Business Matters

Fair Pay Agreements are here, like it or not

By Alan Pollard, chief executive, CCNZ.

The Fair Pay Agreements Act has now passed and will come into effect this month (December 2022).

CCNZ submitted against the proposed legislation and remains opposed to it. Sadly, the Prime Minister made it clear early in the supposed consultation period that the legislation will be passed regardless of public or business sentiment.

The Government rationale for the law is based on fundamentally flawed assumptions, generalisations and plain untruths – that the critical work and contribution of Kiwis performing some of the most essential work in our country has been systematically undervalued; that our employment relations system has embedded low pay and conditions in a race to the bottom in many sectors; that the current system has incentivised competition based on low labour costs; and that the labour reforms brought in under the Employment Contracts Act have not improved labour productivity, a sharing of wealth, or an improvement in living standards.

While undoubtedly there are some employers whose behaviours have been unethical, immoral and in some cases illegal, the rationale for the legislation illustrates a lack of understanding of how New Zealand’s modern labour market works, and fails to recognise and acknowledge the positive contribution that employers have made to improving the health, wealth, and well-being of workers in this country.

The New Zealand Initiative report, Work in Progress: Why Fair Pay Agreements Would be Bad for Labour provides quantitative data that clearly demonstrate these generalisations cannot be substantiated.

In fact, employees’ share of income has been increasing since the 1990s; wage inequality of middle-income New Zealand has declined since 1990; average real wages have risen faster than inflation across all income deciles; and in more recent decades labour productivity growth and real wage growth are largely aligned.

Treasury also noted that evidence doesn’t support the assumption there is a noticeable bargaining power imbalance, nor is there a strong case FPAs would be the most effective policy response to address concerns.

And yet it is now law.

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