Labour’s Attack on Workers

On May 5, New Zealand’s public service workers received a nasty shock. In a joint press conference, public service minister Chris Hipkins and finance minister Grant Robertson announced the 2021 Public Service Pay Guidance (PSPG). The aim of the PSPG was to outline the government’s plans for pay negotiations in the public sector. A key part of this new rubric was a pay freeze for all workers earning over $60,000.

Effectively, this amounts to a pay freeze for 75 percent of New Zealand’s government employees. According to the PSPG, pay increases can only be granted in exceptional circumstances — for example, to address gender or ethnic pay gaps, or in sectors where it is particularly hard to recruit workers.

The nation’s biggest unions, the Public Sector Association, the Nurses Organisation, and the teachers’ unions, all condemned the announcement. In response to the backlash, the Ardern government issued a “clarification” a few days later. It now declared that the PSPG does not constitute a fixed position. Workers represented by trade unions would have their demands for wage increases resolved at the bargaining table rather than through the government’s unilateral decisions.

Despite this concession, it’s clear the Labour government intends to play hardball. Nurses employed by the public health system have already stepped up to the challenge, voting to strike on June 9.

A Glimmer of Hope

Just as unions condemned the Ardern government’s pay freeze, the minister for workplace relations announced the long-awaited introduction of Fair Pay Agreements (FPAs). The present industrial relations system is built around enterprise bargaining, in which unions negotiate agreements between individual employers and specified groups of workers.

Enterprise bargaining makes it possible to build union power and win improvements in individual workplaces. But it has significant weaknesses. Having to fight for different union contracts in many smaller worksites is a big drain on union resources.

The model also gives hostile employers an incentive to break unions and drive down wages. When wages and conditions are set at the level of individual businesses, ruthless bosses can gain an advantage against their more conciliatory competitors by overpowering unions. If aggressive new employers enter a sector, they can undercut union agreements that are the product of years or even decades of campaigning.

In addition, enterprise bargaining gives employers an incentive to sidestep union agreements by contracting out work to nonunion companies. This can undermine union agreements and rapidly reduce pay and conditions to the legal minimum. In industries such as security, cleaning, and bus driving, where unions have fought for years just to defend conditions, this has been the norm.

Because of the enterprise bargaining structure of New Zealand’s industrial relations, unions don’t currently have the ability to set legally binding industry-wide standards. FPAs will change this — and by doing so, they may open the door to the biggest advance in union power since the 1930s.

The new system of FPAs will give unions the power to force employers in an industry to negotiate industry-wide conditions. Under the proposal, unions will potentially be able to win industry-wide rates of pay, leave, health, safety, and so on. For an agreement to become binding, both sides — workers and businesses — must agree.

This means that an industry-wide agreement that applies, for example, to bus drivers working for all New Zealand companies must have support from more than 50 percent of bus drivers and bus companies. If an agreement cannot be reached, then employment courts will have the power to issue a ruling that sets legally enforceable minimum wages and conditions.

This has the potential to correct the power imbalance between workers and employers. Workers will now have a powerful tool to discipline rogue employers who want to outcompete their rivals by undercutting unions. The new FPAs could help unions to finally put an end to the race to the bottom on wages and conditions.

Having said that, FPAs are by no means perfect. At present, New Zealand workers can only take protected strike action for health and safety reasons or during contract negotiations with an individual employer. FPAs don’t extend the right to strike.

That means there will be no legal protection for industry-wide strikes or contract enforcement strikes, let alone for solidarity or political strikes. And while FPAs make industry-wide campaigns more likely, they may also lend themselves to a very bureaucratic and centralized form of organizing.

Crucially, FPAs do not allow unions to circumvent the need to recruit and train new members and workplace representatives. Nevertheless, FPAs do create huge opportunities — especially in the private sector, where the challenges faced by unions are most pronounced.

Turning the Tide

Different unions have reacted differently to these two announcements. Private-sector unions see the new FPAs as a potential lifeline, while public-sector unions face the dilemma of fighting for wage increases during a time of austerity.

Yet the way forward for workers in the public and private sector is essentially the same. To defeat the pay freeze or make the most out of FPAs, unions must urgently recruit members and build up workplace strength in preparation for ambitious industrial campaigning.

It’s clear that public-sector workers can’t simply rely on the government to deliver. Ardern’s Labour government came into power in 2017, replacing the conservative National Party. But the change did not lead to better conditions for government employees.

In 2018, nurses, teachers, and public servants all struck over poor pay and conditions. This strike wave won significant pay increases and other improvements that were previously off the table. The lesson from this battle is simple: if you strike, you can win.

While private-sector unions stand to benefit most from the introduction of FPAs, they will need to turn up the heat to make the most of the opportunity. At a minimum, FPAs can stop bosses driving wages down even further. However, it would be naïve to expect FPA negotiations to solve all the problems faced by workers in New Zealand.

For a FPA to become binding, the majority of relevant companies must agree to it. But few employers will concede significant pay increases purely because union officials make a convincing case. Workers can only win significant gains when their unions are strong and in a position to threaten industrial action. This will require serious preparation and work — an undertaking made more difficult by the fact that FPAs make no allowance for strike action.

Where unions and employers can’t agree, industrial courts will have the power to set FPAs. This points to another serious stumbling block. How can workers have confidence in the employment court system when the government in charge of appointing its judges is also seeking a pay freeze for its employees?

Real improvements come with union strength. As a first step, unions can strengthen their position by improving conditions within existing enterprise agreements. Striking and winning a better deal site by site will, in turn, give unions leverage. They can then use FPAs to extend these wins across corners of the industry that have yet to be unionized.

In this way, workers could reverse trends of the last few decades. Instead of having to endure government pay freezes and ruthless employers chiseling away at their living standards, workers in New Zealand could go on the offensive, pushing for higher wages and better conditions for all.