The cookbook from the past

This week the country’s employers organisations began a campaign against the Government’s employment relations law changes — RICHARD RUDMAN is the author of the “New Zealand Employment Law Guide; he says that it’s strange that the government should think the recipe for future success is to be found in a cook book from the past.

Now that politicians have stopped laughing over Jim Bolger’s appointment to head the government’s working group on fair pay agreements, we might pause to ask how these agreements might work.

The Minister of Workplace Relations and Safety, Iain Lees-Galloway, says the aim is to design a collective bargaining system to lift wages and productivity. A fair pay agreement between workers and employers would set minimum terms and conditions for all workers in the industry or occupation covered by the agreement.

Dust off your copies of awards made by the Arbitration Court from the late 1800s through to the 1970s — because they set minimum terms and conditions for all workers in an industry or occupation, nationally or regionally or, in some cases, for a single enterprise.

But there was one key difference which makes this an unlikely recipe for the future.

The state-sponsored system of collective bargaining and arbitration relied on what was commonly known as compulsory unionism.

As a result, for example, every typist and filing clerk in the country — in the private sector anyway — had to be a member of the clerical workers’ union and had the minimum terms and conditions of her or his employment set by the national clerical workers’ award.

Ironically for the head of the government’s working group, it was Jim Bolger who, as Minister of Labour, swept away the last vestiges of union preference with amendments to the Industrial Relations Act in 1983. In that year’s snap election, Labour promised to repeal National’s voluntary unionism — but failed to do so in government.

In this way, Mr Bolger — egged on by his leader, Robert Muldoon, and others — hastened the decline of union membership and union penetration of the workforce. History will show that the unions’ failure to meet the challenges of voluntary unionism (even after Mike Moore’s 1987 Labour Relations Act offered incentives for amalgamation and other changes) was the real cause of their current weakness, not the introduction of the Employment Contracts Act in 1991.

But times have changed. The notion that all employers of workers in a particular industry or occupation would willingly agree to be parties to a single agreement, or that all those workers would voluntarily have their pay and conditions set in collective bargaining, flies in the face of trends in the world of work.

Thus, “a legislative system of industry or occupation-wide bargaining”, for which the working group is to make recommendations, would have to be based on compulsion and coercion. But it’s hard to see Mr Bolger recommending compulsory union membership for workers or compulsory participation in bargaining for employers. Isn’t it?

Labour, you might remember, set much store on its Future of Work Commission in the lead-up to last year’s election. It found that the world of work has changed, is changing, and will continue to change.

And that is why it’s strange that the government should think the recipe for future success is to be found in a cook book from the past.

The government’s rationale for fair pay agreements seems to assume that the market — without some kind of third-party (read state-sponsored) intervention — cannot provide workers with fair rates of pay (whatever they might be) and conditions.

If so, the government already has mechanisms for fixing that problem. It doesn’t need to set up a special system of collective bargaining.

Under the Minimum Wages Act 1983, a government can set minimum pay rates for workers and classes of workers. The Act already classifies workers by age, by whether or not they supervise or train others, or receive training, and by length of employment. There seems no reason why classification could not extend to occupation or industry.

How is the minimum wage set?

Once a year, the government takes advice from the Ministry of Business, Innovation and Employment and considers information provided by The Treasury and other sources. Then it decides.

In the past, minimum wages were set by the tripartite Arbitration Court — but that system crashed in 1968 when the judge sided with the employers’ representative on the bench and turned down the unions’ application for a 7.6% general wage order. The so-called nil order was subsequently replaced by a 5% increase agreed to by the employers.

Any tribunal charged with setting industry-wide or occupation-wide wage rates — in the absence of negotiated agreement — might want to think about the events of 1968.

Governments have other legislative instruments for setting minimum conditions other than pay rates — for annual leave, public holidays, terms of employment agreements, hours of work, payment of wages, and so on. Surely it would be better to set minimum conditions to apply across all industries or occupations, than to encourage a variety of standards based — probably — largely on the bargaining power of particular unions?   

If the government thinks the current minimum conditions are too low, then it should change them.

In one case at least, the government has already decided that it knows best — and its answer is better than the results of bargaining.

It has decided that all employees in the core public service are to be paid the Living Wage from 1 September this year, thus rejecting both the statutory minimum wage and the negotiated pay rates of these workers as providing what the Minister of State Services, Chris Hipkins, calls “fair pay and employment conditions for a decent standard of living”.

Who sets the Living Wage?

The Family Centre Social Policy Research Unit carries out research “to provide an empirical basis for determining the level of a living wage for New Zealand”, defined by Living Wage Movement Aotearoa New Zealand as “the income necessary to provide workers and their families with the basic necessities of life … [and] enable workers to live with dignity and to participate as active citizens in society”.

It doesn’t matter whether these two organisations are independent or advocacy-based: the fact is that Mr Hipkins and his colleagues prefer their answer to the current statutory minimum wage set by the government itself, the advice and information from officials on which it is based, and the results of collective bargaining between government sector employers and unions.

And note that, at $20.55 per hour, the Living Wage 2018 is already higher than the minimum wage rate of $20.00 per hour promised by the government for 2021. Why are public servants to be treated as a special class of wage worker?

And those with any knowledge or experience of past industrial relations can already see the re-emergence of the scourge of wage rate relativities.

The working group’s terms of reference seem to set unachievable targets.

Any model it proposes must “operate effectively as a component part of the overall employment relations and standards system, including existing single- and multi-employer collective bargaining and minimum employment standards”.

Of course, if employers and workers wanted to, they could achieve the government’s objectives for fair pay agreements within the existing system.

The working group has been given an impossibly short time frame — less than six months — for this Sysyphean assignment.