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Back to the drawing board for Bolger's Fair Pay proposals

Wellington (9 July 2019): The Government must reject the recommendations made by former Prime Minister Jim Bolger’s Fair Pay Agreements Working Group (FPAWG) or face harming economic growth and productivity and the interests of workers, the unemployed and consumers, says public policy think tank The New Zealand Initiative.

The Initiative’s new report Work in Progress: Why Fair Pay Agreements would be bad for labour, reveals that the Bolger report misrepresents New Zealand’s labour market record. Its recommendations to introduce compulsory collective bargaining go against both empirical evidence and international trends in favour of greater labour market flexibility.

The recommendations are also highly undemocratic and would allow a small minority of 10% of workers in an industry or occupation to impose their desire for collective bargaining on a whole sector regardless of the wishes of the majority. The Initiative’s report finds the recommendations will hinder, rather than help, the government’s goal of a high-wage economy that shares the benefits from productivity growth.

Co-authors Roger Partridge and Dr Bryce Wilkinson show that New Zealand has fared well under its flexible labour market laws since the introduction of the Employment Contracts Act in 1991 (and its successor, the Employment Relations Act 2000):

At 80.9 percent, New Zealand’s labour market participation rate is higher than in most other developed countries.
At 4.2 percent, our unemployment rate is well below the OECD average of 6.6 percent.
Employment growth has been the third fastest in the OECD.
Income inequality before taxes and transfers has declined in New Zealand since the 1990s.
Over the same period, employees’ share of GDP has risen since the reforms.

These findings disprove the FPAWG’s case for dismantling the 1991 reforms. They also disprove the analysis the FPWAG presented in their report.

Commenting on their findings, Roger Partridge said:

“French President Emmanuel Macron rightly wants to emulate aspects of New Zealand’s successful labour market flexibility for his country. Meanwhile, the Bolger-led working group would turn us into France with their proposed fair pay agreements. The Government should not let this happen.”

In his foreword to the report, former union official and company director Rob Campbell states:

“Finding a path to accepted social living standards through a collective arbitrated system is more than long and winding, it is a cul de sac. … I welcome this report as a well-researched and thoughtful contribution to an important public policy debate.”

The Initiative is open to recommendations for labour market reform based on sound evidence. Said Roger Partridge:

“Jim Bolger’s working group presented a bold call for substantial labour market changes. But they made it on flimsy and unconvincing evidence. If the Government wants to implement reforms to progress their goal of a high-wage, productive and inclusive economy, they should send the working group back to the drawing board to make a proper case for them. The Government must not introduce new employment laws that would undermine the flexible system that has benefited both the New Zealand economy and New Zealand employees since the 1990s.”

Work in Progress: Why Fair Pay Agreements would be bad for labour, and a report summary can be downloaded from the Initiative’s website.

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