NZ Herald Business Editor at Large Liam Dann explains what the surge in wage growth and near record low unemployment will mean for Aotearoa’s economy in the coming months. Video / NZ Herald
OPINION
It didn’t take long. Since the Monday after the election, business leaders have been in the media calling for the rolling back of workers’ rights, lower wages and a “rebalancing” with higher unemployment, at the same time as cutting benefits for those tossed on the scrapheap.
Now,let me ask you a serious question: when did you ever hear of a country making its people wealthy by paying its people less?
We’ve tried this experiment before.
In the 1990s, the National government brought in the Employment Contracts Act, stripping workers of their union rights and tipping the power balance in favour of employers, while also freezing the minimum wage for years (until Winston Peters forced them to raise it). The result was economic doldrums for years on end. Unemployment over 10 per cent (and 25 per cent for Māori), wages going nowhere, poverty through the roof – and the economy couldn’t grow because there was no domestic demand. People had nothing to spend.
Then Sir John Key’s National government tried the same things in the 2010s. “Fire at will” clauses, stripping back workers’ union rights, barely moving the minimum wage. Again, unemployment stayed stubbornly around 5 per cent, wages barely budged, and GDP growth – boosted by the Christchurch rebuild – slowly tapered off.
Now, Luxon’s Government is looking for round number three. Scrapping Fair Pay Agreements, cutting benefit increases, freezing the minimum wage if David Seymour has his way, and firing thousands from the public sector. Lowering the wage requirements for immigration to “improve the supply of labour” is also on the cards.
We need immigration to help fill high-skill, hard-to-staff roles that help our economy grow. But we cannot abuse immigration as a source of cheap labour. Getting in cheap workers is nice for the employer, but it just means we end up breaking our promise to immigrants of what living in New Zealand is when they find there’s not enough housing and infrastructure, and the wages are no good.
As an employer, I know it can be frustrating to find staff and there’s a lot of pressure on wages. But you know what? That’s a good thing. It forces business leaders to think more cleverly and invest in productivity – not just throw more bodies at every problem.
Ultimately, it’s high wages and low unemployment that drive growth and productivity, not the other way around. When workers are hard to come by, businesses invest in labour-saving technology and processes. That not only increases output for every hour worked, but frees people up to do more interesting work.
Economists say we need more unemployed workers, more “spare capacity”, to give the economy room to grow, but look at what happens in reality. We’ve had unemployment hovering around 3 per cent since 2021 and the economy has refused to go into the threatened recession – it grew 0.9 per cent in the last quarter alone. Compare that to the economic stagnation we’ve seen during high unemployment periods.
We’ve had unemployment hovering around 3 per cent since 2021. Photo / 123RF
We worry about Kiwis going over to Aussie for better wages, but let’s not forget that those better wages came about because of the Australian Modern Awards wage system, which ensures fair pay across different sectors and which our new Fair Pay Agreements system is based on. If we want wages like Australia, we need the strong work rights that lead to them.
So, it’s going to be vital that people come together to fight against the rolling back of workers’ rights once the new Government is formed. The Opposition parties, unions, academics and ordinary people need to stand up against these policies. They not only make life harder for working people, but they fail on their own terms, too – they hurt the economy.
One of the first fights that’s coming on workers rights is pay equity. There have been big moves towards fixing the long-standing underpayment of female-dominated jobs in recent years, but the time is coming when the Government is going to have to front up with the cash to make good on pay equity deals with nurses, care and support workers and others. National’s not put any money aside for that, and we know how shaky their pre-election fiscal plan was already.
I have a bad feeling we’re going to see the new Government try to squirm out of these deals – leaving tens of thousands of workers high and dry. These workers deserve justice and fair pay, and we will have to stand up to ensure they get it.
Pay equity, Fair Pay Agreements, good minimum wage increases – they’re key to a wealthy, growing economy, and we’re going to have to fight for them in the coming months.
