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Government Fair Pay Agreement Proposal Will Harm Workers And Consumers

The Government’s proposal announced today to impose compulsory industry-wide collective bargaining on employees and employers without their agreement or even their participation will harm everyone but unions,” said Roger Partridge, chair of The New Zealand Initiative.

Partridge said The New Zealand Initiative’s 2019 report, Work in Progress: Why Fair Pay Agreements would be bad for labour, found that Fair Pay Agreements would be likely to harm productivity and would be not be in the interests of workers, the unemployed, consumers, and overall wellbeing.

“Rather than advancing the government’s vision of a high-wage, high-productivity economy, Fair Pay Agreements would undermine it,” Partridge said.

The Initiative’s 2019 report examined the claims in favour of Fair Pay Agreements proposals and found there were no good grounds for them. Its research revealed New Zealand’s labour market settings were actually working well for both workers and firms.

Unemployment in New Zealand is comparatively low when measured against the country’s OECD peers. Labour market participation rates are among the highest in the world. Wages are tracking productivity growth. And real wages for all wage-deciles have been rising since the labour market reforms in 1991, abolishing New Zealand’s then system of compulsory industrial awards.

Partridge said, “The case for FPAs rests on alleged shortcomings in the operation of New Zealand’s labour markets. However, the Initiative’s research reveals the concerns are either misconceived or that there is no good reason to believe FPAs will help solve them.”

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“Like the other arguments for FPAs, the ‘race to the bottom’ concern is a myth. The data shows that average wage rates have risen faster than inflation across all income deciles. Workers’ wages are simply not being bid down by employers on an ever-decreasing basis,” Partridge said.

Partridge said, “The failings of the Fair Pay Agreement Working Group resulted in flawed Fair Pay Agreement recommendations. Those flawed recommendations have been carried forward in the Government’s proposals announced today. They will harm everyone except the country’s unions. If the Government is serious about the wellbeing of New Zealanders, the proposals must be abandoned.”

Read our 2019 report, Work in Progress: Why Fair pay Agreements would be bad for labour.

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