Government's pay-equity focus may fuel wage inflation after third-quarter spike
By Rebecca Howard
Nov. 1 (BusinessDesk) - A $2 billion pay equity settlement pushed up wage inflation in the September quarter and pay
pressure may continue to accelerate because the new government plans to dump a bill that would have stymied similar
deals.
The previous National Party-led government announced a $2.05 billion pay equity pay deal for some 55,000 aged and
residential care workers, which took effect on July 1 and contributed to a 0.6 percent increase in wage inflation in the
third quarter and an annual increase of 1.9 percent, the highest in five years.
The TerraNova pay equity deal for aged care workers was widely praised but was followed by a bill introduced in July
that critics charged would make any future pay equity deals harder to achieve. Among other things, it stipulated that
anyone attempting a pay equity claim would first have to look at their own profession and industry, before making
comparisons across industries. Today the new Labour-New Zealand First coalition said the bill won't proceed.
“While both sides of the House seemed united in lauding the TerraNova decision in favour of care and support workers and
Kristine Bartlett, the previous government immediately introduced legislation that fundamentally changed the ability of
anyone else to achieve the same result," Workplace Relations and Safety Minister Iain Lees-Galloway and Women's Minister
Julie Anne Genter said in a joint statement today.
“The government will stop progress on the Employment Bill and start work on new legislation that adheres to all the
principles of the Joint Working Group on Pay Equity,” said Lees-Galloway.
Extremely tepid wage inflation is one of the factors that has led the Reserve Bank to signal rates will stay at a record
low 1.75 percent until September 2019 at the earliest but economists say the conditions for a shift higher in wage
inflation are starting to develop and could lead the RBNZ to lift rates sooner than it is forecasting. The kiwi dollar
was recently at 68.88 US cents having jumped from 68.46 cents before the wages data was released.
Kiwibank chief economist Zoe Wallis said there is a "sense that wage growth is set to build over coming quarters." She
noted while the aged and disability care workers pay deal is at this stage a one-off development for wage growth, "there
is also the possibility that on the back of this deal other workers in similar industries will look to negotiate for
higher pay."
The government's intention to lift the minimum wage to $16.50/hour by next April and then steadily to $20/hour by April
2021 "is expected to add to wage growth," she said. "We believe that wage pressure will build over the coming year and
add to the case for earlier OCR hikes than the RBNZ has signalled," she said.
Overall, "this government appears to be in favour of higher wages as a broad theme. Unions will be listening, and
expectations and starting points for negotiations are likely to be higher than they would have been without the change
in government," said ANZ Bank New Zealand senior economist Sharon Zollner.
The government's plans to scrap the Employment Bill was well received by unions with New Zealand Council of Trade Unions
vice president Rachel Mackintosh saying the move was in line with working people’s expectations of the new coalition and
an opportunity to remove barriers to women being paid fairly for the work they do.
The announcement and labour data also coincided with the release of new University of Otago research showing a massive
and widening pay gap between chief executives and workers. According to the study, mean total CEO compensation has
jumped 114 percent in 17 years in real terms, while mean real worker income is up a more modest 26 percent. CEO’s are
now paid 30-to-50 times more than the average wage, the study said.
(BusinessDesk)