Wellington (21 September 2018): The New Zealand Initiative warned today that government must heed Treasury’s warnings about rushing Fair Pay Agreements.

This week, Treasury released its advice about the upcoming Cabinet Paper proposing Fair Pay Agreements.

Treasury warns that the Cabinet paper provides no evidence that industry- or occupation-wide bargaining could solve problems identified in the Cabinet paper. It also warns that other countries’ experiences point to substantial potential problems: low-skilled workers can be hurt, as can small and new employers, and that reduced firm competitiveness can lead to layoffs.

Treasury also warns that the government’s proposed working group process for developing Fair Pay Agreements requires that group to “make complex policy judgements with only a high-level diagnosis of the problem,” with several consequent risks.

Treasury recommended extending the policy process to allow further analysis.

The Initiative's Executive Director Dr Oliver Hartwich said, “New Zealand’s flexible labour markets have provided some of the OECD’s highest employment rates, while Europe’s rigid labour markets lock too many people out of employment.”

Dr Hartwich continued, “The only sustainable way of improving incomes over the longer term is through productivity growth. Every hour that Treasury and MBIE spend working on Fair Pay Agreements is an hour they do not spend trying to get to the bottom of New Zealand’s low productivity and providing recommendations for improvement.”

Treasury’s advice on Fair Pay Agreements is available here.

ENDS

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