Claire Trevett: Labour in trouble with public sector pay 'freeze'

Will the 'pay freeze' decision bring a spate of bad weather for Prime Minister Jacinda Ardern? Photo / Alex Burton

OPINION:

The Labour Government this week served itself up what may end up being the biggest steaming pile of trouble of its term.

That pile of trouble landed when Finance Minister Grant Robertson and Public Service Minister Chris Hipkins announced the Government had told public department bosses it wanted to freeze wages for most public sector workers earning more than $60,000 for the next three years, and all of those on more than $100,000.

It provoked an almost immediate outcry from blind-sided public sector unions and workers – and a very rare firestorm against Labour from its own supporters on social media.

The Police Association was furious, describing it as a "bombshell" that arrived without warning on the same morning they met with Police Minister Poto Williams to start pay round talks.

The PSA got only one day's notice of the move. The nurses, the teachers all objected, noting it effectively amounted to a pay cut in real terms at a time of high house prices and as the cost of living was expected to rise.

Labour quickly lost the communications war and appear to have under-estimated the reaction to it.

Even the most faithful of the Labour faithful were appalled, struggling to reconcile the move with Labour's usual philosophy of targeting the very wealthy to try to nudge the "equality" dial – not teachers and nurses and DOC rangers.

Of particular concern was the decision to freeze the wages of those on $60,000 to $100,000 other than in exceptional circumstances.

In this, the ministers even had the gall to note that MPs salaries ($335,000 for Robertson and $296,000 for Hipkins) had also been frozen for three years because of Covid.

It is one thing to freeze the wages of chief executives earning more than the Prime Minister, but quite another to do so to those on more modest wages of $60,000 to $100,000. Even $100,000 – which has been seen as the threshold at which "very wealthy" begins for decades – does not go far these days in cities such as Auckland or Wellington.

Will the 'pay freeze' decision bring a spate of bad weather for Prime Minister Jacinda Ardern? Photo / Alex Burton

It was seen as especially galling in the Covid-19 era, given it was primarily public sector workers involved in coping with trying to teach students during lockdowns, border management, and in the health response.

The Green Party opposed it and even National criticised it, arguing nurses, teachers and police were paying the price for Labour fattening up the Wellington bureaucracy.

It is a foolish government that bites the hand that feeds without giving a convincing reason for it, and in this case no compelling reason was given beyond a show of almost symbolic fiscal rectitude.

The reason Robertson gave was it was a time of "severe fiscal constraint" and that meant what money there was should be used for the wages of those on less than $60,000. That was only 25 per cent of the public sector workforce.

In trying to convince people, it did not help that the very next day the Crown accounts showed the books were $5.2 billion better off than forecast in December, and the Labour social media team sent out posts boasting of the resilience of the economy and "confidence in our economic recovery plan".

Nobody has been able to say how much the move will actually save the Government, either because nobody has done the calculations, or the Government does not want us to know so will not tell us.

All of which begs the question, why bother?

The Prime Minister pointed out it was not a "freeze" because wage increases in collective agreements already negotiated (such as the nurses) would still be actioned, and many workers would still get annual increases by moving up through salary grades.

But the Government has already lost the communication war.

If the Government hoped Friday's announcement on Fair Pay Agreements would take some of the heat off, it may be disappointed.

That did please those unions which deal mainly with private sector workers (it is also those unions which donate to the Labour Party).

The package included funding for those unions to scale up for the negotiating required.

The agreements will set minimum wages and conditions across an entire industry, or an occupation group. The first likely to be negotiated include cleaners, bus drivers and supermarket workers.

The Fair Pay Agreements will be controversial, but do deliver on one of Labour's cornerstone promises.

But the Fair Pay Agreements will have little impact on public sector workers, most of whom are already operating under collective agreements.

It also raised the unusual situation of a Government implementing pay restraint, but expecting the private sector to do the opposite.

Nor do other consequences of the public sector "freeze" appear to have been given much heed. The medical profession warned of the likelihood medical staff would simply go to Australia for better wages, something that was already an issue and which the freeze would make worse.

A prolonged freeze could also result in a brain drain from core government departments. It is not hard for the likes of economists and analysts to find jobs in the private sector.

While many public servants accept lower pay rates than private sector colleagues for the sake of knowing they are "serving", warm words of acknowledgement instead of cold hard cash can only go so far.