They won't add cost or take away jobs. Five of the six OECD countries with unemployment rates lower than New Zealand have some form of industry level bargaining agreements. The evidence from the minimum wage here in New Zealand is that minimum standards in workplaces don't lead to worse outcomes for workers. International evidence on industry level bargaining also supports FPAs. The OECD in 2019 said that "Bargaining systems characterised by a high degree of wage co-ordination across bargaining units are associated with higher employment and lower unemployment for all workers".
Some commentators have claimed that there is nothing wrong with the labour market in New Zealand and that there is no need for this reform. I think that speaks to how out of touch they are. The evidence speaks for itself. Max Rashbrooke's excellent book Too Much Money on inequality in New Zealand shows the gap between wages and labour productivity growing across the period between 1989 and 2020. It also demonstrates the falling share that labour is getting from the economy in New Zealand – a story that is not replicated across the rest of the world.
For the past 40 years, Australia has had national awards that cover the overwhelming majority of the workforce. Between 2004 and 2021 the median hourly wage for an Australian increased 92 per cent – from A$18.80 to A$36. Across the same timeframe in New Zealand the increase was 78 per cent. Australian workers also work fewer hours than New Zealanders – equivalent to 7 fewer days at work each year.
This pattern is not just bad for workers – the ILO measure of the output per worker shows New Zealand consistently behind Australia over the period between 2010 and 2020. R&D expenditure as a percentage of GDP has been consistently higher in Australia. Our economy doesn't just lead to poorer outcomes in terms of innovation. Our fixed capital formation as a percentage of GDP – the plant and machinery that drives growth – was lower every year than Australia between 1991 and 2019.
So why do FPAs support positive outcomes? Put simply, under the current system bad employers can drive out good employers. Competition in sectors with very similar products or services (public transport for example) pushes some firms' attempt to gain an advantage by driving down labour costs. This increases profit, but does nothing for the workforce, nor for the wider wellbeing of consumers. Where there is a wage floor in a sector – as is proposed by the bill, that competition model ends. Instead, firms compete on product, service, and value. Everyone except bad employers wins on this basis.
So, let's stop pretending that FPAs are anything other than a change to bring New Zealand in step with the rest of the developed world. Let's stop pretending that FPAs will harm the economy when the evidence from overseas shows otherwise. Working people deserve to get back dignity and respect across New Zealand, and FPAs will help deliver this.
- Craig Renney is an economist and policy director with the New Zealand Council of Trade Unions.