Fair pay can be good for business and for workers
Remember when you could pay a mortgage, keep the kitchen cupboard full, take the kids to the movies now and then, by working as a bus driver, a freezing worker, a journalist, or any number of other solid middle-Kiwi jobs? When a decent working life was a given?
Too far back to remember? Maybe you’ve noticed how just across the ditch our cousins with all kinds of everyday jobs seem to be that much better off than us?
The difference between then and now, and between Australia and New Zealand, is sector bargaining. This used to be called awards here. In Australia, sector bargaining is called modern awards; in other parts of the world it takes the shape of industry agreements or tripartite national bargaining. What it is in all of these places is a system to deliver minimum standards. Minimum standards agreed between employers in an industry and the people who work for them; sometimes the government is involved as well.
The advantage for working people is they don’t have their wages and conditions systematically driven down by businesses competing on how cheaply they can subcontract people’s work. Like we’ve seen in the forestry and service industries. And they don’t have their terms and conditions, negotiated in good faith over years, contracted out from underneath them. Like we’ve seen in the transport and telecommunications industries.
The advantages for employers are that they can invest in skills and training, and plan to increase their productivity over the medium and long term. They’re not forced to compete with businesses running fly-by-night operations based on low wages and insecure jobs. And they can invest in new plant and machinery and innovation – things that take time to pay off – knowing they aren’t going to be undercut by low-tech outfits run on a cheap labour and low-investment model. Not to mention that more Kiwis with better incomes have more money to spend at our Kiwi businesses.
That’s why sector bargaining – in the form of the proposed Fair Pay Agreements – will be good for our economy too. National MP Scott Simpson’s soundbite on the announcement of FPAs was that they would mean ‘‘competition will be sacrificed’’. He’s half right: competition based on lowering Kiwis’ incomes will be sacrificed. So will competition between workers to do more and more hours for less and less money. So will competition for migrant labour to fill jobs that just don’t pay enough to live properly in New Zealand.
But competition based on innovation, investment, and real points of difference between businesses will thrive. Which is exactly what we need if we don’t want to continue on our path to a low-wage, low-skill, low-investment backwater in the global economy.
Because that’s the direction we’ve been taking for the past 30 years. You can see it in the fact that working people’s share of the net domestic income has fallen by 10 per cent over this time – that’s billions of dollars shifting from working people to business. At the same time as business has reaped these rewards, they’ve failed to reinvest: our investment in research and development has consistently been amongst the worst in the OECD.
I don’t blame business for this; after all, why would they invest? It makes no business sense to risk capital on innovation when the same result can be achieved with less short-term risk by throwing cheap, insecure, work hours at the problem. But investment in skills and productive capital makes huge sense over time for individual businesses. And for the nation’s economy and society, it’s how we do better. There is clearly a system-level problem.
The question isn’t whether we need sector bargaining – the wholesale removal of it in 1991 has clearly been a disaster for New Zealanders, and for our economy. Losing sector bargaining has created a huge cohort of working poor, a disappearing middle class, and a moribund business sector. It’s also meant a lot of wealth that would have stayed in New Zealand in workers’ pockets has disappeared to offshore shareholders.
The real question we need to answer is what kind of sector bargaining is going to achieve the best results for working people, employers, and our economic future?
We on the FPA working party have a huge responsibility to deliver that result. And if business groups cannot leave the outmoded and failed Wild West model of employment law at the door, they will be doing our nation, our economy, and the businesses they represent a huge disservice.
Richard Wagstaff is president of the Council of Trade Unions, and a member of the Fair Pay Agreements working party.