Simon Nixon: Those at bottom still badly off

Simon Nixon

The Government has overridden the Remuneration Authority's decision to award a 5.5 per cent increase in MPs' salaries, or more than $8000 for backbenchers, backdated to July last year.

The authority is an independent body established by government to set the salaries for MPs, mayors, councillors, government chief executives, heads of Crown entities and various tribunals.

That a 5.5 per cent increase was awarded means the Remuneration Authority had determined this was the extent of the movement in salaries for equivalent positions elsewhere. Clearly senior management in many organisations must have been receiving significant increases despite many other workers being limited to CPI increases, or changes in the minimum wage rate.

Relativity is clearly the major driving force in the escalating gap between rich and poor as demonstrated by the recent comment by authority chairman John Errington "that the pay gap between ministers and executives in the private sector was growing and would have to be addressed".

To ensure the salaries under its control are competitive, the authority consults with others, though exactly who is not clear. It seems likely, however, that professional salary surveys are a major tool, and it seems probable these surveys are contributing to the widening income gap.

These surveys are undertaken at regular intervals and produce a range of salaries for each category of job as defined by the knowledge and experience needed, certain dimensions such as turnover or number of staff, plus the freedom to make decisions, or level of authority.

Most employers have a salary policy or preferred position in the range for senior staff. They may pay at the upper quartile, or the medium or somewhere else in the range. Few employers will admit to paying below the medium.

When a review is undertaken the organisation inevitably finds it is paying below its preferred position, and as a result and almost automatically this becomes the reason for a salary hike.

This of course is happening right across the country so there is a general upward movement. When the next survey is undertaken these increases are picked up, and again most organisations will find they are paying below their preferred position, thereby justifying yet another upward adjustment thus ratcheting salaries to ever higher levels.

Government may have satisfied the lust for fairness over MPs' salaries, but the changes will do nothing to fix growing inequality in our society. Increases for chief executives, judges, government and local government heads must also be brought into line with the wider population.

This must not stop some people being paid more because of greater levels of skill and knowledge, or stop salary increases for justifiable reasons including improved performance and increased responsibilities.

However, the use of surveys is part of a system that feeds on itself to create compounding increases.

Once those at the bottom were protected by trade union negotiated awards, plus a more egalitarian attitude, but an abundance of lesser skilled workers means there is no pressure to improve their incomes.

In fact, the system now encourages those at the top to exploit those at the bottom with zero-hour contracts and other income restraining measures. It also needs to be remembered that the people who have upheld this blatantly unfair system, including those in governance roles, are clearly part of the club that benefits.

To some extent we should be grateful that we were alerted to the widening gap between the well-paid and less well remunerated, but doing something about this relatively small group of MPs does nothing to fix the growing disparity between those at the advantaged end of the gravy train and the rest.

It will be interesting to see whether the Government now takes the opportunity to curb salary increases for heads of government departments, in local government and in the non-government sector.

-Simon Nixon is a Hastings district councillor.

-Business and civic leaders, organisers, experts in their field and interest groups can contribute opinions. The views expressed here are the writer's personal opinion, and not the newspaper's. Email: editor@hbtoday.co.nz.