Wage flexibility

Press, 18 July 1985, Page 16

Wage flexibility

The employers and the unions are both running scared before the prospect of a wage round in which there would be flexibility of settlements according to the circumstances of the industry or of the particular employer or region. That is hardly surprising. The New Zealand economy has long been one of the most rigidly controlled in the non-eommunist world and the call for workers and employers to arise with nothing to lose but relativities is one to which the country is not psychologically attuned. The Government has freed the New Zealand economy to the extent that it is hardly recognisable as the New Zealand economy any longer. It has done this far faster than practically anyone would have predicted. Now it is finding that changing ingrained attitudes is more than the work of a moment.

The Federation of Labour has submitted a claim for a general wage order and the Government will make its response today. It should also emerge today whether the Federation of Labour president, Mr Knox, and the chairman of the Combined State Unions, Mr Burgess, have patched up their differences over a general wage order being in place of a wage round in September or as well as a wage round. State servants believe that their wages have been held more tightly than those of employees in the private sector and the unionists Mr Burgess represents are not of a mind to forgo a wage round in September. There will have to be a correlation between any general wage order granted and any wage round which follows. A small interim general wage order and a wage round in which some flexibility is retained might be a sensible move.

It makes sense for there to be flexibility in wage bargaining. Some sectors of the economy are more profitable than others, some firms are more profitable than other firms, some regions create a greater demand for various skills than other regions. Under more flexible wage bargaining, some employers would have to give more attention to considering higher payment for skills they need; some unions would find it hard to accept that some skills had greater value than other skills. The country has long been bogged down in a system under which the settlement of an award for a major union becomes the trend-setter for the whole wage round. Life tended to be comfortable for employers and for unions. It is not necessarily the most sensible way to run a modern economy. What would be required under any system of greater flexibility is some agreed method of determining such matters as an employer’s ability to pay. Profitability is only one yardstick. A number of major problems have to be sorted out before the country can embark on a system of fixing wages which, in the New Zealand context, almost amounts to a social revolution.

A general wage order would not be in accordance with the Government’s intentions; but it would not amount to an overthrow of the Government’s economic strategy. It would slow the pace at which New Zealand went down the path intended by the Government. It might relieve the anxiety and financial plight of some in unions and it would give both employers and unions a little longer to think about their attitudes to industrial relations and the setting of wages.