Even Gareth Morgan is not in favour of returning to the failed policies of the 70s & 80s

Gareth Morgan

Even, North Korean loving, Gareth Morgan is not in favour of returning to the failed policies of the 70s & 80s.

He sticks it to Grant Robertson’s failed, lacklustre, and ignored Future of Work effort and their latest industrial relations policy.

Labour’s new employment relations policy is well intentioned, but not fit for the future of work that the Party has spent so much time thinking of. Instead its recommendations interfere in how businesses are run, potentially fatally. At the Opportunities Party (TOP) we are also upset about how modest income folk are not sharing sufficiently in the fruits of national prosperity, but rather than take to workplace relations with a wrecking ball we want to focus on the fundamentals that impact people’s lives: housing, immigration, investment, tax, and fixing our broken welfare system.

Most critically, in terms of the wage rates people are paid, we wish to remove the downward influence that comes from allowing hordes of low skilled immigrants to enter New Zealand. Instead, we want to see those businesses that are running out of labour start paying people more to attract staff. The most profitable firms will be able to afford this, the least profitable firms will either have to improve their act or fade away. This is good, these are the natural forces of bog-basic market capitalism at work. Creative destruction of unprofitable businesses and flourishing of the incomes of the owners and employees of successful businesses is just what we want.

I had to have a sit down after that…it almost sounds sensible.

Labour are pointing out the problems that we all see – rising child poverty and families struggling to keep up with the cost of living, especially housing. Not enough of the benefits of economic growth are going to those on the lowest incomes. In other words, trickle down has failed. We couldn’t agree more.

Labour’s plan to solve this problem involves 4 key planks:

  • An increase in the minimum wage to $16.50;
  • Offering core public sector employees a ‘living wage’;
  • Placing conditions around the 90 day trials; and
  • Making ‘Fair Pay Agreements’ by sector – similar to the 1970s approach of national awards.

The first three changes are pretty minor. The minimum wage has increased by 50c per year for the past few years and is currently $15.75 or 67% of the median wage. That’s very high by international comparisons (as a percentage of both mean and median wage) if Labour keep pushing then there is always a downside – not just a higher bill for workplaces but also the risk of lower employment, particularly for young people.

Check out what has happened in Seattle, if you don’t believe that higher minimum wages cause unemployment.

The idea that has really attracted the ire of employers is the last one – Fair Pay Agreements. And rightly so, given Labour’s own acknowledgement of how precarious the Future of Work is.

These seem very similar to the system of national awards in the 1970s. There the terms and conditions of different businesses in an industry were set by a national agreement. On the one hand it was a hugely cumbersome system, and on the other they were easy to fiddle.

National awards worked where businesses in an industry are all structured the same (like hospitals and schools), but what if two businesses in the same industry work in completely different ways? They might not even employ the same kinds of people, but they might achieve the same outcome. This is a massive barrier to innovation, doing things differently and remaining competitive. Just look at Team New Zealand – where would they be if they had to employ grinders instead of cyclists?

The national awards approach is still open to manipulation by the bad employers that Labour is worried about. Assuming there is a performance pay system, if a business wants to suppress wages they will simply promote people more slowly.

The final point is how does is this work in a modern economy where workers demand greater flexibility in terms and conditions? Short answer is that it doesn’t. This would be a total anathema to young people who are quite used to negotiating an agreement that works for them. And as long as they get the job done, why would any sane employer be worried about that? The world is changing and Labour needs to shed its 1970’s-type ideas for ones that ensure wage rises aren’t offset by job losses, that businesses cannot thrive because of the rigidity of legacy labour market restrictions.

And Gareth is an economist and he’s stated we shouldn’t argue with an economist. On this I think he might well be right.

It is just a shame he doesn’t actually want to be in parliament.



Do you want:

  • Ad-free access?
  • Access to our very popular daily crossword?
  • Access to daily sudoku?
  • Access to Incite Politics magazine articles?
  • Access to podcasts?
  • Access to political polls?

Our subscribers’ financial support is the reason why we have been able to offer our latest service; Audio blogs. 

Click Here  to support us and watch the number of services grow.