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BusinessJune 20, 2022

Why everyone’s so mad with BusinessNZ over fair pay agreements

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The business lobby group has been roundly criticised for playing fast and loose with the truth about the new Fair Pay Agreement law – and over the results of its attempt to have a UN agency intervene. Jacob Flanagan explains the story so far.

After BusinessNZ met with an indifferent response to its complaint to the International Labour Organisation over Fair Pay Agreements earlier this month, workplace relations and safety minister Michael Wood called the lobby group’s actions part of an “active misinformation campaign” against the new law. The strength of his language reflects frustration within government and labour organisations over BusinessNZ’s claims, which many FPA supporters say have been, at best, misleading and hyperbolic; at worst, outright false.

So are the critics right? Is BusinessNZ? Here’s how we got here, and what’s coming next.

Fair pay agreements: remind me what those are? 

A bill currently wending its way through parliament is set to introduce a new system of Fair Pay Agreements, or FPAs, to New Zealand. These are legally binding documents, agreed to by employees and employers, setting out minimum pay and conditions across a sector – for example, all nurses might be under one FPA. Similar minimum employment standards are commonplace in Australia and Europe.

The bargaining process can begin if at least 10% of a workforce or 1,000 employees agree to begin an FPA, or if it’s in the “public interest” to do so, such as in low pay industries.

Next, the proposed FPA needs support from a majority of employee and employer voters – employers receive one vote per covered employee. If the vote fails, parties go back to bargaining, before voting again.

If a second vote also fails, or if the parties can’t agree, the Employment Relations Authority decides the terms of the FPA.

The process for establishing an FPA.

FPAs were first recommended in 2018 by the Fair Pay Agreements Working Group, chaired by former National Party prime minister Jim Bolger. The group’s report found that “wages in New Zealand have grown, but much more slowly for workers on lower incomes than those on high wages; and they have grown more slowly than labour productivity”. The report argued FPAs could boost low pay, while ensuring “good employers are not disadvantaged by paying reasonable, industry-standard wages”.

Businesses, rather than workers, have enjoyed much of New Zealand’s productivity gains since the 1970s. (Source: FPA working group)

Right. But what’s international law got to do with it?

The International Labour Organisation (ILO), the United Nations agency in charge of employment rights, meets every year with governments, employers and workers to promote fair work conditions. Because New Zealand has agreed to many of the ILO’s conventions promoting things like banning child labour, our legislation is obliged to comply with them.

One of the many pieces of legislation from around the world examined at this year’s meeting was the government’s FPA bill.


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And BusinessNZ said we were on the ILO’s naughty list?

Last month, BusinessNZ released a statement claiming that “The International Labour Organisation has included New Zealand on the list of the 40 worst cases of breaches of international labour treaties”.

“The fact New Zealand was included on a list bookended by Afghanistan and Venezuela and just ahead of Nigeria showed just how flawed the proposed FPA Legislation was.

“The fact we’re on a naughty forty list […] is seriously damaging for our international positioning as a leading human rights protagonist,” complained Kirk Hope, BusinessNZ chief executive (and, apparently, human rights advocate).

What? New Zealand is one of the worst 40 countries for labour laws? Our worker rights are nearly as bad as Nigeria, where child slavery is common? This sounds terrible!

Or would do if it were true. As has been widely reported, BusinessNZ misleadingly edited the title of the ILO’s report.

The ILO did not publish a list of the 40 “worst case breaches”. Instead, they published the much more boringly-named “Preliminary list of cases as submitted by the social partners Committee on the Application of Standards” – in other words, the list of nations the ILO were going to meet with.

New Zealand was only on that list because BusinessNZ campaigned for them to be on it, and only “just ahead of Nigeria” because the list was ordered alphabetically.

Council of Trade Unions (CTU) president Richard Wagstaff explained that “being on the shortlist does not in any way indicate the ILO does not support the creation of FPAs in New Zealand”.

Workplace relations minister Michael Wood agreed, accusing BusinessNZ of an “active misinformation campaign” against the fair pay agreement system.

The title of the list BusinessNZ claimed the ILO had published (top), and the actual title of the list (bottom)

So when NZ went to the ILO, what did the ILO say?

OK, we’re about to get into the sometimes dull world of international labour law, so stick with me here.

BusinessNZ had convinced the ILO to examine New Zealand’s FPA bill at their meeting. The ILO looked at the bill, and published this:

What the ILO said to New Zealand: basically ‘Keep talking to employers and workers, and keep us in the loop.’

It was a very short statement, essentially just reminding the government to continue working with employers and workers, and to keep the ILO informed of progress.

For context, if we were to compare the ILO’s response to Aotearoa with, say, Nigeria (as BusinessNZ misleadingly did); the Nigerian government was advised to “without delay” review whether men and women were paid equally, ensure everyone is receiving at least minimum wage, and stop the policy of deliberately delaying wages.

One of these two countries was heavily criticised for its archaic and inhumane laws, while the other was told to continue as they were – which one do you think BusinessNZ kicked up a fuss about?

What did workers, businesses and the government think of the ILO response?

The Council of Trade Unions was pleased by such a concise decision, with president Richard Wagstaff arguing that BusinessNZ’s complaint was “more political than credible” and noting that several international worker associations, as well as the Australian and Belgian governments, spoke in favour of FPAs.

As you may have guessed, that’s not how BusinessNZ saw it.

They argued that the ILO ruling has been “misinterpreted” by the government and unions. Instead, BusinessNZ say, the FPA bill breaches ILO Convention 98, which New Zealand has agreed to.

Article 4 of the convention says collective bargaining must be voluntary, and according to BusinessNZ, “the Fair Pay Agreements system is not compliant with this Article because it requires/compels the parties to bargain once bargaining is initiated by a union”.

BusinessNZ argued that because the bill is still being debated by parliament, the ILO was reluctant to make conclusive statements, but that when it does become law the UN agency could rule it breaches Convention 98.

Minister Michael Wood was happy with the ruling, saying that “the ILO’s Committee on the Application of Standards has not found that FPAs are inconsistent with international conventions”. He again railed against “active misinformation campaigns” and called for BusinessNZ to cooperate with the government on the bill.

Labour’s Marja Lubeck, who chairs the education and workforce select committee currently reviewing the bill, was also critical of BusinessNZ’s interpretation of the ILO ruling.

Why are businesses so opposed to FPAs?

BusinessNZ have refused to cooperate with the government on FPAs and are running a public campaign against the legislation, stating that the FPAs “aren’t needed, they remove the flexibility and autonomy of modern workplaces and won’t improve pay and conditions for hardworking Kiwis.”

In fact, workers will be free to negotiate flexibility and autonomy, as the FPAs will simply place a “floor” on pay and conditions, which workers can freely go above and beyond.

Last year Employers and Manufacturers Association chief executive Brett O’Riley revealed his fears that FPAs “will result in higher wages, and the solution for businesses will be to cut down their workforce”.

Unions, unsurprisingly, see this predicted rise in wages due to FPAs as a positive. “Mr O’Riley is right about one thing – FPAs will lead to higher wages for New Zealanders. That’s because we are one of the only developed countries without some sort of minimum awards,” argued the CTU’s Wagstaff in March.

Since the 1970s, employers have enjoyed significantly increased output from their employees, but workers haven’t seen the same benefit. Labour productivity more than doubled from 1978 to 2016, while real wages have risen considerably more slowly.

The FPA bill is currently at the select committee stage and is expected to become law by the end of the year, with the first agreements being negotiated in 2023.


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Finance minister Grant Robertson has a massive challenge ahead of him. (Photo: Getty Images/Photo illustration: Tina Tiller)
Finance minister Grant Robertson has a massive challenge ahead of him. (Photo: Getty Images/Photo illustration: Tina Tiller)

BusinessJune 17, 2022

Just how cooked is the economy right now?

Finance minister Grant Robertson has a massive challenge ahead of him. (Photo: Getty Images/Photo illustration: Tina Tiller)
Finance minister Grant Robertson has a massive challenge ahead of him. (Photo: Getty Images/Photo illustration: Tina Tiller)

It’s bad – but not as bad as you might think, writes economist Brad Olsen.

It’s been a grim week of economic news. The US stock market has entered bear territory. Food prices are up 6.8% over the last year. And now the New Zealand economy has shrunk 0.2% at the start of 2022. It wasn’t the start we wanted for the year, but reflects the omicron disruptions across the country, still-disrupted supply chains, and intense pressures both overseas and here in New Zealand.

That 0.2% fall means that, in simple terms, the New Zealand economy was smaller after the first three months of 2022 than at the end of 2021, because the amount of output across the economy fell. The main driver of this decline was that we didn’t sell as much stuff overseas – exports were shockingly weak.

Despite the downbeat headline figure, there are parts of the New Zealand economy that are still showing admirable momentum, especially given that omicron was hitting during the early part of the year. At the same time as the entire economy contracted, domestic-based activity actually rose 2.6% (seasonally adjusted).

Household spending rose 4.6% in the March 2022 quarter, regaining further ground after a weak end to 2021 when delta restrictions were still in place. Despite the red setting at the start of 2022, spending was still up 1.1% from a year earlier, and almost back to the “normal” level we’d expect without the Covid-19 pandemic.

Investment spending (on buildings, infrastructure, factory machinery, etc) is also robust, with total “gross fixed capital formation” up 4.8% from a year ago.

Government cash is also boosting economic demand. Year-end growth in government consumption reached a new post-1970s high of 10.4%, with central government spending showing no signs of easing back from the breakneck pace that has persisted for the last year and a half.

The big drag on our current economy? Exports (Photo: Getty Images)

The tl:dr here is that households are still spending, businesses are investing, construction is continuing, and government is stimulating.

The GDP killer this quarter was exports, which recorded a whopping 14% seasonally adjusted decline in activity. After being a key backbone of economic activity over the last two years, export volumes pulled back to be at their lowest since 2009.

The export weakness was widespread, with the biggest contributions to the quarterly decline coming from services (-25%), metal products, machinery and equipment (-12%), dairy products (-5.6%), meat products (-10%), and agriculture and fishing primary products (-10%, all figures seasonally adjusted).

The services sector (tourism, international education, other business service exports) is still seriously messed up, and will be until tourism rebounds, which will start to show through in coming months with the border reopening.

But weakness in our agriculture exports is troubling. It looks like a combination of things have hurt exporters. Supply chain disruptions and restricted export shipping capacity mean that it’s expensive and uncertain to actually get our product overseas. High input costs are making it difficult to produce as much, both because people are trying to keep costs down, and because supplies are difficult to acquire. Fertiliser prices are at least double what they were a year ago. And the lack of available workers means we’re struggling to find people to actually do the work in the primary sector.

Fewer workers mean less production, and less production means lower GDP. Despite high prices for our primary exports at the moment, all these factors might be keeping production limited – and concerningly, there’s no clear end in sight for any of these challenges.

Inflation – in everything from grocery to travel to petrol prices – remains a persistent problem. (Photo: Hannibal Hanschke/Getty Images)

So where does this leave the New Zealand economy? And will we see a recession?

The short answer is probably yes. Keeping household spending levels high is going to be a challenge, with the housing market softening, inflation roaring, and interest rates rising. Household budgets are under pressure, and anything that isn’t essential spending will likely be pared back. In the firing line are transport and travel, restaurants and hotels, and recreation and culture.

Inflation remains a persistent problem and getting it under control means that interest rates need to go higher, limiting spending to dampen demand to a level that we can actually resource. We’ve got a brain drain going now, along with real difficulties finding enough materials and people for us to build, manufacture, and staff our businesses.

Given the strength of demand pressures and inflation, the government also needs to do its part and rein in spending. The government is also facing capacity constraints, and unless it recalibrates and prioritises the projects it wants to get done, it will simply exacerbate the delays and cost pressures that are being experienced across the entire economy.

It’s going to be difficult to keep economic momentum going at current levels. The fall in GDP at the start of the year is just the warning shot. We’re currently overcooking the economy and leaving the motor to burnout without any oil left to keep things moving. The aim now to is achieve enough of a reset to bring demand lower, allow supply to catch up, and be more focused on where in the economy we can direct our precious, limited, talent and resources.

There’ll be a recession, but probably not like we remember previous recessions. This one looks set to be a realignment after we’ve run too far ahead of our supply lines, and now it’s time to consolidate and take the pace down a notch.

Brad Olsen is principal economist at Infometrics.

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