The spectre of Fair Pay Agreements, also known as industry award payments loomed threateningly over the economy when the Fair Pay Working Group headed by Jim Bolger released its recommendations in December 2018. The issue seems to have slipped into the shadows since then, over-powered by this incompetent government’s continuous policy flops.

New Zealand is on the verge of employment policy dominating the news cycles again. The Council of Trade Unions is becoming impatient over the lack of momentum in this area and began flexing their muscles at the October 15th conference. CTU President Richard Wagstaff said, “The work on designing good Fair Pay Agreements has already largely been done by the Government’s Joint Working Group of unions and business. The Labour Party have pledged their commitment to Fair Pay Agreements, but action is needed to turn the concept into reality.”


Rather foolishly, Wagstaff pointed to the example of the equal-pay deal in the aged-care and support roles sector as evidence of existing industry-wide agreements working well. That is a sector where the purchaser of services is overwhelmingly the Government and funding the sector’s needs is not keeping up with cost increases which are largely the result of government policy. Mark Rouse, the General Manager of a retirement village in Waikanae, said in May that unsustainable staffing costs had increased as a percentage of income from 72% in 2010 to 90% in 2019.


There are an increasing horror stories emerging from the aged care sector. In the last week it has been revealed a 71 year old woman with an amputated leg died with maggots in the wound around her stump and in the dying tissue on her other foot. A 92 year old woman was found shivering in her urine soaked bed. The sector is struggling to deal with increased elderly obesity, with a quarter of those aged over 75 considered obese. There are calls to implement national standards of care across New Zealand rest homes but E Tu Union organiser Alistair Duncan says 83% of their members don’t have time to do their jobs properly.


Trade unions have highlighted supermarkets, security and cleaning industries as their next targets for action. If their model example of industry award systems is the aged care sector, that doesn’t bode well for the next sectors on their list. I suppose the only silver lining for the latter industries is that there are far more customers in those sectors and they aren’t the Government. That gives those employers greater ability to protect their margins however it is you and I that will be paying those costs.


However, I have noted it repeated by the working group, by the Minister, by the Council of Trade Unions ‘economists’ and any other ideological numpty who’s abilities do not extend beyond regurgitation; that they believe fair pay agreements are necessary to prevent industry players competing against one another by slashing wages in a race to the bottom. This is a rhetorical fantasy that might generate a grumble and applause at a union meeting but it does not survive even a glance at the facts.


‘Slashing’ wages is such an ominously slow and difficult process that, even in the employment contracts which permit it, would be a desperate last gasp of a business teetering into bankruptcy. It is not the cavalier routine process this rhetoric implies. Evidently, these are the debate tactics of those with careers requiring no real-world business experience or keeping those with no ambition beyond clocking out in a job. 


In a perverse sense of fortune, due to the stratospheric increases in minimum wage under the Labour-led government, it is possible to observe the opposite of slashing wages to test the hypothesis of competitive business behaviour. Let’s take the supermarket industry. Not just because I’ve got the firsthand experience that comes with working in the industry for two decades, but due to being a provider of goods,the statistical impact of government policy is easier to measure.


The minimum wage increase in April 2019, 7.2% up to  $17.70 an hour, is the largest single increase in NZ history. Three months later, the food price index has moved up by 0.9% on July 2018. However, let’s dissect that further:

  • Fruit and vegetables are down 9.3%
  • Meat, poultry and fish are up 5.4%
  • Grocery is up 2.1%
  • Non-alcoholic beverages down 1.1%
  • Restaurant and takeaway foods are up 3%


At the risk of making this article TL;DR, (I promise it is worthwhile) look to the latest FPI from September 2019. Food prices compared to last year are 2.2% up

  • Fruit and vegetables down 1.0%
  • Meat, fish and poultry up 5.3%
  • Grocery up 1.6%
  • Non-alcoholic beverages up 1.9%
  • Restaurant and takeaway foods up 3.3%


Keep in mind these prices are compared to the same time last year, not the previous month. It is clear that not only is the supermarket industry incredibly competitive, there is zero evidence of wage manipulation being used as a competitive tool. While click-baiting media and panic-inducing politicians label NZ’s food market as being a duopoly, 15% of sales are not from the two major players. In August, Countdown revealed volume of comparable transactional sales had increased 0.3 to 3.2% over the previous quarters while price contracted in every quarter by 0.3-1.8%.


Supermarkets are experiencing price deflation in a highly competitive market with high artificial wage increases, not the spiralling slashing of wages in a competition to the bottom. The figures do not match the rhetoric, yet the unions and the government indebted to them are still rushing to return to the path of unproductive, work to rule, labour market stagnation not seen in this country for 35 years.


What isn’t being mentioned by the government, unions or media are the side-effects of this rapid minimum wage growth on collective agreement negotiations. Normally we would refer to these as “unintended consequences” but I can comfortably assert these consequences were intended. 


Despite three unions donating $260,000 of their member’s money to the Labour party in 2017, leading to the rapid minimum wage growth demanded, no union is ever going to say to their members, “The minimum wage is up, job done, back to work.” The game remains the same, only the name has changed. Now there are many more employees in entry-level positions on the minimum wage than before and that must change; it is time businesses paid a ‘living wage!’


MBIE (Ministry of Business, Innovation and Employment) released their discussion paper on Designing a Fair Pay Agreements System on Friday the 18th of October. I won’t attempt to cover the entire discussion document in this article. 


What I have covered thus far is the most recent example of an entire industry afflicted with the type of employment agreements the FPA working group envisions for others. The aged-care sector is dangerously burdened by the increased costs inflicted upon it following a successful court case launched under the Equal Pay Act. 


Staff numbers have barely moved since the passing of the pay equity settlement, despite  leading to pay rises between 15 and 50%. Turnover rates for Registered Nurses are 38% and caregivers 27%. One in ten positions available nationwide are currently vacant; this is only getting worse since the NZ Nurses Organisation were successful in obtaining large increases late 2018; levels being higher than registered nurses in the aged care sector. Resident numbers are up 1.7%, beds available have dropped by 0.5% and 2018 audits found a third of providers had shortfalls related to resident care and 10% in wound care.


The current MBIE discussion contains sections which allow for sector wide collective agreement negotiations, if 1000 or 10% of workers in a sector demand it. In the case of a nationwide supermarket pay agreement, we don’t know whether it may be broken down into supermarket staff (1.7% of 60,000 employers) or the entire retail sector (0.5% of 200,000 employees).


What we do know is that unions would be required to represent non-union member interests by ‘acting in good faith.’ As someone who has never been a union member, ‘good faith’ sounds like getting stabbed in the from instead of the back. This legislation still has a long road ahead, but I would bet my union pay rise, that attempts will be made to inflict bargaining fees on non-members.


That would see New Zealanders return to pseudo-compulsory unionism, which must be fought with every step. Current union density is 17% (public sector monopolies 60%, the private sector 10%. 


I’ll conclude by paraphrasing Margaret Thatcher.
When people are free to choose, they choose freedom. When workers are free to choose, they reject unions. When socialist governments choose, your choice is made for you.


(Disclaimer: Stephen Berry works for Countdown supermarkets. He has no authority to publicly represent Countdown and all the information included in this article is obtained from sources published publicly. Any views expressed are the authors own.)

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