The Labour Government didn't do "complete unionism", Minister for Workplace Relations Iain Lees-Galloway said in Dannevirke last week.

"I believe in freedom of association.

"But the Labour Government does believe people need strong bargaining rights and we're operating under the same settings as the Clark Government with low unemployment at 4 per cent.

"We want industries to bargain for agreements across their industry because we have pockets in our labour market where employers have to undercut each other.

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"This is a problem. A good example of bargaining across an industry is the Care and Support Workers Agreement."

On Tuesday, Lees-Galloway announced former National Party Prime Minister Jim Bolger would lead a pay working group.

The Government has said Fair Pay Agreements will lift pay and conditions by preventing a "race to the bottom" by preventing employers from competing with each other by lowering wages.

In Dannevirke, Lees-Galloway said this would be "a significant piece of work for our industrial relationships. But, for most people the status quo will remain".

Dannevirke businessman Craig Lancaster said there was a huge labour problem in small towns.

"There is a 50 per cent fail rate of apprentices across the board, with a good percentage of people leaving school who can't read, write or spell."

And Bryce Galloway, manager of Dannevirke Mitre 10, asked what the Government proposed to help employers.

"There is a big hole in every single trade," he said.

Lees-Galloway said our workforce had an estimated 30,000 to 40,000 shortfall, but the Government believed there was a 10-year certainty of work coming through.

"Over time, there will be a shift from immigration to developing our own workforce, but there is work which needs to be done.

"Our first year free of fees not only applies to universities, but for students at polytechnics and in-work training where there is two years free of course fees."

Meanwhile, Fair Pay Agreements would establish a framework for employers and employees to work together constructively to lift wages and productivity, Lees-Galloway said.

Bolger's group will develop recommendations on the design of the system and report back by the end of the year.