Hamish Fletcher: Kiwis have given up on pay rises

Westpac said that bleak mood is probably due to years of muted wage growth. Picture / 123rf

Many Kiwis are giving up on the promise on a pay rise.

In fact, workers haven't been this glum about getting a pay bump since the global financial crisis.

New Zealand employees, according to the latest Westpac McDermott Miller Employment Confidence Index, are displaying "a lot of nervousness about
what's happening to wages and salaries".

"When it comes to the outlook for earnings, sentiment is really in the dumps.

Increasing numbers of workers are telling us that they don't expect any change in their earnings from work over the coming year. In fact, the number of workers who expect to receive a pay increase over the coming year is languishing at the sort of lows we saw during the financial crisis," Westpac senior Economist Ranchhod said.

A net 25.3 per cent of the 1533 people in the September survey said they were expecting pay growth in the year ahead, down from 28.4 per cent in June.

"Nervousness about earnings growth is widespread, and is particularly acute in regions such as the Bay of Plenty, Wellington, Southland, and Nelson/Marlborough. It's also evident across all income groups," Ranchhod said.

So why are workers in the doldrums?

Westpac said that bleak mood is probably due to years of muted wage growth.

Salary and wages - as measured by the Statistics New Zealand's labour cost index - grew 1.7 per cent in the 12 months to June.

That equalled the rate of inflation, meaning people won't be feeling any richer as a result.

And given private sector wage rates only grew by 1.6 per cent, there's a big chunk of workers whose spending power fell.

No wonder some people expressed dismay and outrage this week at Fonterra boss' $8.3m remuneration - a jump of 78.5 per cent from 2016.

The flipside to low pay rise expectations is that Kiwis are getting more upbeat about their employment prospects and the number of job openings available to them.

"New Zealander workers are reporting that job opportunities have continued to rise in recent months, building on the solid gains we've seen over the past few years.

And looking forward to the coming year, they expect that the jobs market will continue to strengthen," Ranchhod said.

The Employment Confidence index overall rose to 113.8, up from 113.4.

That's its highest level since 2008.

That's all well and good for people looking to get a job or shift from the one they're in.
But it's cold comfort for those who don't want to take leap into a new company, industry or career.

The gloominess about earnings growth presents a tough task for the incoming Government to grapple with.

But nothing would give sentiment a shot in the arm like an significant lift in real wages.
Just how Labour or National - together with Winston Peters - will achieve this remains to be seen.

NZ First's policy of cutting immigration to 10,000 people per year could lift some people's wages, but equally could also starve industries of the skilled workers they need.
A better method would be to lift productivity.

That's a tougher ask and something policy-makers around the world are struggling to do.

Ultimately it's the long term answer to this country's persistently low wage growth and the discontent that it brings.