Free Press 13 June 2022

Mon, 13 Jun, 2022

The Haps 

ACT is this year holding not one, not two, but three Annual Conferences. Coming to a town near you (Auckland, Wellington and Christchurch), the Real Change events are open for ticket sales. 

Labour has shuffled its Cabinet but has revealed the depth of its skill shortage in the process. Like the embattled Health Minister David Clark before her, hopeless Police Minister Poto Williams will be replaced by Chris Hipkins, who is also Minister of Education. Trevor Mallard is going now to take a knighthood of shame from his own Government. No new government would put him beside Hillary, Rutherford and Ngata by giving him a knighthood.

"Fair Pay" Agreements: What you need to know 

Few policies are a total loss. Normally, it’s possible to at least say ‘I can see they were well intentioned,’ or ‘it was a good idea but they missed some important details,’ or, ‘bad policy, but good politics.’ So-called “Fair Pay” Agreements are one policy that has no saving grace. This week Free Press looks at how they’re supposed to work, and why they won’t.

The idea is simple, at first. If you are in an occupation (like video editor) or a sector group (like hospitality) then you can be subject to a Fair Pay Agreement that puts you all on one contract.

If a union can sign up 1,000 people, or 10 per cent of the workplace, or for any reason at all really (such as ‘a high proportion of the covered employees are employed by small-to-medium-sized employers’), then it can apply to the Chief Executive of MBIE. The Chief Executive can then decide to initiate bargaining between the union and an employer group.

Business New Zealand has said it just wouldn’t cooperate as an employer group. Labour has retaliated by saying that if employers don’t show up, the Employment Relations Authority will force an employment agreement on them in their absence!

Once bargaining is initiated, there is no way out. A fundamental principle of the legislation is that bargaining must result in a Fair Pay Agreement. Every person in that occupation or sector group must be on that contract. They can remain on an individual employment agreement or workplace collective agreement only if that agreement is judged to be more favourable to the employee than the FPA.

In the process, unions have the right to enter private property, demand employees’ contact details from employers, and hold meetings at employers’ expense. Curiously there is little obligation on unions. They are not obliged to inform people that there is bargaining underway, even if said people might find themselves subject to the agreement.

You have to join the bargaining even if you don’t join the union. However, a bonus payment for union members can be built into the agreement. It is one-way traffic.

Why? Well, ACT has calculated that 30 per cent of current Labour MPs are former union organisers or leaders. This compares with 0.026 per cent of all workers in New Zealand. Anyone wanting self-serving political change should study New Zealand’s union movement.

Then things get really complicated. What happens if you are in the wrong job? What if there are two bargaining rounds and it’s not clear which one you fit into? Inter-jurisdictional battles were infuriating in the 70s. Now there are many more jobs in a vastly more complex economy. This time they will be a nightmare.

The Fair Pay Agreements legislation is 160 pages long. It will not make anyone produce more, so New Zealand will not get richer. We will get slightly poorer, because an enormous amount of time will be spent navigating this process.

Jim Bolger is responsible. If you ever wondered why Free Press does not vote National, riddle us this: Can you imagine any current or former ACT leader writing a government report that recommends compulsory unionism? That’s where this came from.

The analysis in Bolger’s report is all wrong. It said that our productivity growth is low, and workers are getting a smaller share of what is produced in New Zealand. Those things are true, but not the whole truth.

As the New Zealand Initiative has shown in its comprehensive analysis, the labour share of GDP and the growth of labour productivity in New Zealand were worst in the period before the Employment Contracts Act of 1991. The ECA was brought in while the Prime Minister was… Jim Bolger. Labour productivity and the labour share of GDP improved once workers could negotiate their own conditions.

But, but, but… Australia. Yes, Australia has employment agreements like this. That’s true, but Aussies don’t like them. Here in New Zealand, 18 per cent of workers are members of a union. In Australia the same number is 14 per cent. Putting more people on union rates will not make us more like Australia.

Fair Pay Agreements are not fair, they’re not even agreements. They do not solve a correctly defined problem. They will not improve productivity. They will in fact lower it by tying up more people’s time in complex negotiations. They must go as quickly as they are introduced.