The Aussies earn on average one-third more than Kiwis, and in some countries the gap is even wider. Data scientist and mathematician John Holt crunches the numbers.
New Zealand is a low-wage economy compared to other OECD countries. When a currency’s buying power is taken into consideration, New Zealand ranked 18th out of 36 OECD countries in 2016. And the gap is not small: 10 of these 36 countries have average wages that are 25% more than New Zealand; three countries have 50% more; Australians earn on average 32% more than New Zealanders.
Comparing like with like, and looking at 40 OECD countries in the last 20 years, NZ industries consistently rank in the bottom half for salary and wages as a proportion of value-added profit. That’s profit after expenses but before labour costs, depreciation, and taxes. This proportion is itself a measure of productivity (turning lots of profit from relatively small labour costs) – it is just a shame that this “high productivity” is associated to low wages.
Sizeable New Zealand industries where labour gets more of the profits than the same industries overseas are iron and steel production, real estate, electrical machinery and apparatus (such as electric motors, or toasters, and their repair), and food, beverage and tobacco products. This may be more an indication that we approach these industries in very labour-intensive ways, or that our wages, though low, are higher than in the countries where this sort of production is commonly done.
Whatever the reason, employees in these industries are getting more of the available profits than most of their international counterparts, whether their wages are low or high.
At the other end of the spectrum we see a bunch of utilities industries like water supply and electricity and gas distribution. These are followed by research and development, education, machinery and equipment manufacturing and computer and related activities. Workers in these industries earn a smaller proportion of the available profits than most workers in those same industries overseas.
AVERAGE PAY.
How to interpret this? The utilities figures raise questions that aren’t about wages being artificially low. We have a minimum wage, so it is hard to imagine that water and sewage employees are paid worse than 97% of the water and sewage employees worldwide, and it’s the same for electricity and gas distribution. So perhaps the figures are due to profits being much higher. Are we being charged too much for water and energy?
And how do we interpret the figures for these other industries? Can we conclude these industries are underpaying their employees? Are the profits going to the shareholders, or are they being retained or invested back into the business? It isn’t clear, and there are a number of possible explanations.
To begin with, the figures are not precise – obtaining international benchmarks is fraught as every nation records their numbers in different ways, so work has to be done to sort it all out so that like is being compared with like. And national accounts data can be imprecise as well. But the higher and the lower numbers are still likely to be amongst the highest and the lowest, respectively.
In some instances, companies in other countries have higher wages because they are producing more sophisticated products and services and need more highly skilled staff, or are investing in-house in innovation.
In addition, New Zealand is a nation of small to medium enterprises, and smaller owner-operators may compensate themselves through dividends rather than a salary. Nevertheless, most small nations tend to be full of SMEs, and many of them (such as Finland) lead the world in labour’s share of value-added.
Revenue in New Zealand could also be more irregular, with bad years unexpectedly following good years, and businesses might retain profits in order to operate during the lean times. Again, this would afflict a lot of small nations – so are we just more risk averse than most?
It is a comparison with Finland. Red bars are <=33rd percentile. Yellow are between 34th and 66th percentiles. Green are over 66th percentile.
Whether or not greed is to blame, none of the causes outlined are particularly promising for the New Zealand economy. In short, many of us are working in companies which, if they are not being guided by short-sighted avarice, are lacking in innovation and allergic to risk.
Apparently, the problem is productivity – which was very much in the news this election, with charges by Jacinda Ardern that it is “flat lining” countered by Bill English’s claim that it is “growing pretty well”. Why is productivity important? The official view is that if we were better at turning labour, capital and inputs into products, businesses could pay people more. As the Productivity Commission says, “the higher the productivity of a country, the higher the living standards that it can afford and the more options it has to choose from to improve wellbeing.” Increases to productivity will lead to higher wages only if business owners share the gains with their employees, and the evidence is that this doesn’t happen in New Zealand as often as it does overseas.
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As this country continues to engage with the issue of productivity – and the prosperity it could bring – it’s important to make sure that increased productivity doesn’t increase inequality.
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With three restaurants in Auckland, Bird on a Wire is already a success story. So why did Sophie Gilmour jump on a plane bound for China to open a pop-up restaurant?
It was an opportunity to good to pass up. New Zealand food incubator, Hatchery, offered Kiwi food company Bird on a Wire the chance to test its offerings in the Chinese market.
Hatchery says it allows entrepreneurs with food ideas to quickly validate their concept to see if it will find a place within a crowded market, by taking care of the logistics in China including the venue. “They can do this by working with our team to ‘pop up’ their concepts or test their ideas in front of our community of millennial, Wechat-savvy patrons who enjoy eating and drinking,” Hatchery’s Alex Worker says.
Hatchery have done pop-up restaurants and events across Beijing and Shanghai, and have worked with Villa Maria, Tuatara, Sealord and Silver Fern Farms to bring New Zealand food to Chinese consumers, minus the usual boring trade shows.
The Chinese middle class is growing, and Worker estimates there are about 400 million millennials in the country. But Bird on a Wire says there’s not much happening in terms of ethical food sourcing and supply. Commercial supply of free range chicken, Bird on a Wire’s bread and butter, is more or less non-existent. A significant attraction for it was the idea it could help to educate consumers and influence their thinking; a lofty goal no doubt.
Co-founder Sophie Gilmour returned from her China trip this month full of praise for Hatchery.
“Hatchery, and the hospitality incubation in my opinion is genius,” Gilmour says.
“Initially it’s benefit appeared to be testing the market, but on reflection its greatest benefit has been getting to test how the concept translates logistically, and the likelihood of replicating it in a foreign market isn’t all that approachable without a partner on the ground. It removes the obstacles – both perceived and actual.”
So how did pan out? Gilmour says she would “highly recommend” New Zealand restaurants give it a go. “The Hatchery team are professional, well assimilated, well connected and a pleasure to work with.”
The next steps for the company is to regroup and reflect on the trip, and make a plan, she says.
“Hopefully someone is keen to move to China!”
Here’s Gilmour’s “captain’s log” from Bird on a Wire’s Chinese adventure.
Day 1
Arrived in Beijing at 5 am. Breezed through customs – surprised given the rigmarole of getting visitors visas at the Chinese Consulate in Auckland. Easy taxi to our hotel in the city centre at Wanfujing, but far too early to check in. Followed our noses (literally) to a busy 食堂 (shitang)with a Chinese man hollering noisily about the fried bread he was making outside, took notes on sales technique. Ordered baozi, wonton soup, millet congee, fried bread and dumplings – great start! Off to explore Beijing. Scanned the QR code on some city bikes in WeChat and we’re off to Tiannamen Square and the neighbouring Hutongs.
‘On our bikes’ to meet the Hatchery team for lunch at Zhang Mama on Fensiding Hutong near Andingmen. Menu entirely in Chinese, and we note that no-one so far in Beijing has spoken English. Holy Sichuan deliciousness – Shuizhu Zu (fresh vege and meat skewers to cook ourselves in boiling spicy chilli broth), Kung Pao lotus root, Huigo Rou (double cooked pork belly), Dan Dan Mian (wheat noodles with pork, chilli, garlic & vinegar), Suanla Choushou (Sichuan wontons), Mapo Doufu (translation ‘pock-marked grandmother’s tofu) and Chuanbei Liangfen (mung bean jelly with spicy sauce).
Next stop, Bird On A Wire in Dongcheng. First impressions – very familiar playlist. Hey! Those are our staff tees. Bird orange branding everywhere. Pass me the menu… this is spooky!
We’re feeling enamoured with Beijing, despite the visible pollution that locals constantly refer to – it varies enormously from day to day, and can be controlled simply by the government requiring factories on the outskirts of Beijing (its cause) to shut down when blue skies are on order for a state conference or the like. Call it a rose tinted lens, but it feels like mist to us.
MENU. PHOTO: SUPPLIED
Day 2
Having spent the entire afternoon and evening at Bird On A Wire Beijing, we are reflecting on how uncanny it is to see our concept translated to China. The feel of the place is pretty bang on, and the punters largely Westerners. The menu looks great bilingual and awash with food imagery – as is the custom in China. ‘The Classic’ (served in a burger bun instead of a baguette here) tasted about 90% on point, the tarragon mayo was a tiny bit light on the tarragon. The ‘Chicken Feed For One’ with Japanese Slaw and Korean BBQ sauce tasted so familiar it was unnerving.
The Hatchery team extended considerable effort to source free range chicken – it’s not a thing in China, not in commercial supply anyway. They managed to track some free range birds down in Taiwan, and are receiving the stock frozen before defrosting, brining, drying, cooking & serving it – no logistical mean feat. The financial reports we have received so far also demonstrate that the model is pretty similar to New Zealand in terms of cost of goods sold and labour vis a vis sales, so it’s fantastic to see and taste it for ourselves. Hats off to them!
Today’s mission was to check out other Western concepts in Beijing – Great Leap Brewing Co, Jing-A, Moka Bros, Blue Frog, Beersmith, Sproutworks and the newly opened jewel of Guomao, Migas Mercado. Beijing feels much less chaotic and overpopulated than we expected – our phones are also working completely normally (through a VPN) so we’re struggling to observe the effect of censorship and the impact of communism on Beijingers.
There is a distinct air of ‘up and coming’ about Western concepts in Beijing, and we’re pleased to note that Chinese people are getting amongst them too. If we’re completely honest though, we’re super keen for our Sichuan Degustation at Hatchery tonight!
CHINA VIBES. PHOTO: SUPPLIED
Day 3
Arrived home at midnight after 9 courses of Sichuan food cooked by Jenny Gao of Fly By Jing – the highlight was the fried cod tongue with dried chillies and the Tian Shui Mian (Sweet Water Noodles) with slow brewed special soy sauce, organic tahini and lots of garlic.
It’s 6 am and we’re off to The Great Wall of China this morning. The Hatchery team lease a place out there and we’re agreed that it’s too good to miss, being only 90 minutes out of Beijing. To get to Xiang Shui Hu(the quaintest and quietest of Chinese villages) we drove through a thick polluted smog, heavy rain, sunshine, a flooded village and past a local food spot to pick up some baozi and smashed cucumber for breakfast. Arrived at 9 am and took off on a 45 minute hike, steeply up a rocky and deserted path to The Wall, just as the clouds began to lift. Wow. Totally struck by the airy silence and taken back by the presence of The Wall.
We had an extra spring in our step on the hike down to a local bed and breakfast where we were having lunch – our Hatchery hosts had been raving about Hewei’scooking, andit did not disappoint. It was a fascinating look into rural life in China – we watched as Hewei and her husband turned produce from the garden into our best meal yet, and we helped ourselves to a cold beer from their underground cool store while government propaganda blared from speakers on the street outside. We have vowed to learn to reproduce the Kung Pao Chicken (with a million dried chillies), Yuxiang Qiezi (Fried Eggplant in Garlic Sauce) and Xi Hong Shi Chao Ji Dan (Stir-fried eggs and tomatoes) at home. We are enamoured with Chinese people. They are friendly, accommodating and tolerant of us in all settings, despite not speaking a word of English, nor us Chinese.
We napped in the car ride back to Beijing, grabbed some Bird On A Wire takeaways for the overnight train to Shanghai and laughed ourselves to tears at how hectic the Beijing Central train station was.
THE WALL. PHOTO: SUPPLIED
Day 4
Good morning Shanghai! Our overnight train arrived at 7.30am – we’re going pro at arriving too-early-for-check-in. Dropped our bags at the hotel right next to Fuxing Park and set off through the park on bikes, to explore Shanghai. We later learned that you’re not supposed to ride bikes in parks in China, nor sit on the grass. Getting together with your friends however, and slapping your limbs in a qi gong type manner (presumably to increase blood circulation?) is 100% legitimate use of the park.
Impressions: There are So. Many. Malls. in Shanghai. The Prada store alone was the size of an entire mall in New Zealand. Although we’re not generally big on malls, they had air conditioning and Din Tai Fung – so a few Xiaolongbao (soup dumplings) and we were away laughing. Loads of food retail – we’ve just recognised that Chinese people eat out practically every meal. Nice! A plethora of novelty (to us) beverage shops also – the best one is called ‘Hey Tea’ and each store has its own security guard and cordons to control the crowds. Off to highly recommended Liquid Lounge for dinner – another micro brewery! Certainly the most popular Western trend we’ve seen iterated in China.
CHECKING IT OUT. PHOTO: SUPPLIED
Day 5
Last night we went for a nightcap to the rooftop at The Captain, right on The Bund (waterfront) to experience all of the lights shining famously from modern buildings across on the Pudong side of the Huangpu River. Amazing. Times Square times a thousand. We thought there had been a power cut when the lights simultaneously turned off at 11 pm on the dot. Awesome.
Up early (thank you jet lag) so we’re off to hit the hotel gym in preparation for a big day of eating. Today’s objective is to try and get a feel for how Bird On A Wire would work in Shanghai. The Hatchery Team are opening a location here and tipped us that Shanghai has more of an appetite for Western food concepts, and in particular the fast casual category. We found a chicken shop! Called ‘Dodu’, it was a French style, fast casual rotisserie chicken joint in the Jing An District. They even use free range chicken.
In all honesty, we didn’t think the rotisserie chicken came close to Bird on a flavour or moisture scale – but the potatoes cooked in chicken fat have inspired us to create a special shelf for them in our rotisseries. Ban Ban by Sproutworks was the closest thing to a salad bar that we saw, and although we were really impressed by the three storied upmarket ‘Starbucks ‘Reserve’ concept – we headed to Tianzifang to wander the craft and cashmere laden laneways and check out the leafy streets for the afternoon.
YUM. PHOTO: SUPPLIED
Day 6
We once heard someone say that there is no such thing as ‘Chinese Food’ – it is a group of separate and distinct cuisines – and last night we tried a new and delicious one. The Yunnanese food at Lost Heaven was unreal. You could literally taste the fresh influence of Vietnam and we’re still dreaming about the Da Li Style Chicken with Chilli and Green Onions. Drinks overlooking the mansions of the French Concession was not a bad aperitif either.
It feels incomprehensible that 1.4 billion people live in China. In a 30 minute bike ride around Shanghai we saw three totally different, but equally charming neighbourhoods. The streets are clean and organised, and it certainly does feel more ‘advanced’ in terms of retail vis a vis Beijing. At times, it feels like we are in Paris. At other times people hover over you until you finish your noodles and free up your seat for the next diner.
Quick boat trip down the river and rooftop drink before jumping in a taxi to the airport – we’re told it’s 1.5 hours away, guess this place is massive. We’re currently sitting in massage chairs near our departure gate plotting our expansion into China! What a wild, worthwhile, fascinating, experiment. What a privilege to be able to ‘flex our Bird On A Wire muscle’ in China and a pleasure to feel confident that we’ve created something world-class.
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