Pressure on Wage Settlements

28 September 2017

Even though the CPI is staying low at 1.7% for the year to June 2017 and projected to remain under that level until 2019, there is increasing pressure in wage negotiations.

The combination of the recent pay equity settlement for aged care workers and the living wage campaign is driving wages well beyond the level of inflation. While some settlements are in the 2.0-2.5% range in many cases 3.0% and more is required for settlement and that is likely to increase once pay equity bargaining gets traction.

The Care and Support Workers (Pay Equity) settlement was a deal between the Government, ACC , District Health Boards and Employee Representatives to avoid further litigation in the Supreme Court following the Terranova Homes and Care Limited Court of Appeal decision. The settlement covers 55,000 workers in aged and disability residential care and home and community support services around New Zealand. In essence the argument was because support workers are predominantly women, a support worker is paid less than what would be paid to a man performing work involving the same or substantially similar degrees of skill, effort and responsibility in similar working conditions. The net result is that on 1 July 2017, employees received pay increases of between 15% and 50% depending on their qualifications and or experience.  Those on the minimum wage of $15.75 per hour moved to at least $19 per hour – a 21% pay rise. The new pay scale ranges from $19.00 (entry) to $23.50 (Level 4) this year increasing to $21.50 and $27.00 respectively by 1 July 2021. 

The Living Wage concept is the hourly wage a worker needs to cover the basic expenses of workers and their families such as food, transportation, housing and childcare.  It is calculated independently each year by the New Zealand Family Centre Social Policy Unit and currently the figure is $20.20 compared with the minimum wage of $15.75. So if you’re employing people on the minimum wage you face a 28% increase to meet the living wage.

In either case it’s all very well for central and local government to promise these pay increases because the costs just get passed onto tax payers or ratepayers who can do little about it.  But if you’re in private business you know that no-one is going to come along and save you if your labour costs get out of control.

We all want to see people being paid well but how to achieve that is the tough question for which there don’t seem to be many answers at the moment. That leads into a debate about whether there should be a push or pull approach, but to my mind you have to make the revenue before you can increase pay.  Platitudes about skills training and high wage economy count for nothing.