High pay deals ‘could worsen jobless toll’

Press, 4 October 1985, Page 4

High pay deals ‘could worsen jobless toll’

PA Wellington High first-round settlements of the wage round could put more than 30,000 people out of work, according to a Wellington economic forecasting group. Business and Economic Research, Ltd, analysed three scenarios of likely wage round settlements for Radio New Zealand news — 8 per cent, 10 to 12 per cent, and 16 to 18 per cent. Settlements about 8 per cent would push unemployment up about 5000, while 10 to 12 per cent settlements could actually result in more jobs and lower inflation. Interviewed on the “Morning Report” programme yesterday, an economist, Mr Kel Sanderson, said settlements in the 16 to 18 per cent region would push the consumers’

price index to 18 per cent and with GST to 23 per cent by the end of 1986, where it would stay. “We would have to assume that monetary policy is carried on and that money supply is limited or controlled to the extent that they can control it,” Mr Sanderson said. “Money supply would start to bite and certainly unemployment would start to rise rapidly." If the Government held its nerve and the money supply, registered unemployment could go even higher than 30,000, he said. The other option for the Government then would be to relax its tight money policy. “We would still have the high inflation and that would be cemented in,” said Mr Sanderson.

Inflationary expectations would remain until the nation’s international trading position was destroyed, he said. If, however, settlements were about 8 per cent with allowance for about 2 per cent second-tier bargaining, inflation would be brought down from its present level. “Inflation certainly comes down ... keeps on going down and by September, 1986, is running about 4 per cent, only, but because the spending power has come down the jobs are lost and the unemployment would inevitably creep up, we think, to about 55,000,” Mr Sanderson said. The increase would be held to about 5000 because emigration was likely to continue. “People are leaving because of the lower spending

power of their money,” he said. A wage round averaging settlements of 10 to 12 per cent with allowance for second-tier bargaining could actually pull the number of registered unemployed down by 10,000, he said. The Prime Minister, Mr Lange, said yesterday that when the Government accepted the 15.5 per cent settlement of the Electrical Contractors Award it knew there was no secondary bargaining in the industry. Commenting on the possibility of 30,000 people being out of work, Mr Lange said he could not be specific in terms of figures. “But I do know this: if you have high wage settlements you get unemployment,” Mr Lange said. Referring to the industrial action in the engineer-

ing and road transport industries, Mr Lange said the Engineers’ Union secretary, Mr Rex Jones, and the Drivers’ Federation advocate, Mr Rob Campbell, were travelling the country stirring up apathy. “They have to be their own judges of tactics. But I cannot think of anything less productive than having people stop work for what are unobtainable objectives ... or worse, if they succeed and get it, having people stop work permanently in six months time,” Mr Lange said. People involved in wage bargaining had a prime obligation to remember whether the people they were bargaining for would have jobs in six months. Settlements at too high a level would see people laid off.