Free Press, 12 February 2019 - How Wages Grow

Tue, 12 Feb, 2019

The House Resumes

Parliament is back after giving the country a glorious break. All bets are off as the Government resumes its experiment of torturing a free market economy with policies they used to dream about in the student union lunch room. ACT will continue to stand up for opportunity and freedom because those values enable happiness and prosperity.

How Wages Grow

Raising wages isn’t complicated but it seems we must state and restate basic truths to keep them alive. More investment, better ideas, and more skilful workers combine to produce more valuable products and services. The more tax, regulation and compliance costs governments throw in the gears, the slower those wheels turn. This week, Free Press looks at the Government’s so called ‘Fair Pay Agreements.’

Old Socialist Seeks Salvation

Poor old Jim Bolger has never recovered from the days when Ruth Richardson made him do stuff. Stuff that helped make New Zealand a top economic performer in the 1990s such as cutting government spending and basing employment law on contracts. He is now cosying up to the Labour Party in an attempt to reintroduce national awards and, we can only imagine, salve his socialist soul.

Not Just any Labour Government

The Clark Government kept Jim Anderton in line and was contemptuous of the Greens. Today’s Labour Party effectively gives the unions a casting vote on its leadership and proposes much more radical change. This is the kind of Labour Government that Jim Bolger is cuddling. Some say Jacinda Ardern has no substance, but can anyone imagine her selling out and helping undo her Government’s policies in 20 years’ time?

Fair Pay Agreements

Bolger is now the lead proponent of these new national awards, where everyone in an industry, regardless of employer, gets the same collective agreement. They can be initiated by just ten per cent of workers in an industry, or 1,000 workers. If the industry has more than 10,000 workers, then a national award might be initiated by fewer than 10 per cent of the workforce. Or, a national award can be initiated in the ‘public interest,’ but we don’t know what that means.

What’s an Industry?

Once upon a time, classifying workers wasn’t too different. There were tinkers, tailors, soldiers and sailors, with the odd airline pilot floating around. Today there are social media influencers, life coaches, and brand managers too. Free Press predicts that categorising workers will be almost impossible, but much effort will be wasted fighting and trying.

Back to Front

Nobody can sustainably raise wages by wishing or legislating. The Fair Pay Agreement Working Group argues that collective bargaining might actually raise productivity, then admits there’s no real evidence for this claim. Instead, Fair Pay Agreements will be more sand in the gears of business, meaning people will spend more time complying and less time producing. The exact opposite of what is needed for prosperity.

Harder to Make a Difference

Self-esteem is called that because you can only build it for yourself. National awards would take us back to the days where effort and initiative are neither here nor there. In sum, it is a misguided policy that would drain good incentives from the workplace, tie people up in arranging to do work more than doing work, and making us all poorer in pocket and in spirit. It is worth resisting for a better future.