A generation of NZers misses out on the gains
(shareholders, banks and other investors) or labour (the people who work in the business).
In recent decades, the share of company profits going to labour has decreased sharply, from around 60 per cent to around
50 per cent, one of the lowest levels in the developed world.
That in turn is being driven by technological shifts – workers being replaced by robots – but also changes in bargaining power.
People running companies have much more ability than before to threaten to take their business somewhere else.
In contrast, staff generally have much less bargaining power than they did a few decades ago.
Trade unions, whatever their faults, helped workers band together and demand a larger share of profits.
But they now represent just
20 per cent of the New Zealand workforce, down from 70 per cent a few decades ago.
The International Monetary Fund – a body not normally very sympathetic to unions – has produced research showing that the decline in union membership have greatly contributed to this increased inequality.
In the debate about working poverty, much of the focus is likely to be on boosting skills and education and trying to create better paid jobs that way.
All those ideas, which are about growing the pie, are valuable. But the evidence suggests that working poverty could be sharply reduced simply by ensuring that ordinary staff get a larger share of that pie.
Max Rashbrooke is the author of Wealth and New Zealand and a senior associate at the Institute for Governance and Policy Studies.