Fair Pay Agreements proposal could see NZ cop wrath of UN's International Labour Organisation, BusinessNZ says

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New Zealand risks being placed on a list of alleged breaches of international labour law if it continues with its proposal for Fair Pay Agreements, a business group says.

BusinessNZ says the introduction of Fair Pay Agreements would essentially force collective bargaining, which would have detrimental effects on the country and its reputation, as well as set a bad example globally, while the FT says Fair Pay Agreements would reverse 30 years of labour market deregulation.

The UN International Labour Organisation (ILO) last week said it was in favour of collective bargaining and that collective bargaining in the workplace was essential for the global recovery post-Covid-19 pandemic.

BusinessNZ is concerned that the proposal does not support voluntary bargaining but rather wants to enforce it, Kirk Hope, chief executive of the pro-business group, told the Herald.

"The problem with this proposal is it compels people to bargain, which sends a pretty bad signal to many other countries," he said.

"It is quite serious to compel people to a bargaining table, which is why again the ILO language in their conventions are all about supporting and governments putting in place things to support collective bargaining, not compelling people."

If enacted, the Fair Pay Agreements would breach the freedom of association rules and convention 98 relating to voluntary bargaining, Hope said. "There is compulsory mediation as well so that would almost certainly breach convention 98, then there is government intervention that would then breach convention 98. The signal and intention to breach from a country like New Zealand is a pretty serious matter."

Enterprise-level bargaining was commonplace around the world, but very little sector-level bargaining was "left in the world", Hope said.

"France finally got rid of sector-level bargaining in 2018.

"Most countries have said it stifles innovation, it disables regions in favour of cities and it can have a range of pretty significant impacts, which is why they have all moved to enterprise-level bargaining."

Workplace Relations and Safety Minister Michael Wood said sector-based bargaining was commonplace across the OECD, including in Australia and most of Europe.

He said it was "ridiculous to suggest that the likes of Australia was on par with Afghanistan and Venezuela. Business New Zealand needs to leave the hyperbole at home and engage in the substance."

Wood said Fair Pay Agreements would "incentivise competition based on the right things across the economy".

"Our 30-year experiment with a low labour-cost model has not worked. Many workers have suffered, but, equally, our rates of labour productivity have been amongst the worst in the world under that regime. A model based on wage-based competition is focused on the wrong things. FPAs will incentivise competition based on the right things across the economy. The quality of goods and services offered, investment in skills and training, R&D innovation - these are the things that will drive productivity and prosperity for our country," said Woods.

Hope said other countries had recognised that sector-level bargaining was not conducive to good-quality economic outcomes or good-quality labour market outcomes.

"There are alternative things the Government could do which they could do if they properly identified their concerns in sectors.

"No OECD economy has moved to further centralised wage bargaining since the 1970s, so that tells you how out of step these proposals are."

Hope claimed the ILO had put New Zealand on the list of the 40 "worst cases" of breaches of international labour treaties, which will be examined at this year's International Labour Conference in Geneva in June.

However, BusinessNZ has since admitted it changed the name of the list title from "preliminary" to "worst case". It defended doing so.

BusinessNZ claimed the ILO has put New Zealand on the list of the 40 "worst cases" of breaches of international labour treaties.

It has since admitted it changed the name of the list title from "preliminary" to "worst case", but defended doing so.

The actual title of the ILO report is "Preliminary list of cases as submitted by the social partners Committee on the Application of Standards".

Other countries on the list for collective bargaining concerns include Columbia, Egypt, Hungary, Iraq, Malaysia and Mauritius.

"Clearly the International Labour Organisation, which this government is a founding member of, sees the introduction of compulsory Fair Pay Agreements as trampling on people's human rights. It is a clear infringement of workers' and employers' right to freedom of association," Hope said.

Wood, however, said the ILO had not made a finding on the government's proposed FPA system, and it had instead been included on a list of policies that may be looked at.

"Our nation's long-standing mismatch between wage growth and inflation is not economic progress. Suppressed wages and inflexible working conditions are not economic progress. Working two or three jobs just to put food on the table at night is not economic progress. Economic progress is a high-wage, high-productivity economy that delivers for workers and businesses alike, and this is what this government is committed to delivering."

This story has been updated to correct the statement originally made by BusinessNZ that the ILO list was a "worst case" list. The actual title was "Preliminary list of cases as submitted by the social partners Committee on the Application of Standards".