The case for fair pay and the best ways to realise it

We’ll be waiting a long time to see if fair-pay agreements deliver anything for working New Zealanders. But there may be other ways to address possible power imbalances between employers and staff.

In trying to deliver a bigger slice of the pie for ‘‘middle New Zealand’’, the Government is dabbling with powerful global trends.

For at least 160 years to about 1975 or 1980, world income was becoming increasingly unequal.

But since then poor countries have started to catch up with richer ones.

Inequality within countries in the developed world has been getting slightly more marked since about the 1960s.

But that trend has been more than counteracted by the reduction in inequality at the global level.

It’s no coincidence that the move towards greater global equality coincided with the information technology revolution.

As of December, 54 per cent of the world’s 7.6 billion people had access to the internet, according to the International Telecommunications Union.

Wider access to information is making workers around the world more equally productive and levelling incomes at the global level.

More than half of New Zealanders now have a tertiary education.

The upshot is that being born in a country like New Zealand and having an education and some sort of profession is no longer a ticket to a super-high and ever-rising standard of living – or the right to consume 10 times as much of the Earth’s resources as the global average, and fair enough really.

No industrial-relations reform can change that big picture.

But there is also evidence that business owners are grabbing a greater share of wealth created in New Zealand at the expense of their employees.

Total business operating profits jumped 38 per cent to $65 billion between 2009 and last year, according to Statistics NZ.

That far outpaced the increase in the median hourly wage, which rose by just under 20 per cent over the same period.

It is hard to understand why employers would negotiate away that gain by voluntarily entering into fair-pay agreements.

So what case is there for intervening in the market?

Full employment and the elimination of age, sex and racial discrimination are the best guarantors of fair wages.

Perhaps it’s time for large employers to report on job applicants’ make-up, putting an onus on the firm to explain any hiring imbalance.

That would only be possible if candidates provided their age and ethnicity, something they’re not currently encouraged to do.

Then there’s the information imbalance. Businesses are more likely to know the going rate for staff than job applicants.

Obliging companies to publish an intended pay band for a job when they advertise a vacancy might address that issue.

It’s also a reform that wouldn’t need a working party.