The business lobby groups' negative knee-jerk reaction to the workplace relations policy Labour announced last week was predictable, but facile.

They dismissed industry-wide "fair pay agreements" - to set basic standards for pay and conditions - as a return to the bad old days of national awards.

"They would mean less flexibility for companies to innovate and pay productive workers more," declared Business NZ chief executive Kirk Hope.

But what Labour proposes would set a floor, not a ceiling. "By setting a floor [fair pay agreements] will prevent the race to the bottom where good employers are undercut by some bad employers who reduce labour costs through low wages and poor conditions," said Labour leader Andrew Little.


Hope said New Zealand got rid of national awards "because they facilitated all the big strikes in the 1970s and 1980s that critically damaged the economy."

It is more than a quarter of a century since the Employment Contracts Act was enacted and the world has changed radically since then. Union membership, for one thing, has dropped below 10 per cent of the private sector workforce, from around 40 per cent. So a return to mass industrial unrest seems unlikely.

Labour says negotiations on fair pay agreements will begin once a sufficient percentage of employers or employees within an industry call for one. But what will count as a "sufficient" percentage? That would have to be worked out "in consultation with all stakeholders".

Another thing that has dropped markedly since the 1970s and 1980s is the share of national income going to workers, rather than the providers of capital. While the labour income share has recovered some of the ground lost from its trough around 2000, it remains well below the OECD median.

Tellingly, since the deregulation of the labour market a quarter century ago, real wages have grown more slowly than labour productivity (output per hour worked). And labour productivity growth has been nothing to write home about.

EMA chief executive Kim Campbell says that as a nation we have moved on from the days of national awards "and our current economic prosperity reflects this".

But how widely is that prosperity shared? Real wage growth has been sluggish, to say the least. Statistics New Zealand's most recent quarterly employment survey recorded a rise of 2.2 per cent in total weekly earnings for wage and salary earners over the year ended March, which is no increase at all when adjusted for CPI inflation over the same period.

The business lobby groups seem incapable of grasping the simple idea that one man's employee is another man's customer.


Policy settings that lock us into a low wage economy are not good for business, at least not for those in the business of selling things to New Zealanders.

Gareth Morgan argues that Working for Families tax credits enable some employers to get away with paying their workers less than they need to raise a family. If their businesses are only sustainable with that taxpayer support, maybe they should go out of business and surrender market share to competitors which can afford to pay a decent wage.

Policy settings that lock us into a low wage economy are not good for business.

At the same time, immigration policy does not seem to be delivering on the declared objective of relieving skill shortages.

Despite historically high rates of net immigration, this week's quarterly survey of business opinion (QSBO), from the NZ Institute of Economic Research, found a net 47 per cent of firms saying it was getting harder for them to find skilled labour - the worst that indicator has been since the mid-2000s.

A Cabinet paper delivered in March, ahead of some adjustments to the policy settings, says that on a per capita basis, our temporary migrant inflows are the highest in the OECD.

And citing last year's NZ Income Survey, it says that across all skill levels, recent migrants earned less per hour than their New Zealand-born counterparts - ranging from 6.7 per cent less for those classified as highly skilled to 13.1 per cent less for the lower-skilled.


These are the sorts of data which, on the face of it, support the argument of Labour and the Opportunities Party, that immigration at current levels is preventing the labour market from working properly and keeping wage growth weak at a stage in the cycle when business is good.

The official unemployment rate is 4.9 per cent, but a broader measure of slack in the labour market is the underutilisation rate, which stands at 12.5 per cent of the potential workforce. It counts not only the 139,000 people classified as unemployed, but another 200,000 people who are either underemployed (part-timers who want to work more hours) or potential job seekers who want a job and are available to take one, but who are not actively looking for work, which you have to be to count as unemployed.

When there is that much labour going spare, yet nearly half of the firms surveyed in the QSBO say it is getting harder to find the skilled labour they need, there is clearly a serious skills mismatch between the supply and demand sides of the labour market.

To address that, Labour has committed to a policy of three years free post-secondary school training and education. It says that is aimed not only at the young, but those who missed out on post-secondary education when they were young.

"This support can be accessed over a person's lifetime. It can be used for any training, apprenticeship or higher education approved by the New Zealand Qualifications Authority and can be used for full-time or part-time study," says Labour's finance spokesman Grant Robertson.

Not only that. "Labour wants every worker who loses their job as a result of technological change to be provided with adequate retraining and support through free training programmes."


These sorts of active labour market policies are essential, Robertson argues, if New Zealand is to seize the opportunities, and manage the risks, of the rapidly changing world of work.