"30 per cent cheaper" - Govt admits defeat on NZ wage gap with Australia

Media release: National Distribution Union. Saturday April 9, 2011.

Rather than talking up New Zealand’s wage gap with Australia, Bill English should have a decent plan to close it, the National Distribution Union said today.

Finance Minister Bill English was quoted in a newspaper this morning as saying New Zealand’s competitive advantage with Australia included its wage differential, with our “30 per cent cheaper” workforce.

NDU General Secretary Robert Reid said this amounted to an admission of defeat on the goal of lifting New Zealand’s wages against Australia.

“These comments are perhaps not surprising, given the government has refused to face up the reality of why the Australian wage gap opened up in the first place,” Robert Reid said.

"As Treasury has acknowledged, the wage gap opened up in the 1990s when firms were offered the low road, including the deregulation of the labour market. Poor investment in plant and machinery was coupled with cut-price wages thanks to the Employment Contracts Act.”

"Our wage levels were roughly comparable to Australia in the 1980s, but then dropped to 60% of their level by 2002.”

"Australia retained wage fixing systems, and these produced better outcomes for workers, where there are clear industry standards on wages and conditions."

"That is the real story behind the Australian wage gap."

“But instead of acknowledging this, and having a decent plan to lift wages, this government is instead taking away work rights and putting barriers in the way of workers accessing unions to help them bargain collectively to lift their wages.”

“There is a path to an economy based on high workforce participation and high productivity, where firms base their competitive advantage in greater investment in capital, rather than relying on a low paid workforce.”

“But we have yet to see any evidence that this government is serious about finding that path,” Robert Reid said.



1 - Bill English’s comments this morning.

2 - Treasury Research.  See Capital Shallowness: A Problem for New Zealand?, a 2005 Treasury Working Paper.  Excerpt from the report's summary (page 32):
In New Zealand the price of labour relative to Australia was very comparable in the late 1980s. By 2002 it had fallen to about 60% of the level in Australia. With labour relatively cheaper in relation to capital than in Australia, it appears that New Zealand firms have opted for a lower level of capital intensity.


Newstalk ZB: Govt given up on closing gaps - Union

TVNZ Online: Government accused of giving up on wage gap

RadioLIVE: Bill English: NZ's low wages an 'advantage'