Public sector wages grew faster than private sector wages in September quarter

Collective bargaining has driven pay rises in the public sector. Photo / Mark Mitchell

Public sector workers are reaping the benefit of collective bargaining agreements and pay increases.

Overall quarterly wage growth across the private and public sector is the lowest since December 2021.

A Public Service Commission report found public sector wages rose 0.9% in the September quarter.

Meanwhile, private sector pay saw quarterly wage growth of 0.6% this quarter, from the June quarter.

The commission’s Labour Cost Index has found both sectors saw reduced levels of wage growth this quarter compared to the one prior.

Public sector wages grew 1.2% in the June quarter, whereas private sector wages increased 0.9% in the same period.

The September quarter growth appears consistent with wage growth averages.

The Public Service Commission report states since September 2009, wage growth averages for the quarter sit at 0.8% for the public sector and 0.6% for private sector employees.

Annual changes follow a similar pattern.

In the year to September, public sector wages grew 5.6%, compared to 3.3% growth in the private sector. Both figures are down from the period covering the year to June.

The Public Service Commission said public sector wage growth is “generally slower to react to market conditions” than its private sector counterpart.

The report stated it tends to be slowed to adjust down in reaction to negative market movements, or up in reaction to tight conditions in the labour market.

It is estimated 18,500 public servants, including police, received a pay increase in the September quarter.

Annual wage growth in the public sector is falling, though recent data has been impacted by the Public Service Pay Adjustment.

As of March 2023, under the terms of the agreement, workers were in for $4000 payments in the first year, and further increases in the second.

Wages classed under “other central government groups” saw the largest spike in the three months, up 3% and 4.2% in the year to September.

The group, which includes police staff, NZDF, ACC, and other Crown agencies, saw the largest growth after a collective bargaining agreement for roughly 10,000 constables.

The offer, confirmed in July, included a $1500 lump sum payment, with wage increases coming into force from November 1.

The Government confirmed a pay increase for the roughly 10,000 members of the police association in July. Photo / Bevan Conley

At the time, Police Minister Mark Mitchell said it had been a “long process” for staff.

Prior wage growth in the public sector was driven by a health settlement for nurses.

Portions of pay increases have been called a “wage correction” on technicality. Increases to wages, as part of pay equity settlements, impact the labour cost index.

The commission’s report states this cannot be disambiguated from other causes of wage growth.

“This is particularly salient for health and education sectors which have been more heavily impacted by pay equity in recent years than elsewhere in the public sector,” the index said.

In the September quarter, 23% of public sector wage rates grew, compared to the 15% of wage rate increases in the private sector.

Since March 2018, wages in the public sector grew 24.5% compared to 20.3% private growth.

Public Service Association assistant secretary Fleur Fitzsimons said pay equity outcomes and collective bargaining are driving the difference.

“These settlements address the long-standing and historical undervaluation of crucial work, predominantly performed by women, particularly within our healthcare system,” she said.

“These salary increases primarily stem from adjustments in pay for nurses, allied health professionals, and midwives, following hard-fought legal recognition that their compensation has been unjustifiably low for decades, due to undervaluation.”

This year, the average wage in the public sector officially ticked six figures for the first time.

The average public servant earns $101,700, according to a prior Public Service Commission report.

Year-on-year savings of $1.5 billion continue in the public sector, after the curtain was raised on Nicola Willis’ first Budget as Finance Minister in May.

Savings follow a round of mass job cuts earlier in the year, with some agencies eyeing further reductions in staff.

Azaria Howell is a Wellington-based multimedia reporter with an eye across the region. She joined NZME in 2022 and has a keen interest in city council decisions, public service agency reform and transport.