Strike action may spur on widespread wage growth, BNZ's Toplis says

Updated

Protest by First Union outside parliament of "missing health workers" and doctor shortages in May, 2017. Photo by Lynn Grieveson

Looming strike action from public sector employees could start driving up wages across the board as private sector employers take heed of the industrial action in what's becoming a tighter labour market, says Bank of New Zealand head of research Stephen Toplis.

Agitating workers are becoming a more common sight with planned employment law changes reinstating some collective bargaining rights. The latest talks between the district health boards and nurses ended without agreement, primary school teachers are currently voting on whether to accept a pay offer or take action, and more than 4,000 civil servants at the Ministry of Business, Innovation and Employment and Inland Revenue have announced work stoppages next month

Opposition leader Simon Bridges said the Labour-led coalition government has seen more strike action in the past nine months than National did in nine years, something acting Prime Minister Winston Peters called "nonsense".

"We know why people are asking us for more. It’s because they know we listen and we are prepared to help them," Peters told Radio New Zealand today.

Government figures show the weekly pay for a public sector full-time equivalent employee has increased at an average annual rate of 2.7 percent over the past five years to $1,352.83 while private sector pay has advanced an annual 3.4 percent to $944.75. Both have increased at a faster pace than consumer prices, which were up at an annual 1.1 percent pace through that period, but were well behind the 10.7 percent annual pace of house price inflation.

Tepid wage inflation is among the factors likely to lead the Reserve Bank to keep the official cash rate at a record low 1.75 percent on Thursday but if recent negotiations with different sectors lead to higher pay it may eventually contribute to higher rates.

BNZ's Toplis said the strike action coupled with an extremely tight labour market both here and abroad, the increase in minimum wage and some significant wage settlements that have already been hammered out, could well be the catalyst that stokes broad-based wage gains.

"If you put all that together, it has to have flow-on effects to the rest of the labour market," he said. Toplis said anecdotally, BNZ is also seeing wage increases in the private sector - partly to avoid things like strike action.

Overall, "there is some evidence of creeping inflation," he said.

Late last year, a $2 billion pay equity settlement which took effect on July 1 contributed to a 0.6 percent increase in wage inflation in the third quarter and an annual increase of 1.9 percent, the highest in five years. This month, the government announced the extension of the Care and Support Workers Pay Equity Settlement to New Zealand’s estimated 5,000 mental health and addiction support workers.

Meanwhile, some 29,000 nurses will see their pay increase once a deal is reached. The latest mediation between the DHB and New Zealand Nurses' Organisation failed to reach a deal late Monday and both parties are seeking the intervention of the Employment Relations Authority.

“While this is a setback, we will continue to do everything we can to settle this agreement and avoid strikes,” the DHB said in a statement. The ERA can make a recommendation for settlement, it said. NZNO meanwhile also said the facilitation was a more “formal process” in an “endeavour to resolve the impasse in bargaining”.

Nurses are preparing for strike action on July 5 and 12.

The DHBs said they are continuing to implement contingency plans to ensure emergency and essential services are available if the strike goes ahead.

Primary teachers and principals, meanwhile, have been holding nationwide meetings this month with NZEI Te Riu Roa education union members voting on whether to accept the Ministry of Education's pay offer or take industrial action.

If they reject the offer, teachers and principals will then vote on whether to hold nationwide half-day work stoppages from 1:30pm-4:30pm on Aug. 15. This would effectively result in half-day school closures. During the stoppages, members would attend union meetings to consider any further developments or offers.

“There are significant issues facing education, including a growing teacher shortage, stress and workload problems, and under-resourcing. Children with additional learning needs are not getting their needs met. Principals and teachers have these issues weighing heavily on their minds as they head to their union meetings,” said lead negotiator for the primary principals' collective agreement Louise Green.

In government, more than 4,000 Public Service Association members at MBIE and IRD announced plans to take part in two two-hour stoppages on July 9 and July 23.

"Spending millions on contractors while denying our members a cost of living pay increase is poor practice, and it’s not in the spirit of the new government’s expectations for the public sector,” said PSA national secretary Glenn Barclay.

It will be the first strike action at IRD in 22 years.