The productivity-wage gap

We used to be a country where a fair day’s work gave you a fair day’s pay, but the gap between what workers are earning and how much they are producing is growing larger by the year.

The latest news from the Organisation for Economic Co-operation and Development (the OECD) reported on Radio New Zealand is that New Zealand has one of the largest gaps between productivity and wages.  Productivity overall has increased but wages haven’t kept up and New Zealand workers now have less than half the share of national income.

Amongst other things, the OECD attributes the reduction in unionism as a factor in the disproportionate sharing of the economic pie.

Max Rashbrooke has recently been touring the country speaking about the book he has edited Inequality: A New Zealand Crisis which describes the growing problem.

In chapter three, Dr Robert Wade from the London School of Economics says that in order to address growing inequality of income we need to look at what he calls ‘the pre-distribution of wealth’ – that is we need to find ways that ensure low income earners are paid better – and he identifies collective bargaining for unions as a way to ensure it.

This of course is completely opposite to what we are seeing with the Government set on discouraging unions from bargaining collectively for workers and this is demonstrated clearly with the Employment Relations Amendment Bill that will be reported back to the House shortly.

Currently only about 9% of the private sector workforce is unionised and pay rates are hardly increasing.  On top of that we still have an unemployment rate of 6.2% and 635,000 people are in insecure or casual jobs.

Meanwhile MPs are getting a pay increase. The contrasts are decidedly alarming. Frankly I’d like to see the wealth of our nation shared more fairly.

24 thoughts on “The productivity-wage gap

  1. this govt loves to give big capitalists more by lowering workers’ wages even more,if possible, to the slave level when people are struggling to make ends meet. If local workers are not willing to earn low wages, they will hire workers from countries with even lower wages…

    another bonus for national govt who hates beneficiaries; when the gap become smaller between low wage earners and beneficiaries; latter got hated and resented, people got divided and they hate/fight each other, while all forgot the Nat. govt is the one should be blamed…

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  2. the cure for this in most countries is civil war, people will only be suppressed for so long before they push back

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  3. If the unions had been half decent at working for their members prior to the lifting of compulsory unionism in 1991, the working class would still be voluntarily union members and arguing for collective wage bargaining.

    But union just could not let go of the cloth cap, communist mentality that turned their members away in droves.

    If cloth cap unions are the answer then the question must be, why are workers not signing up in droves to be members?

    Could it be that what unions are able to provide, does not match what workers are requiring?

    Even 9 years of union fed Labour party governance, we did not see a return to compulsory unionism. Even Labour must have recognised that cloth cap unions are not the answer. Mind you Labour will hypocritically take cloth cap union members money to fund their political campaigns.

    Hypocrites that the Greens want to power share with in 2014.

    Is it Greens policy to return to compulsory union membership for workers in New Zealand?

    Or would the Greens be more interested in finding a better type of collective bargaining system that suits the workers better in the 21st century. A system much better suited to the 21st century then the failed 19th century cloth cap communist union model that still festers employee and employer relations today?

    Greens need to get in tune with workers wants in regards collective bargaining, not what the cloth cap unions wants in pushing their political barrow.

    And if the MP salary increase is burdensome, just send the extra “guilt income” to a needy low income worker. No MP needs to take the salary increase, just pass it on.

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  4. “But union just could not let go of the cloth cap, communist mentality that turned their members away in droves. ”

    The majority of unions dropped the old class-struggle attitude completely and turned into organisations run by educated middle-class liberals who would run a mile from anyone in a cloth cap and would bend over backwards to avoid any conflict. Consequently they did nothing for their members, and sat around doing bugger all until legislation had made them ineffectual. Which made it a complete waste of time being a member.

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  5. With so many term and individual contracts, that have become the norm in New Zealand, with the casualisation of so much employment, it is not surprising that the created division has led to lower wage growth in New Zealand.

    With the Employment Contracts Act most unions lost high numbers of members, and some unions have even disappeared, as they could no longer sustain themselves.

    Labour did reverse some provisions and brought in their Employment Relations Act, but it could not create an environment that restored unionisation. Only in the public sector is there a reasonably high degree of union membership, but in the private sector it is a mercenary style employment environment that rules.

    Put up and shut up, sign at the dotted line, is the approach many employers take to workers applying for jobs, unless the candidate has such high calibre skills ande experience, they are in urgent need.

    I know that some union representatives have let their members down, which was though more frequent before the 1990s than since then. But it is unfair to blame the lack of membership simply on unions and the present legal framework.

    Sadly most people have become so individualistically minded, indeed self serving and opportunistic, rather than sticking to a minimum degree of collective spirit and responsibility. This certainly does not help, and having so many out there simply “adjusting” to the competitive job market and conditions, and seeing work mates rather as rivals than colleagues, is disheartening.

    The “reforms” in employment law, that this present National led government has pushed for, will in core parts need to be reversed or amended.

    Unions must be seen as partners not as enemies, and they are absolutely necessary to represent workers’ rights. Productivity is also not just achieved by humans working ever so more hours and doing more manual and other work, it is often achieved with smart organisation, technological innovation and better ideas that are implemented into action. Better educated and trained workers also tend to be more motivated and better performing, when paid appropriately.

    In all above mentioned areas New Zealand can do with improvements, but with that there is absolutely more need of fairness and better pay and conditions.

    Lifting the minimum wage must be one of the first actions a new Labour led and Green supported government takes. Also should the living wage idea at least be supported and striven for.

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  6. I think that the issue with increasing inequality has very little to do with the strengths or weaknesses of unions. They become more and more irrelevant as more and more work becomes more and more automated and requires more smarts than muscle.

    When that is combined with naked Capitalism, debt backed money and a reduction in taxes on the wealthy the effect is an inevitable shift of money into the pockets of the wealthy and out of the hands of the rest of the population.

    Unions addressed only the “naked Capitalism” part of the equation… and we have the “Labour” party as a historical artifact, but the inequality is supported by a whole series of troubles.

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  7. It is Gerrit and the Nats who live and persecute according to outdated sloppy stereotypes.

    Why dont you give us a fact free prejudice laden lecture on greedy jews next Gerrit?

    There’s a good ol stereotype for you.

    How do cloth cap unionists fight greedy jew bankers and bosses in your world?. .

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  8. Gerrit. It is the “Cloth Cap” unions that look after their members, which still have members. Most of the ordinary people who actually had pay rises over the last few decades were in “Cloth Cap” Unions.
    Doctors, Lawyers, Accountants, Freezing workers, MUNZ, Teachers, Nurses, Junior Doctors to name a few. The first three being more powerful and active than the rest ever were.
    Which makes a nonsense of your statement.

    The “collective” Union of Managers and Directors, of big corporates, seems to be working well for their members also.

    Unions have become less relevant for three reasons.
    1. Unrelenting propaganda against Unions.
    2. Many people, such as office workers, independent tradespeople and, small business owners! have have the benefit of the floor set for wages and conditions by the remaining unions without the need to join them.
    3. Successive Governments have removed so many of workers rights, to organise collectively, that Union, and worker power, to negotiate is almost nil. (Note that the “right to withdraw your labour is almost non-existent in New Zealand. Strikes are effectively illegal except in very limited circumstances. Sam Parnell’s collective action, as a small business/tradesman, for the 8 hour day would be illegal now)

    The demise of Unions and the huge reduction in the share of the economy going to low and middle class workers has been a huge detriment to New Zealand:

    Increasing the amount of profits going offshore.

    Discouraging capital investment
    Who would invest in plant when you can increase profit by screwing your workers and then loaning them back the money they need to live, and house themselves, at some of the OECD’s highest interest rates.
    Who would invest in selling to New Zealanders, who cannot afford their products.
    There is a reason why Germany sells more cars than the USA, despite their factory floor auto workers earning almost three times as much.

    Decreasing the amount of disposable income for savings.
    Treasury is taking the piss when they say New Zealanders need to save more. In fact New Zealanders save more of their “disposable” income than most of the OECD. Countries with high rates of saving correlate exactly with those who have the highest disposable income, workers rights (German Unions have seats on the board) and, mostly, the highest progressive taxation.

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  9. Increasing the amount of profits going offshore.
    The rest of us are subsidising giant corporates, with WFF and social costs, who are paying less than subsistence wages and taking profits offshore. Unite is showing, even now, with “Cloth Cap” tactics, that Unions can slow the process of the race to drop workers wages and conditions to the bottom.

    Bloody text editor.

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  10. We don’t need unions; we just need the Remuneration Authority’s scope to be widened so everyone gets the same wage increment as MPs do!

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  11. I think one of the factors causing this growth in inequity is the unspoken demand professionals are making. “Pay me a bigger slice of the cake or I move to Australia.” Young and older professionals in New Zealand are sought after around the world for various reasons, the fact that they are English speaking is just one of those reasons. They put up a good case for higher salaries, as do the professional workers from Asia and other places that come to replace them. New Zealand has become a railway station for professionals moving from the third world to the first world. Then there is the union’s decline – another big factor in the inequity debate. Once it was compulsory, now it’s a disadvantage to belong to a union. Some employers simply don’t employ anyone who even mentions that they belong to a union. I know someone who has a second job – cleaning an office. His employers, a well know cleaning and security company, offered him a wage rise, but only on the condition he would sing a document stating will not join a union that covered his occupation. They also refuse to pay existing union members the higher pay rate. That is two pay rates for their workers – the higher rate is for non-union members. This is apparently allowed by the New Zealand government.

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  12. Graham,

    That is two pay rates for their workers – the higher rate is for non-union members. This is apparently allowed by the New Zealand government.

    Proves my point that the cloth cap unions we have in New Zealand are USELESS.

    An individual on a personal contract can negitiate a higher wage, then the unions asking for money to represent the workers for higher wages.

    Just how more useless can a cloth cap union get?

    Cloth cap unions just cant compete with the individual nouce of the self reliant worker.

    Off cource it is allowed by government, it is why since 1991 not a left or right wing government will return the country to the deep dark days of compulsorary cloth cap unionism.

    If unionism was so good, ALL workers would voluntarily join one. The fact that 85% of workers dont want to, shows how effective cloth cap unionism is in New Zealand. Not at all effective.

    You get better pay negotiating your own employment agreement.

    Down clicks to this truth in 1.2.3.4 seconds?

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  13. Skilled and professional workers are not getting much of a slice of the cake either. That is why they have to bring in less skilled third world immigrants to fill the gap, and keep skilled wages down. And why most of us have moved to Australia or Europe.

    The “cake” is going to a class of semi-skilled administers (Accountants and MBA’s) who have replaced the truly skilled, in the “Anglo Saxon” countries, and offshore corporate owners.

    http://kjt-kt.blogspot.co.nz/2011/04/kia-ora-corporatism-and-neo-liberalism.html
    “The corporations with the largest income gap between Directors/Managers and employees have proven to be the least functional.
    The star managers paid in millions have proven to be much less effective than, lesser paid, experienced promotions from within the organisation”.

    But in the meantime they award themselves 17% pay rises and 600k bonuses while their disillusioned, skilled staff, leave in droves.

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  14. Gerrit. Last year Union members got over 2 to 2.5% pay rises, despite laws which have removed almost all worker power. . The majority of non Union members got, nothing!

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  15. The reason why employers can now get away with Union busting tactics, like different wage rates, is because the Government has made it illegal for workers to collectively support each other.

    And. The reason why employers temporarily offer higher wages to remove the Union is so they can get rid of the Union representation and drop, wages and conditions over time

    Government, and employers, attacks on human rights are not the fault of the Unions. It is nowadays illegal for workers to oppose them.

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  16. Kerry

    Government has made it illegal for workers to collectively support each other.

    Pardon me but that is rubbish. You saying the useless unions like MUNZ and EMPU are illegally working collectively for their members?

    Government, and employers, attacks on human rights are not the fault of the Unions. It is nowadays illegal for workers to oppose them

    Victim mentality of useless cloth cap unions is the biggest fault for unions loosing membership, not any state sanctioned attacks.

    So cloth cap useless unions can only operate effectively if they have 100% enrolement of the workers?

    Jeez, no wonder they are rejected far and wide. Market forces, in the form of workers voting not to be menmbers of useless unions, is the real reason.

    Useless cloth cap unions never got to grip with what the members actually wanted. Instead they kept up the cloth cap, them versus us mentality. Workers good, employers bad, was the motto. Much like you are spouting in your comments, a contest between big corporates and workers.

    Whereas most members wanted repirosity arrangement with their employers.

    Especially in the SME sector (70% of all employers) where most employees knew the state of the business and the ability to pay for individual wage levels versus their union demand of pay parity across whole industries.

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  17. who’s the old goat spitting out ‘cloth cap’ over and over as if that proves his prejudice

    Grandpa’s off his medication ?

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  18. I don’t know what sort of fantasy world you live in, Gerrit.

    And far too many bosses are arsholes. Otherwise we would not need Unions.

    The way many businesses treat their young staff, in particular, is disgusting! They need Unions. They don’t know enough to know it.

    MUNZ has done very well for their members compared with the non Union watersiders. The ones at sea were one of the few bunches of workers to get pay rises this year.

    Which is why POAL has wasted 34 million plus of their owners money trying to break them. If the union was ineffective, for its members, they wouldn’t have bothered.
    Plenty of other watersiders wish they had never let the ports establish employer run “unions” and turn them into low paid casual workers waiting by the phone for their 12 hours a week.
    By the way, the contractor, screw the employee model, in Tauranga, costs more per box, than Auckland.

    PPTA has resisted Governments ideologically driven attempts to fuck our education system.

    Similarly health sector unions have addressed totally impossible working hours for junior Doctors.

    The lack of sector unions has allowed businesses to compete simply by seeing who can rip off their workers the most. Which is why wages for most New Zealanders are spiraling downhill. And many businesses lack capital investment and good management. It is easier just to screw your, non-union, workers a little more.
    And why so many SME’s are closing their doors. Workers are also customers.

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  19. Kerry,

    very gracious of you to admit that your quote regarding unions being unable to legitamitily bargain collectively for their members was an untruth.

    Any backup that “far too many bosses are arseholes” or is it just in your circle of aquitances.

    My point remains that if the cloth cap unions are so good why are the rest of the workers not joining?

    Your theory is that they the un-unionised workers are unknowingly unaware seems to be the cloth cap union fall back position.

    Maybe, just maybe the unions are useless at attaining new members?

    Oh I forgot, it is a VRW conspiracy to keep workers in a state of unknown ingnorance on the benefit of joining a union.

    You would think in this day and age of instants acces,s a union web site would at the very least have a list of features and benefits to entice workers to join the union.

    This is the MUNZ one (yours?)

    http://www.munz.org.nz/

    Not a skerrick of information on the benefits in joining, nothing that I cold see in a decent five minute browse.

    That is what I mean by useless. You claim the VRWC is preventing workers from joining unions. But are unions actively looking for members? What is in it for the average worker to join?

    No marketting, no sales pitch, no lists of benefits, no fee payment structure, etc., etc., etc.

    And you expect workers to fall over themselves to join a union?

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  20. “very gracious of you to admit that your quote regarding unions being unable to legitamitily bargain collectively for their members was an untruth.”

    Except that is not what I said.

    “Any backup that “far too many bosses are arseholes” or is it just in your circle of aquitances.”

    My circle of acquaintances are, mostly, excellent, bosses. However they are also in a position where extremely high skills and credible leadership both daily and in life threatening, emergencies, is required.

    Fast food franchises just been in court for stealing 100 of thousands of unpaid hours from employees. Court case bought by Unite, by the way.
    Retail outlets, part of large profitable offshore chains, which employ people as casuals for years on minimum wages, then to add insult to injury make it a condition of employment that they are on call and have to work rotating shifts so they cannot even take another part time job.
    Employers that cut permanent employee hours to the level they have to quit, so they can take on WINZ subsidised staff for 3 months, who they then encourage to leave in their turn so they can take on more staff paid for by WINZ. Ultimately of course by tax payers).
    Millionaire fruit growers who pay minimum wage then charge back $350 a week for a bed in the barn. That’s if their picking rates even pay minimum wage. Then bleat they cannot get Kiwi’s to travel to their farms and earn less than the cost of travel and the WINZ stand-down..
    Just some examples of large scale exploitation and abuse of non-union workers, which has come to light recently.

    “My point remains that if the cloth cap unions are so good why are the rest of the workers not joining?
    Your theory is that they the un-unionised workers are unknowingly unaware seems to be the cloth cap union fall back position.”

    They are unaware as you yourself show, as you claim unions are useless, while you enjoyed your almost free education, 8 hour days, cheap health care, functional society and lunch breaks, courtesy of the union movement.

    “Maybe, just maybe the unions are useless at attaining new members?”

    MUNZ has acquired a large number of new members since the POAL lockout.

    “Oh I forgot, it is a VRW conspiracy to keep workers in a state of unknown ingnorance on the benefit of joining a union.”

    You hit the nail on the head there. The main reason the costly lockout was pursued by POAL management is because MUNZ was an example of a Union keeping good pay and working conditions for it’s members, unlike the casual, dangerous and precarious low paid job it has become in non union ports..
    Why we see the present concerted campaigns to vilify Teachers, State servants, Freezing workers, Doctors, wharfies and other examples of Unionisation. To get rid of the last examples of worker power before National gets confined to well deserved oblivion. National is currently rushing through some more Fascist anti-worker legislation to ensure Unions cannot succeed next time.

    No one has a go at the business roundtable, now the NZ Initiative, a RWNJ union which is responsible for much of our present failed policy.

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  21. I tend to think right wing anti worker employment law that successive National governments have brought in has weakened unions and decreased workers pay and conditions.

    Big corporations tend to screw their lower rank workers ( while paying millions to the boss’s ), and big corporations also screw the countries they operate in by cheating, in a legal way, on their taxes.

    The National Government has done nothing to plug the multi millions, or even billions that big corporations are fleecing from our country.

    Instead National gives more money to these large corporations and cuts dodgy back room deals with them.

    As a prime minister John key makes a good greedy merchant banker ……….

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