Govt nod for 15% all-up pay round

Press, 4 October 1985, Page 1

Govt nod for 15% all-up pay round

By

PATRICIA HERBERT

in Wellington

A pay round of 15 per cent all-up got the nod from the Government yesterday as being good for the economy.

The Prime Minister, Mr Lange, said that 10 to 12 per cent on award rates, plus house agreements taking the total to 15 per cent, was the path indicated to the parties at the tripartite talks He also said the electricians’ 15.5 per cent increase was “on course” and that, when he had described it as being at the limits of tolerance, he had been mindful that there was no secondary bargaining in the electrical industry. The Acting Minister of Finance, Mr Caygill, took a similar line. He said the only way both employers and unions could win was aiming for “a moderate average level of settlements this year.” If they went too high or “ultra low” everybody stood to lose. The apparent shift is a repetition of last year’s experience when, after talking down expectations by declaring a guideline of 5 per cent over nine months, the Government happily accepted increases of between 6.5 and 7.02 per cent over 10 months. Both Mr Lange and Mr

Caygill were commenting on an analysis released yesterday morning by the Well-ington-based economic consultant group, B.E.R.L. This explored three wage options and found the middle one — a 10 to 12 per cent movement in award rates, rising to 15 per cent to accommodate the second tier — to be positively beneficial. According to B.E.R.L.’s forecasts, it would produce a drop in unemployment from 50,000 to 40,000 in the year beginning this September, and a fall in inflation from 16.4 per cent to 10 per cent. By contrast, the Minister of Transport, Mr Prebble, has been arguing for a round of about 8 per cent. B.E.R-L. estimates that this would pull the consumers’ price index back to 4 per cent but that the loss of spending power in the local market would cause companies to contract, costing about 5000 jobs. The third scenario presupposes a total wage increase of near 20 per cent; 16 to 18 per cent in awards and the rest in house agreements. This would produce

the greatest damage, B.E.R.L. says; a rise of between 10,000 and 30,000 in the numbers of unemployed by September, 1986, and inflation running at 18.5 per cent by March. Mr Caygill said he had no fundamental disagreement with the figures B.E.R.L. had put out and that everybody was now “coming up with the same basic answers.” The responsibility facing wage negotiators was huge, he said. Inflation was on the way down but if they went for high over-all increases they would not only push it back up but lock it in. Alternatively, they could opt for moderation — “the only sensible course” — and consolidate the gains that had been made. “If people refuse to behave rationally and insist on chasing the worst options, it is not just the Government which has a problem but every worker and employer in New Zealand,” said Mr Caygill. The new chairman of the Combined State Unions, Mr Colin Hicks, was unimpressed. He described the

survey as a clever news media gimmick which added nothing to the public debate. He said he believed B.E.R.L. had used an economic model similar to that used by the Reserve Bank, and that the result was not a second opinion but a restatement of the Government view from another source. It also, Mr Hicks said, assumed that the present tight monetary policies would be adhered to, yet the union movement had persistently argued that these were not in the interests of working people and should be scrapped for a more balanced package; An economist with 8.E.R.L., Mr Kel Sanderson, acknowledged that the analysis assumed a continuing firm hold on the money supply. He also acknowledged that while a 10 to 12 per cent award round might be desirable, it was unlikely given the current mood in the workforce. It is also unlikely as, electrical workers aside, shipping office clerical staff got 12.5 per cent and — in

the trend-setting documents — the drivers have already rejected a 13 per cent offer. In the metal trades, the union is still pushing for 17 per cent. Mr Sanderson thought, however, that there was some room for flexibility. He said an increase of 14 per cent on awards would not damage the economy provided the unions did not push too hard at second tier and provided companies were willing to meet some of the bill from profits rather than pass it all on. Neither is likely but a total wage increase of about 15 per cent may still be possible — 13 to 13.5 per cent at award level and the rest in house agreements. An industrial relations expert at the University of Canterbury, Dr Jonathan Boston, believes B.E.R.L. may have exaggerated the. impact of secondary bargaining on the general wage movement He said that in the past it had added only about 1 per cent This would appear reasonable as it affects comparatively few workers — 30 per cent at the outside. Further reports, page 4