Horse shot from under Fair Pay Agreements

Tue, 09 Jul, 2019

"The horse has been shot from under the Government's Fair Pay Agreement policy with new data showing the problem they're supposed to resolve doesn't exist," says ACT Leader David Seymour.

"A new report from the New Zealand Initiative has shown it simply is not true that the labour share of income has fallen in the era of contract based employment law, since the 1991 Employment Contracts Act. 

"Ironically, the data show that, instead of workers losing their share of the economy during the era of the big bad Employment Contracts Act, losses occurred before the ECA, when we had labour laws more like what the current Government is now proposing.

"Poor problem definition is becoming a hallmark of this Government. Its more harmful policies are those where it hasn't thought hard about the problem it wants to solve before taking action.

  • It has banned oil and gas exploration even though identifying gas reserves doesn't contribute to emissions. Meanwhile finding such reserves is important for solving the real problem of securing a low carbon energy future instead of resorting to coal.
  • The Government has banned plastic bags while admitting it doesn't know if New Zealand sourced plastic bags are a contributor to ocean pollution. Meanwhile the real problem of poor waste management in foreign countries remains unaddressed.
  • It has set up a government home building scheme that aims to build more homes when the real problem is unambiguously a shortage of sections due to poor land use planning and infrastructure funding policies.

"In each of these cases, the Government has resorted to a combination of Labour Party or New Zealand First folklore about the 'good old days' or whatever trend children write to the Prime Minister about without analysing the evidence.

"Fair Pay Agreements are another example of this unfortunate tendency to favour marketing and ideology over quality public policy analysis.

"If the Government is committed to raising workers' pay in a growing economy, it will not add another layer of bureaucracy but rather ignore Jim Bolger's low quality recommendations and maintain the system that has done well for workers over the past three decades.

"The Fair Pay Agreement proposal would introduce additional complexity and uncertainty into labour law. This harms productivity because people end up spending more time arranging to do work and less time actually doing work.

"The Initiative, and report authors Bryce Wilkinson and Roger Partridge in particular, should be commended for raising the standard of public policy debate. Hard data reports such as this and their earlier report New Zealand's Global Links (on the myth of New Zealand's savings problem), have scotched major underlying public policy myths by testing them against hard data.