Employers walk to table on fair pay, but there are doubts they'll drink

Wednesday, 6 June 2018

Workplace Relations Minister Iain Lees-Galloway (right), pictured with Jim Bolger, says sector-level pay agreements are common across the developed world.

ANALYSIS: Fair pay agreements could fundamentally change industrial relations in New Zealand but they could also prove a fizzer.

Workplace Relations Minister Iain Lees-Galloway and former prime minister Jom Bolger explained on Tuesday why they were keen to set up a new pay-bargaining mechanism to improve the lot of 'middle New Zealanders'.

Bolger was motivated by a desire to create a fairer society. He appeared concerned that disaffected Kiwis could blame immigrants and vote in a demagogue if their lot did not improve.

But there was less information on what the fair pay initiative might look like, or how it might work.

* BusinessNZ chooses to sit at fair-pay table rather than 'lob hand grenades'**

Those details have been left to a 10-person working group to consider.

Wellington Chamber of Commerce chief executive John Milford said the group had in effect been handed a 'blank sheet of paper'.

There are three subject-experts on the working group who don't represent unions or businesses, who may soon be able to shed more light on what could be proposed.

They are employment lawyer Steph Dyhrberg, Victoria University academic Stephen Blumenfeld and Motu economist Isabelle Sin.

But all three say they have been asked not to voice their opinions until the working group has had its first meeting in about two weeks.

So what do we know?

Lees-Galloway has said he does not expect fair-pay agreements to cover the whole economy, and they are less likely to cover occupations that already have strong collective bargaining such as teaching or nursing, or those where workers might be happy with the status quo.

There are obvious difficulties designing fair pay agreements for some white-collar employees whose jobs might not easily fall into a particular category.

So these may be agreements for groups of employees doing fairly homogenous jobs at more than the legal minimum wage, but who might not all be happy to be on individual contracts; say motor mechanics, chefs and surveyors to pick a few examples out of the air.

Lees-Galloway also says it will be up to unions and employers to initiate bargaining. So agreements would be voluntary for each occupation or industry, with the decision on whether to create one presumably coming down to a vote among both workers and employers.

Massey University employment relations expert Barry Foster says the university's research suggests employers are not willing to engage in collective bargaining 'let alone industry-sector bargaining', which casts doubt on how many voluntary agreements might be negotiated.

However, since one of the stated goals is to prevent 'good employers' being undercut by those seeking 'a race to the bottom' on wages, it will be compulsory for employers to abide by an agreement if one is established in their industry.

There are already whispers that small employers could be exempt from having to abide by a fair pay agreement, so a deal covering retail workers might set minimum pay and break-times for staff at your local supermarket, but not at your local dairy.

That is likely to be a hot topic among the working group, according to insiders.

Australia's system of 'modern awards' which have set minimum pay and conditions since 2010 and which now covers 122 industries and occupations from airline pilots to 'wool samplers and testers' are an obvious model for the working group to follow.

The modern award system is overseen by a Fair Work Commission which has from time-to-time acted itself to improve the rights of workers covered by those agreements to reflect changing societal norms.

For example, in April it ruled that Australian employees covered by modern awards should be entitled to five days of unpaid leave if they were affected by family or domestic violence.

Foster says it is an interesting question whether fair pay agreements might work against some employees by creating minimum pay and conditions for occupations that employers now offering better terms might then 'average down' to.

'We have the minimum wage at the moment, which in some industries has become the 'maximum',' he notes. 'It is a problem when you have one rate that will apply across an industry, but I would imagine the unions would be cognisent of that fact.'

Another question was whether a minimum proportion of workers in an industry or occupation would need to be unionised, before unions might be allowed to negotiate fair-pay agreements that would apply to the wider workforce.

Whether agreements would cover 'industries' or occupations, or both, could be important, in that many businesses will employ people in multiple occupations, such as salespeople, tradies and accountants; so might need to be involved in multiple fair pay negotiations if they do get off the ground.

The terms of reference for the working group indicate it will be able to look at whether regional variations should be allowed in fair-pay agreements, for example to allow for higher living costs in Auckland.

It will also consider how often they should be renegotiated, and whether they might apply to other classes of worker beyond actual employees – seemingly raising the prospect they could also cover the self-employed and contractors.

Not on the agenda is why imbalances might exist between employers and workers in pay negotiations, and whether there might be alternative ways to address those.