Fight for fair pay: The radical plan to increase Kiwi workers’ slice of the pie

More than 250,000 low-paid workers are the focus of the most far-reaching workplace reform in 30 years. The business sector has vowed to fight it. By Rebecca Macfie.

Victoria (not her real name) has been filling the shelves at Countdown for five years. She’s a permanent staffer and works steady hours: she starts at 8.30pm and finishes at 6am, except for Sundays when it’s 6pm until 3.30am.

It’s heavy work, lifting boxes of cheese, flour, pet food, Coke and countless other grocery items from pallets on to display shelves. Apart from two 30-minute breaks, she’s on her feet all night, putting her back and legs, arms and shoulders into the service of the $22 billion grocery trade.

She has a forklift licence, is trained in health and safety and has a first-aid ticket. She has experience as a supervisor and, as a delegate with First Union, she supports other workers, including those facing a rising tide of aggression from customers, and new hires who don’t know their entitlements.

She’s paid $22.22 an hour for labouring through the nights. There’s nothing extra for weekend work. Through the first level 4 lockdown in 2020, Countdown and Foodstuffs topped up supermarket wages by 10 per cent, but that was stopped as soon as restrictions eased. Since then, being an “essential worker” hasn’t come with any compensation for working through the pandemic, coping with surges of panic buying, and battling through Omicron-induced staff shortages.

She lives in a regional town and has grown-up children. She gets by, “but it’s hard”.

“I struggle to buy food. But I am really grateful I’ve got a job,” she says.

Her employer, meanwhile, does not seem to be struggling. According to the Commerce Commission’s study of the supermarket sector, between 2015 and 2019, Woolworths (the owner of Countdown) and Foodstuffs (New World, Pak’nSave, Four Square) raked in $430 million in “excess profits” every year.

For Manaia (also not her real name), a standard working week is 48 hours, spread across four shifts from either 7am until 7pm, or from 7pm until 7am. The 65-year-old is a security guard at a commercial building.

She has a warm office to work in, but her roster is punishing. Day shifts routinely flick into night shift without any chance to adjust. She’s tired, but “you just have to get up and go”, she says. “What else can be done? You can’t fight it because they will just say, ‘Okay, we’ll put you from place to place, instead of working at one stable point.'”

After 12 years of service with her employer, First Security, she’s on $21.25 an hour. The wage is the same whether she’s on day shift or night. Overtime kicks in after 60 hours a week, and then it’s only time-and-a-quarter.

She’s “comfortable” on her wage and national super, but recently her landlord gave notice on her modest one-bedroom flat. The prospect of finding somewhere new in Auckland is daunting, and she thinks her income will have to stretch an extra $100 a week to meet the expenses on another place.

In a society troubled by crime, poverty and homelessness, her employer has been enjoying buoyant trade. With more than 2500 workers, First Security is the biggest in the business. Last year, its revenue increased by almost 50 per cent to $129m, helping its parent company, Wilson Parking, book a $17m profit.

Neutering the unions

Low-paid employees such as Victoria and Manaia – along with bus drivers, cleaners, forestry workers and early childhood teachers – are the focus of the most far-reaching workplace reform since 1991, when the National government of Jim Bolger introduced the Employment Contracts Act (ECA). The ECA overturned 100 years of centralised pay bargaining, including the system of national awards, which set a minimum floor under wages and conditions for entire industries and occupation groups.

The ECA wiped out this national collective structure almost overnight and atomised the vast majority of workers on to individual contracts. The underlying premise was that trade unions needed to be neutered, and that individual workers should be able to negotiate their pay and conditions directly with their bosses.

The upshot was that most workers were rapidly stripped of overtime rates and penalty pay for night and weekend work, and many pay packets got smaller. The deep benefit cuts imposed in 1991 combined with persistently high unemployment, which reached 11.4 per cent in 1992 and didn’t drop below 6 per cent for eight years, also deprived workers of bargaining power.

The union movement was brought to its knees, and collective bargaining all but collapsed in the private sector.

Three decades on – despite the repeal of the ECA in 2000 and its replacement with the more moderate Employment Relations Act (ERA) – New Zealand has one of the lowest rates of union pay bargaining in the OECD. Only 10 per cent of private-sector workers have the income-boosting benefit of collective pay deals, and the bulk of collectives that do exist – such as those covering Countdown workers and First Security guards – apply only to a single company or site.

Agreements that create a level playing field of standard wages and conditions across whole industries are possible – known as multi-employer collective agreements, or Mecas – but unions have found them all but impossible to achieve outside the state sector. This is despite the global arbiters of good economic practice, the OECD and the International Monetary Fund, concluding that industry-wide collective bargaining reduces inequality, and that declining union power has helped the highest earners get even richer.

Excess profits

To summarise a long and complex economic narrative in which the collapse of collective bargaining is one factor, the share of the pie going to New Zealand workers has shrunk, while the share going to the owners of capital has grown.

Economist Bill Rosenberg has spent years tracking workers’ share of the national income. His work shows that a long-term decline began with the Muldoon wage freeze of 1982-84, and accelerated after the ECA; after some improvement in the 2000s, it fell again in the years after the global financial crisis of 2007-09.

In recent research, Rosenberg and Victoria University of Wellington economist Geoff Bertram have found that the story for New Zealand workers since the early 1990s has been one of ongoing wage suppression, longer hours and multiple members of households seeking low-paid jobs to make ends meet. At the same time, asset owners (excluding homeowners and non-commercial public assets such as schools and hospitals) have been extracting excess profits above a “justifiable rate of return in a competitive market”.

In 2019 alone, those excess profits amounted to between $50b and $60b.

The cost of that wage suppression is borne not just by workers, but by taxpayers through welfare top-ups including Working for Families and the accommodation supplement.

Which brings us back to the proposed overhaul of wage bargaining. This task is in the hands of Workplace Relations and Safety Minister Michael Wood, who on March 29 introduced a bill into Parliament ushering in a new system of fair pay agreements.

Sector-based bargaining

The proposed regime is such a drastic departure from the past 30 years of industrial relations, and is opposed so vehemently by the business lobby, that it’s worth spelling out the details in full.

Unions will be able to initiate negotiations for a fair pay agreement (FPA) covering a whole sector or occupation – for instance, all supermarkets, all security companies, or all cleaning outfits – provided they represent at least 10 per cent or 1000 workers in that sector. If they can’t make those numbers, they can still initiate an FPA if a public interest test is met. This would need to show, for instance, that the industry pays extremely low wages or hires large numbers of vulnerable migrant workers. It’s expected that unions will use the public interest mechanism to seek an FPA for forestry workers, who suffer high rates of death and injury and are entirely de-unionised.

Once bargaining has been initiated for an FPA, unions and employer representatives will negotiate, and an agreement must result. It then has to be ratified by a majority of workers and employers within its scope. If a deal isn’t reached through negotiation, it can go to the Employment Relations Authority for an arbitrated settlement.

Employers covered by a proposed FPA will have to hand over the details of each worker affected, unless the worker opts out. Unions will have access to sites to talk about bargaining, and workers will be entitled to two two-hour, paid stop-work meetings.

Certain things will be “mandatory to agree” in an FPA, including base wages and penal and overtime rates. Contractors won’t be covered, but employers who introduce sham contracting arrangements to dodge an FPA will face penalties. Government labour inspectors will be authorised to decide if a worker is covered by an FPA.

Workers are being asked to accept a massive quid pro quo for a regime that compels employers into coverage – strikes in support of FPAs will be illegal. And while unions will be expected to represent all workers covered by an FPA, union membership will remain voluntary.

Employers will be bound by an FPA in their sector whether they like it or not. If First Union wins a deal for supermarkets, for instance, the owners of a particular store won’t be able to continue paying rock-bottom wages to suit themselves; they will be compelled to meet the FPA’s minimum rates. But there’s nothing to stop them negotiating with their workers for pay and conditions that are better than the FPA.

If FPAs are achieved for industries where work is routinely tendered out – city bus services and security, for instance – contractors won’t be able to win jobs simply by paying lower wages than everyone else, because every bidder will be subject to the same minimum. In both these sectors, race-to-the-bottom contracting has been cited as a key cause of low pay, bad health and safety, and brutal hours – such as the split shifts that force bus drivers to work across 14 hours of the day, with hours of unpaid downtime.

Embedded unfairness

It’s a radical shift for New Zealand, but Michael Wood, a former union negotiator, insists it’s needed to turn the tide for workers. “We have deeply embedded unfairness in parts of our labour market for many workers,” he told the Listener. “It has been there for 30 years, since the labour market was deregulated, and has contributed to disconnection, to poverty, to loss of opportunity. And sector-based bargaining, like fair pay agreements, is one of the most internationally and historically proven mechanisms for dealing with this unfairness.”

The roots of the FPA policy go back to 2011, when the late union leader Helen Kelly developed a scheme for industry-wide agreements as a way to break the pattern of low wages and overcome the inherent weakness of the union movement in a deregulated labour market.

Versions of the proposal have been on Labour’s manifesto ever since, albeit with significant changes to Kelly’s draft. But the package now being steered by Wood remains targeted at the poorest workers.

And there are a lot of them. A 2018 Government working group set up to look at the design of a fair pay system (chaired, ironically, by Jim Bolger) found that nearly half a million workers were on less than $20 an hour. A disproportionate number were Māori, Pasifika, women and part-timers.

A 2019 study by Auckland University of Technology academics found that 10 per cent of children in poverty were in working households.

The Ministry of Business, Innovation and Employment (MBIE) has estimated that 255,700 workers would benefit if just eight FPAs were achieved for the likes of checkout operators, cleaners, food-preparation and hospitality workers. Assuming 10 per cent pay rises, up to $600m in extra wages would be injected into their pay packets (based on 2018 economic data).

This, however, has not been welcomed by the business sector. Its lobbyists, in particular, almost universally hate the idea of any form of centralised pay bargaining.

Their short-hand position is that the Government has come up with FPAs to solve a problem that doesn’t exist. According to the New Zealand Initiative – the modern iteration of the Business Roundtable, a group of company bosses who played a decisive role in shaping the ECA – both workers and employers are doing rather well in the current system. The group’s chairman, Roger Partridge, a former partner in law firm Bell Gully, says wages have risen, inequality has reduced, unemployment has stayed low and labour-force participation has remained high for years. These good things have occurred since the ECA, he argues.

“The country’s track record since the early 1990s suggests it would be foolhardy to throw out a system that has been working so well for workers,” Partridge wrote in a newspaper column last year. There’s no case for a “return to a compulsory system of industrial awards”, as he describes FPAs.

His group says Wood’s reform will deprive employers of “flexibility” and increase consumer prices. And it claims that as FPAs push up wages, employers will be forced to lay off workers.

The New Zealand Initiative rejects every shred of economic analysis behind the policy, including that workers’ share of the economic pie has shrunk (“a myth”), that there is a “race to the bottom” (“also a myth”), and that wages have failed to keep up even with New Zealand’s slack productivity growth.

Voluntary codes

BusinessNZ, whose boss Kirk Hope was a member of the 2018 working group, has also declared war on FPAs. Late last year, it announced it would not act as a bargaining agent representing employers in FPA negotiations, and would refuse funding put up by the government to help employer representatives and unions carry out their roles under the system. It is also taking a case to the International Labour Organisation (ILO), arguing the FPA regime will breach international law.

This move is rich in historical irony: the Council of Trade Unions went to the ILO in the early 1990s with a complaint against the ECA. When the ILO concluded in 1994 that the legislation violated key principles by failing to promote collective bargaining, the government and employer groups simply interpreted the long-winded report to suit themselves, and nothing changed.

But BusinessNZ’s Paul Mackay says this time is different, and more serious. He says the Government knows the compulsory FPA regime will breach the ILO conventions relating to voluntary negotiation and freedom of association, but is going ahead with it anyway. He hopes his organisation’s case will be selected as one of just two dozen heard this year by the ILO’s highest arbiters of workplace malfeasance, to be argued alongside the stories of child labour, modern slavery and murder of trade unionists that routinely come before the global body from regions such as South America, Asia and the Middle East.

Wood is unperturbed by the ILO complaint, which he thinks is without merit. “Sector-based bargaining is a common and accepted process around the world. New Zealand is one of the only countries that doesn’t have a proper system for sector-based bargaining. It’s also established in ILO jurisprudence for there to be arbitration systems in labour markets.”

Mackay insists FPAs “will not be good for anyone”. And in any event, he says, the tight labour market, New Zealand’s relatively high minimum wage ($21.20 from April 1), modern leave entitlements and equal-pay legislation mean that “all those basic things that people fought for for 100 years are pretty much there now”.

Surely Manaia, who works night and day for a flat $21.25 an hour, with nothing to compensate her for the cost to her health or the burden of exhaustion, might beg to differ?

“We have to acknowledge the imperfection of the system,” Mackay tells the Listener. “A pure market system is no better than a totally regulated one. We have never found a happy medium.”

Confronted with Wood’s sweeping reform, he concedes there is “market failure” for some workers. His group now proposes a system of “voluntary codes”. In industries with “clearly demonstrated undesirable labour outcomes” – such as the security industry or forestry – a code would set out an “agreed view of a reasonable approach to terms and conditions of employment”. Employers could sign up to it, which would “generate labour market pressure” on those who don’t. This would “dampen, if not disincentivise, the ‘race to the bottom'”.

Council of Trade Unions president Richard Wagstaff says what Mackay is describing is a Meca. These have been available for 30 years, he notes, but employers have consistently resisted them.

The idea of fixing market failure through voluntary agreements is “a bit like inventing a bucket and then putting a hole in it”, says Wagstaff. The whole point of FPAs, he says, is that everyone has to meet the minimum standards – otherwise nothing will be achieved.

Victoria and Manaia would certainly like something to be achieved. They don’t expect the earth, they say – just a fair go.

“I want anyone who walks into a job to know exactly what they are entitled to. Too many people don’t,” says Victoria. “At least with an FPA, if they walk into a Four Square, this is the rate they are on, this is their starting rate, and they will understand what their breaks are.”

And yes, she would like penal rates to compensate her for the extra sacrifices she makes to work all night and at weekends. “We don’t get to socialise. We miss out on family time, birthdays. Why can’t we have an incentive for working those times?”

• Victoria and Manaia are pseudonyms to protect their identities. Both said they would likely be sacked or harassed if they were quoted by the media.

Source: Read Full Article