The introduction of Fair Pay Agreements, also known as industry awards, in which entire industries are required to negotiate minimum pay and conditions, appears to be finally groaning its way into Labour’s legislative agenda. Given it is approximately three years since the Fair Pay Working Group, chaired by former Prime Minister Jim Bolger, recommended a return to industry awards, one must wonder whether it was Winston Peters or Covid that has stopped more progress from being made. One would be quite justified in wondering if it is the incompetence of the Labour Government.
Unsurprisingly I am completely opposed to the introduction of these new archaic regulations, but I have also moved to Australia since last looking at the proposal. In New Zealand, the right argues productivity growth is the answer to sustainable wage growth, while the left argues for increasing minimum entitlements for workers.
Labour productivity growth in New Zealand has averaged 1.3% per year from 1996-2020, while Australia has averaged 2%. New Zealand reformed employment laws in 1991, abolishing most penalty payments and eliminating compulsory unionism. Australia’s unions continue to be very powerful – some would argue, corrupt – and employment agreements are complex, with long lists of conditions and entitlements. While New Zealand is consistently within the top five nations for economic freedom in the world, I’ve only really begun to appreciate the difference since navigating the Australian bureaucracy for public services and licences. Despite a bloated, deficit-spending state, Australia still far outperforms New Zealand economically. This resource-rich nation excels despite its government, not due to it.
In my 12 months’ working in Australia, I have worked for two different retail companies: a supermarket and a general merchandise brand. I’m going to call the former Foodmart and the latter GMStore. Both companies are covered by the General Retail Industry Award [MA000004]. Some of the entitlements are quite mind-boggling, even to someone on a salary (like myself) who doesn’t enjoy any penalty pay entitlements. However, for all staff, if nine hours elapse between your start and finish time, you are required to take a one-hour unpaid break and two fifteen-minute paid breaks. If you’re a waged part-time or full-time employee classified as level one (there are eight levels and I don’t understand them all):
- Base hourly rate (A$) 22.33
- Each hour worked after 6 pm Monday to Friday $27.91
- Each hour worked Saturday $27.91
- Each hour worked Sunday $33.50
- Each hour worked on a public holiday $50.24
Overtime is any hours worked in excess of nine hours in one day, 20 starts in one four-week period for a part-time employee or 19 starts in a four-week period for a full-time employee, more than 152 hours in four weeks for a part-time employee or 144 hours in four weeks for a full-time employee (confusingly, under this award system, full-time employees get one paid day off every four weeks). Returning to our earlier example of the level one retail employee:
- Base hourly rate $22.23
- Each hour in excess of the limits above, to a maximum of three overtime hours on Monday to Saturday $33.50
- Each hour above the first three hours of overtime on Monday to Saturday $44.66
- Each hour of overtime on Sunday $44.66
- Each hour of overtime on a Public holiday $55.83
To the outsider, this makes Australia look like the land of gold and oil. However, these complex agreements (this particular agreement has 29 pages dedicated to pay rates alone) have resulted in two perverse effects. Firstly, the complexity of the agreements results in individual businesses wasting hundreds of thousands of dollars a year each on ‘administrative overtime’. That is overtime that is unnecessarily paid to staff as a result of their rosters being completely compliant with the requirements of the award agreement. Secondly, companies under the award agreement minimise the amount of intentional overtime being paid to staff through running their businesses in a manner that looked extremely odd to me when I started working for “Foodmart” for the first time.
- New Zealand supermarkets run their specials from Monday to Sunday. Foodmart’s specials run from Wednesday to Tuesday so they aren’t paying Sunday penalty rates to change displays over.
- New Zealand supermarkets do most of their grocery and chilled/frozen filling at night time when the store is closed. Foodmart, depending on the arrival time of their deliveries, do as much filling as possible from 7am (when the overnight penalty rate ceases). No filling would ever occur beyond 10pm (when the overnight penalty rate commences).
- Large New Zealand supermarkets employ full-time wage clerks, a price integrity team and storemen. Those positions don’t exist in many Australian retail brands and GMStore has eliminated them all.
- Foodmart doesn’t hire cleaning contractors but instead maintains their own regional cleaning teams who clean the store throughout the trading day and return trollies.
- While Foodmart has recently made all butchery teams redundant, replacing them with part-time staff due to virtually all products arriving in store ready for sale, German supermarket giant ALDI goes even further. The only management is the store manager, assistant store manager and a duty manager. There are no department managers and from 7am everyone, including the area manager if based in the store that day, will work the entire delivery for every department in the store by 10am that morning.
Ironically, aside from the administrative errors which result in unintentionally paying overtime to some staff, Australia’s generous employment agreements have resulted in very few workers actually being offered overtime hours and retailers finding multiple opportunities for efficiency. Is it actually possible that the industry award system has increased labour productivity in Australia and could it possibly do the same in New Zealand?
I have previously covered my initial objections to Labour’s Fair Pay Agreements proposals in 2019 and, on the surface, there isn’t much difference between Labour’s plans then and now. However, unlike in 2019, the 244 clause Fair Pay Agreements Bill is now available for inspection. Unsurprisingly, it is a beast of legislation so I will cover its details in the near future.
Given that it allows a mere 1,000 people in the supermarket industry, which employs over 50,000 New Zealanders, to dictate that a collective agreement must cover everyone and that Business New Zealand has refused to sully itself by acting as the government’s employer advocate, this law will be economically devastating if Labour manages to pass it at all.