Will Fair Pay Agreements improve productivity?

Peter Williams 16/07/2019

A report published by The New Zealand Initiative disputes the findings of the Fair Pay Agreements working group.

The report argues that the recommendations from the working group “would be bad for just about everyone and especially for workers and the unemployed.”

Dr. Bryce Wilkinson, Senior Fellow at The New Zealand Initiative and co-author of the report joins Peter Williams on Magic Mornings to discuss their findings. 

Peter begins the interview by reviewing the first pillar of the report that New Zealand workers share of the Gross Domestic Product has dropped since the introduction of the Employment Contracts Act of 1991.

Dr. Wilkinson explains that their report refutes those findings, “entirely using statistics New Zealand that the share of employees in income has trended upwards.”

Peter then asks Bryce why is there a disparity in the statistics reported? Bryce responds, “what we found is that the numbers in their report were valid statistics but were very one sided.”

Bryce explained that the working groups report came under scrutiny, "when you looked at the broader range of statistics."

The shakiness of the case made by the working group came out very clearly.

Willimas then moves on to the reports findings that income inequality is on the rise.

Bryce disagrees describing that after an initial rise in inequality, which he argues is not attributable to the Employment Contract Act, has been trending downward until 2013 after which it remains static.

The Magic Mornings host moves on to the next pillar of the working groups report that employers are engaged in a race to the bottom at the workers expense and if that is true.

We found absolutely no evidence of a race to the bottom.

Dr. Wilkinson continues, “the working group did not supply any evidence that there was any such problem. It just seemed to be hypothetical.”

Williams then asked if the conclusion of the working group that fair pay agreements would increase productivity have any merit?

It’s just implausible.

“Both sides cite OECD research but the research cited by the working group focus on European countries but not New Zealand.”

You can listen to the full interview above.