Wages predicted to rise up to 17%

Press, 8 June 1985, Page 1

Wages predicted to rise up to 17%

By

PATRICIA HERBERT

in Wellington

Pundits on both sides of the industrial relations fence predict a high wage round this year with estimates of the level of increase ranging from 12 to 17 per cent.

This will likely alarm the Government, which has signalled a reluctance to go above 10 per cent and which is already trying to talk down expectations.

It will be the more anxious to hammer home the need for restraint when it. gets the message that this time both the unions and the employers expect it to leave the field at the end of the tripartite talks on August 17 so that they may bargain freely with each other. Neither party expects an agreed wage guideline to emerge from the talks. The president of the Employers’ Federation, Sir William Leuchars, has dismissed the possibility as “a pipedream” while the secretary of the Federation of Labour, Mr Ken Douglas, has said that agreement would reflect the weakness rather than the strength of the trade union movement.

Last year, when the parties failed to agree, the

Government declared a guideline of 4.5 per cent over nine months which, translated into 6.5 per cent over 10 months, it managed to achieve in about 80 per cent of awards.

The guideline had no legal force but was backed by bullying tactics and threats of retaliation in the form of raised import quotas against those companies tempted to give soft settlements.

At the end of the day this proved to be so much bluster but the 6.5 per cent rate stuck, at least until the closing stages of the round, for two reasons. The first was that the unions were in a weak bargaining position. Negotiations were compressed into a tight schedule and they were answerable to a workforce which, after a threeyear freeze, was anxious for immediate relief. The second was that the Employers’ Federation acted as the Government’s policeman by pressuring its members to toe the line.

The federation is unlikely to assume this role again not only because it cost it a loss in membership but also because the guideline served to reinforce that pattern of historic relativities between awards which the

employers are determined to break.

The F.O.L. is distrustful with different cause. Its experience last time has taught it to regard the guideline as a form of wage control and this it resents as unfair in an otherwise deregulated market. Both sides are approaching the talks with the intention of learning what they can of the Government’s plans for the economy and Treasury’s forecasts for the next 12 months. They also want to rehearse macroeconomic arguments which will form a back-drop to award negotiations. The Government had the option of abandoning the round in favour of a series of general wage orders, a course advocated by the Employers’ Federation and at least two leading unions, and apparently supported by the Minister of Labour, Mr Rodger. It also had the option of easing the pressure by granting a cost-of-living adjustment either this month or next as sought by the F.O.L and the Combined State Unions. It is believed that the Government has decided against both proposals. This being so, the problem facing it now is how best to con-

tain the average level of increase.

According to the executive director of the Bankers’ Association, Mr Max Bradford, it will do this by clamping down hard on the money supply through the Reserve Bank so that, lenders will not be able to increase their lending later in the year and businesses will know that they cannot rely on loans to meet high wage bills.

But Mr Bradford has warned that there are “real risks in trying to stiffen the employers’ bargaining stance by using a lack of financial wherewithal as a lever.”

He has identified two weaknesses in the strategy. The first is that it depends on the unions “playing ball” and the second, that there is often a communication gap within companies between those who manage the funds and those who negotiate the awards. The unions have announced that they will be concentrating on improving the positions of the low-paid both within and outside the work-force.

They will make high pay claims based on the erosion of real incomes over the last several years and will be looking for a catch-up on

prices since December and for protection against further inflation in the 12 months the round will run.

The employers will be wanting to break out of the horizontal relativity structure and will counter the unions’ wage demands by pointing to the drop in company profitability which all the forecasters say will begin soon.

The federation is not expected, however, to strike a silly position as it did in the last tripartite talks when it began with an opening guideline bid of 2 per cent, the lower end of the Treasury’s 2 to 4 per cent offer.

Indeed, if it comes up with a figure at all, it is likely to start at close to 10 per cent.