‘Real wages need to fall’

Press, 31 August 1984, Page 1

‘Real wages need to fall’

By

OLIVER RIDDELL

Average real wages need to fall in the short term if unemployment is to be reduced substantially, according to the Treasury. The level of unemployment was one symptom of the more general difficulties that New Zealand was experiencing, the Treasury said. Unemployment reflected a comparatively poor economic performance over a long period and inadequate flexibility in the labour market. In a policy package, the Treasury outlined ways of signalling the need for wage restraint, but said that this would take time to work.

Unions and employers needed to be aware of the adjustments needed in the labour market, and of reforms needed in the wagefixing system. These should influence the timing of the move away from wage controls.

“Achieving a substantial reduction in unemployment is likely to take time,” the Treasury said. Meanwhile, it was important that the method of reducing unemployment did not unduly impede improvements to New Zealand’s economic performance or the flexibility of its labour market.

The array of labour market programmes was expensive for the Government, and the programmes needed to be watched to ensure that they helped those who needed them most.

In spite of apparently equal access to the traditional social services for everyone,’ important differences persisted in education, health, and housing among different socio-economic groups, the Treasury said. For example, evidence suggested that the education system was poorly adapted to Maori and Pacific Island pupils. While social well-being over-all had undoubtedly risen, some facets of welfare had remained of considerable concern, such as housing, poverty, and the distribution of income.