Hamish Rutherford: Pay freeze and fair pay agreements; this week was more about unions than workers


Fair pay agreements represent a major shift in New Zealand’s industrial relations landscape but in terms of having an impact on workers’ conditions over the next few years, it was not even the biggest announcement of the week.

Friday’s announcement that Cabinet is finally ready to start moving towards the agreements, nearly four years after Labour made a manifesto commitment, will be celebrated by the union movement which despite having low participation rates in New Zealand, will have equal footing even where membership is negligible.

In terms of numbers likely to actually feel a difference, more will be impacted by the announcement three days earlier, that the Government was imposing a pay freeze on most public sector workers earning over $60,000, at least in the next few years.

The surprise announcement will – if the Government sticks to its commitment – mean tens of thousands of workers will see their incomes move relatively backwards until 2024.

Fair pay agreements will undoubtedly have an impact on industries or occupations where the agreements are struck, likely to be generally low paid and vulnerable workers.

The Government has repeatedly raised the example of cleaners, supermarket workers, security guards and bus drivers, claiming good employers are frequently undercut in a “race to the bottom” by rivals who use low wages for competitive advantage.

In theory, the agreements will allow standards to be set for wages, including overtime above the legal minimums.

But it will not happen soon. Workplace Relations Minister Michael Wood hopes to have legislation before Parliament in November.

Even if that target is met – which would be a first for fair pay agreements which have seen a series of delays – legislation is unlikely to be passed before the middle of 2022.

In 2018, Jacinda Ardern urged business leaders not to fear the agreements, saying no more than one or two would be struck before the 2020 election; it remains to be seen whether that many will be struck before the 2023 election.

Nurses and teachers will still very much be smarting about the lack of pay adjustments before bus drivers or cleaners see an improvement.

Over time the changes will shift the balance in workplace relations; almost immediately, they will change the balance and breadth of negotiations.

The agreements will create a structural importance to the union movement which it has not had since the Employment Contracts Act was passed in 1991, the passage of which saw enterprise level bargaining replace collective bargaining.

Unions have never been the same since.

Now, not only will the Council of Trade Unions get $250,000 a year in funding, it, or one of its members, will be able to trigger nationwide talks if they can find the support of 10 per cent of a sector or occupation to do so. Or 1000 workers. Or they can prove that the process is in the public interest.

Sectors where the fair pay agreements are triggered will face reaching a deal with unions, or risk an uncertain determination by the Employment Relations Authority, which is arguably not equipped to set sector-wide negotiations.

Unions have good reason to celebrate. Their power will soon outstrip what would be justified by their membership.

It will take much longer for better conditions to be felt by large numbers of workers.

Given the sheer number of public sector workers likely to be hit by the pay freeze, this week appears to have been much more about improving the strength of unions than it was about helping workers.

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