Steven Joyce: There's nothing fair about Fair Pay Agreements

Workplace Relations Minister Michael Wood. Photo / Alex Burton

Opinion

OPINION:

The Government's plan to retro-fit 1970s-style public policy into a 21st century economy took another step in the last week with the announcement that old-fashioned centralised wage bargaining is to reappear after more than 30 years.

The Orwellian-sounding "Fair Pay Agreements" are a big step backwards. Yes, they have been long-signalled but the announced proposals are far wider in scope than we were previously assured they would be.

At election time the public was told the focus would be on vulnerable workers at risk of experiencing worsening conditions as a result of supply contracts being re-tendered to new companies. For example, in areas like bus driving and cleaning.

But now this approach is to be encouraged in every industry. National wage bargaining with a union must take place in any industry where at least 10 per cent of the employees or 1000 workers (whichever is the least) decide they want one, or where the union concerned can demonstrate that they meet an undefined public interest test. National awards are on their way on building sites, farms, in horticulture, retail, manufacturing, trucking firms, hospitality and the technology industry.

Businesses and their staff will no longer be able to agree their own wage rates, penalty rates, overtime, or the process for pay increases. Things like holiday entitlements, training requirements and redundancy arrangements will all be decided nationally with no reference to what the business or its employees prefer or can afford.

There are many problems with this. Firstly and fundamentally, it is completely undemocratic. The other 90 per cent of workers in an industry will be bound by this government-run bargaining process, whether they want to be or not, and importantly whether they are union members or not.

And employees will be given Hobson's choice as to who will represent them — it will be the Government-mandated union.

Employers won't get any choice in the process at all.

I don't have any issue with collective bargaining, but it should be initiated by at least half the affected employees, and they should have the right to choose their own bargaining agent. This approach treats employers and workers like children, unable to decide for themselves what is good for them.

The second problem is that once again it centralises all power in Wellington. It harks back to and romanticises a time when government bureaucrats and politicians were arrogant enough to believe they knew what was good for every industry and what each could afford to pay.

A time when strikes and lockouts were always in the news and when the old Federation of Labour and the employers' association butted heads until the minister rode in and dealt some rough justice to one side or the other, or both.

Fair pay plan could mean a return to the old days of union power, regardless of who workers want to represent them. Photo / Getty Images

This centralisation and concentration of power in Wellington is becoming the hallmark of this administration. Out in the regions, nobody is capable of running a polytech, a hospital, a council, and now even a business in the way they had done previously. Which is quite insulting when you think about it, particularly given the Government's track record on delivery.

And this change will further damage the regions. Employers in Southland will have to pay the same wages as central Auckland, regardless of the local cost of living, removing any competitive advantage from operating outside the big smoke.

The biggest problem with centralised wage-setting is that it does not reflect the reality of the world New Zealand businesses live in today.

Back in the 1970s, life was much more homogenous. Despite some people's rose-tinted glasses, we were an uncompetitive cost-plus economy which survived because of our status as Britain's farm. Everything we made we sold to the mother country at inflated prices.

When Britain joined Europe we were cast adrift. As a small, isolated country it took us decades to find our feet and thrive in a much less accommodating world.

But we did it. Our standard of living recovered and improved, and wages as a share of our economy grew again. We became efficient in producing quality food at world prices, we grew service industries like tourism and education, and we discovered manufacturing and technology niches that could sustain companies of the size we could create, without being monstered by the big multinationals. As the late Sir Paul Callaghan used to say, we became good at the weird stuff.

We did it by allowing our businesses to be innovative, flexible, and to change rapidly, away from the dead hand of a nationally mandated award system. Today there are few New Zealand-only walled garden industries that can make their own wage rate decisions without being constrained by the outside world.

We have a tiny domestic market compared to the US, Germany and even Australia. And despite leaving Europe, Britain doesn't want us back as their farm.

Take manufacturing. It isn't an industry as much as a series of discrete businesses operating in hundreds of different markets from agricultural equipment to freeze dryers to commercial fridges. Any attempt to standardise wages across those markets would make many businesses uncompetitive at the stroke of a pen.

The other thing that's changed since the 1970s is that investment capital is now completely portable. Money isn't locked here — people can invest anywhere.

We built our economic recovery by being an attractive place to start a new business, hire people and achieve success. National awards are another way in which our attractiveness as an investment destination is being given away.

Not content with simply recovering from the pandemic, the Government seems hell-bent on completely dismantling the previously successful New Zealand economy under the cover of Covid.

I've heard people say that at least "Fair" Pay Agreements is Labour being Labour. I have a different view. The decision to give unions vastly greater power at the expense of businesses and workers gravely risks creating fewer opportunities for working people to get ahead in this country.

Which ultimately wouldn't be Labour representing labour at all.

- Steven Joyce is a former National MP and Minister of Finance.