerous.

    Billy could you name these sensible policies from 15 years ago?

  19. IrishBill 19

    I’m interested to see that despite all the right-wing whinging about the wage gap all of the right-wingers are complaining about wages rising. Good to see you showing your true colours.

  20. sweetd 20

    IrishBill, I think what everyone would prefer to see is the size of the cake increasing so that everyone gets paid more, not the cake staying the same size and employers having to pay more. The latter takes us down a dead end road, the former is a much better place.

  21. sweetd 21

    Keep up Iprent, I came back last week.

    [lprent: Pity. I saw that, but been a bit busy. I passed over it as “mostly harmless”. ]

  22. IrishBill 22

    Sweetd, the size of the cake has increased. Considerably. Wages have increased also but not as fast. In the 90’s profits increased while wages fell. The lesson to learn is that increased profits do not flow into increased wages unless there is IR law that allows workers the leverage to ensure they can get the increase they deserve.

    It would be more honest of you and your political ilk to simply admit that you favour lower wages because you support the employer class. Of course that would make it a lot harder for the right to get votes as ACT have demonstrated.

  23. Daveski 23

    IB – I’m not complaining about wages rising. That’s completely untrue.

    What I said and I repeat is that SP’s metric of the share of “workers” vs capitalists is short-sighted, particularly given the fact that in NZ a greater proportion of businesses mean the worker is also a capitalist.

    I would be interested in seeing your source re the increase in the size of the cake. I would respectfully suggest that given our OECD status, it can’t be that much in real terms.

  24. Scribe 24

    I heard — at least I think I heard — a comment that private sector wages grew more quickly than public sector. That’s good.

    But has any media outlet compared the average increase with the increase MPs gave themselves?

  25. Tane 25

    You’re right there IB – even ACT don’t campaign on their policies anymore. It’s all ballroom dancing and ‘tough on crime’ these days. Their economic policies are the elephant in the room.

  26. sweetd 26

    IrishBill, even though the size of the cake may have increased, other coutries are doing much better than NZ, so in actual fact we are doing worse. We have dropped 2 OECD places under Cullen’s watch. Not good enough. Six out of the eight countries that rank below NZ were admitted 1994-2000. All this during the best conditions we have seen in generations.

  27. IrishBill 27

    sd, that’s a ridiculous argument. Where NZ sits in terms of international economic growth has nothing to do with the relationship of domestic profits to domestic wages. Try again.

  28. sweetd 28

    IB, try this for cause and effect. Higher up the oecd scale, bigger wages.

  29. Phil 29

    Despite the recession, wages have continued to grow at a record rate

    Wages measures tend to be one of the last indicators to show a slow down – they’re a little bit ‘backward looking’ in that sense.
    Saying ‘despite the recession’ is a bit like saying “I mowed the lawn yesterday despite the weather raining today”.

  30. bobo 30

    Chris S – I bet you drug test employees and have video surveillance in your staff toilets too.. National spent the nasty 90s with a wage freeze then have the gaul to blame labour’s last nine years for it when wages actually start to improve… running a small business myself that exports NZ are amongst one of the top places in the world in regards to lack of red tape with small business. It cost’s less to start up a limited company than a flight to aussie…

  31. randal 31

    ha the new zealand sux gang going hammer and tongs again.
    want to keep everything for themselves.
    ]those new utes and trips to aussie for the grand final and to europe to swan around look so tantalising .
    New Zealand is what it is
    if You want to be in the top countries in the oecd well go to one of them
    when was the last time anyone moved 10 places
    this post is full of half boiled eggs in the lower half of the iq stakes

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