If you want a more productive economy, lift wages and make the inefficient businesses lift their game, says Shane Te Pou. Photo / Julia Czerwonatis
If you want a more productive economy, lift wages and make the inefficient businesses lift their game, says Shane Te Pou. Photo / Julia Czerwonatis
OPINION:
There's no doubt that a lot of families are feeling the pinch at the moment. It might be comforting academically to know that New Zealand is performing better than most of the world during this global inflation spike, with lower inflation than the OECD average – but it doesn'tmake it hurt any less when you have to fill up the car.
But here's my question – we know the economy is growing. It expanded 5.6 per cent in 2021, over and above inflation. So how come wages haven't kept up? Even when you allow for the fact more people are working and less people are underemployed, workers' incomes are still growing more slowly than the economy. Where's the extra money going?
Business profits.
Before the neoliberal revolution, more than half the economic output of the country went to workers' pay. The removal of workers' rights and the weakening of unions saw that fall to just 42 per cent by the time Labour came power in 1999. Since then, it's see-sawed depending on whether we have a pro- or anti-worker government: rising to 48 per cent under Clark, down to 44 per cent under Key, and back up to 45 per cent under Ardern as of the start of 2021 (that improvement might not seem much, but it's an average of $1000 per worker a year). The share of the economy going to business profits follows the same pattern, reversed.
This tells us something – wages aren't just a result of "the economy", they are the result of government policies.
The last National Government, for instance, increased the minimum wage by an average of just 3 per cent a year, while this Labour Government has increased it more than 6 per cent a year on average. Likewise, we've seen big pay increases for teachers and other workers like nurses, with a new grad getting $10,000 more a year (and I stand in solidarity with the nurses' mahi for further increases through pay equity).
If we want higher wages, we need government policies that support higher wage growth. The fact we're seeing wages struggle against inflation even as the economy has been growing shows we need to do more to tilt the balance in the favour of workers, particularly the ones in low-wage jobs.
Inflation is outstripping the rate of wage increases, making the weekly shopping more expensive. Photo / Getty Images
Now, National and Act would say "we don't need pay rises, we need tax cuts" but take a look at Christopher Luxon's tax package: $100 a year for the typical taxpayer, $18,000 for him, and at a cost of more than $3 billion a year that would have to be funded by cutting back on desperately needed funding increases for health and education.
Tax cuts are no substitute for wage rises – they're one-offs that don't put much money into workers' pockets and come with unacceptable cuts to public services.
No, if we want families to be able to afford the rising cost of living, we need stronger laws to lift wages. And Fair Pay Agreements (FPAs) are the next big step there.
You can tell FPAs are going to help lift wages because Business New Zealand is doing everything it can to try to convince us that FPAs are a bad idea – after all, those higher wages are going to come out of its members' profits.
Opposition MPs are fond of quoting wages across the ditch, so why not adopt their policies that lead to higher wages? That's basically what FPAs are, a version of the Modern Awards that the Aussies have had for more than a decade.
In that time, incredibly, the sky hasn't fallen and wages for Australian workers have gone through the roof. More than half the Australian economy still goes to workers' wages.
If we want higher wages here, why not copy what's working over there?
We're going to hear all kinds of scaremongering from Business New Zealand, National and Act but the fact is Fair Pay Agreements will lead to higher wages, especially for workers who are currently getting ripped off – and that's exactly why the Opposition is against them.
But how shortsighted is it to try to hold down workers' wages and protect the worst businesses - who exploit people who are desperate for a job, and create a race for the bottom that holds down wages for everyone? What's the long-term result for the country? Has there ever been a country that has become wealthier while making its workers poorer?
No. The opposite in fact.
Higher wages drive investment and innovation by businesses. When your workers cost you serious coin, you make sure you're getting value from them, so you invest in better equipment, better processes and training. We always hear that we have to wait until productivity rises before wages rise (never mind that productivity has risen faster than wages for 30 years) – but it actually works the other way around: if you want a more productive economy, lift wages, make the inefficient businesses lift their game, and that's going to grow the economic pie for all.
• Shane Te Pou (Ngai Tuhoe) is a company director at Mega Ltd, a commentator and blogger and a former Labour Party activist.
