Public sector wage growth highest on record, driven by nurses, health settlement

Finance and Public Service Minister Nicola Willis told a select committee no agency was exempt from looking for cost savings. Photo / Mark Mitchell

Wages in the public sector have had the highest growth on record, largely driven by a recent pay-equity settlement for nurses.

The just-released Public Service Commission Labour Cost Index report shows in the year to December, wages grew 5.7 per cent in the public sector.

It’s the highest growth seen in PSC records, which started in 2002.

Wages in the public service are at an all-time high, but do not appear to be keeping up with inflation in recent increases.

In the three months to December, wages for public servants rose 1.1 per cent, slightly higher than wage growth in the private sector.

The report details about a quarter of public servants received a pay increase in the December quarter.

Local government wages had the biggest quarterly jump, up 3 per cent, with annual wage growth up 5 per cent. The Public Service Commission report states it’s likely this increase comes down to collective bargaining.

Health sector wages had a 2.9 per cent rise in the December quarter — with annual wage growth sitting at 7.9 per cent. The “above-average” wage growth in the health sector is said to be directly influenced by a recent pay-equity settlement for Health New Zealand Te Whatu Ora nurses.

The Public Service Commission's December-quarter wage growth data (2023) shows wages have spiked beyond the private sector. Photo / Public Service Commission

The Public Service Commission anticipates “significant wage growth” in the service in the upcoming March 2024 quarter. It comes as agencies are being urged to find and cut costs, though Public Service
Minister Nicola Willis has confirmed the Government would not be looking at decreasing pay.

Data from the Commission shows real wages have not kept up with the Consumer Price Index.

Average growth for the March quarter has historically been slower than in the December quarter.

The report predicts increases in settled collective agreements will continue to “drive wage growth” across the public sector.

“Increases will also be delivered to many Health New Zealand-employed nurses, and both primary and secondary teachers applying from April 2024,” the report states.

The record growth comes as Willis is looking to axe annual public service spending by $1.5 billion.

Agencies are being urged to put cost-saving proposals on the table, to be decided on by ministers and Cabinet, before Budget 2024.

Public sector entities are undergoing talks on “cost-saving” options, including voluntary redundancies, which have been offered at the Ministry of Business, Innovation, and Employment.

Agencies are being directed to find cuts of 6.5-7.5 per cent on average.

Willis confirmed to Parliament’s governance and administration select committee last week that the Government was not “intending” to reduce the salaries of public servants, through agency cost-saving directives.

The report comes after revelations from NZME that MBIE chief executive Carolyn Tremain is looking at slashing discretionary spending by 15 per cent.

Some agencies were looking at cutting costs in November.

People who applied for voluntary redundancy at MBIE will learn their fate from February 26. MBIE chief people officer Jennifer Nathan confirmed there was “no target for uptake” in the cost-saving scheme.

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Yesterday, all Customs staff met to discuss how the agency would meet the Government’s directive.

A Customs spokesperson confirmed to NZME it was seeking expressions of interest from staff “who may be interested in voluntary redundancy or early retirement”.

The spokesperson said the agency was at the “beginning of this process” and had not finalised any decisions or estimated how many jobs would go.

Azaria Howell is a Wellington-based multimedia reporter with an eye across the region. She joined NZME in 2022 and has a keen interest in city council decisions, social housing and transport.