Passing the Fair Pay Agreements (FPA) Bill is the government’s top legislative priority and will help to boost economic productivity, says workplace relations minister, Michael Wood.

Wood fended off concerns raised by Parliament’s education and workforce committee on Wednesday, saying that he expected the bill to become law by October or November and there was funding for up to six FPA processes to run each year.

National MP Todd McClay asked Wood if there was any inconsistency between “… getting ready for six at a time and one or two, as the prime minister suggested before the last election?”

McClay was referring to a speech the PM made to business leaders in 2018, reassuring them there would be “no more than one or two” FPAs concluded during that term of government (the FPA bill was not introduced until March this year).

The PM also said the “vast bulk” of those in the room would be unaffected as FPAs would only be in sectors that have low pay and regular exploitation of vulnerable workers.

Wood told MPs he did not expect a large influx of FPAs at the beginning, and the last two years showed why FPAs were so important in stopping a “race to the bottom”.

‘Catastrophic’

He said the public transport operating model had been “catastrophic” in driving down bus drivers’ terms and conditions, contributing to a driver shortage.

Covid had also shown how much the country relied on low-paid workers such as supermarket checkout operators, security guards and cleaners: “So, I think the case is built for the good minimum standards for these workers.”

McClay said he had been told that the kiwifruit sector would be targeted for an FPA and asked if the $26 per hour pay rate of its largest employer, Seeka, was evidence of a race to the bottom?

Wood said FPAs would protect good employers who were trying to lift wages by stopping other players from coming in and getting a competitive advantage by undercutting them.

“By definition fair pay agreements are about establishing minimum standards that will particularly have the effect of pulling up terms and conditions from other players who are offering pay and conditions at the lower end.”

Sector-based approach

ACT MP Chris Baillie asked if all the improvements to working conditions over the previous 30 years, such as increases to leave entitlements and parental pay, were evidence of a race to the bottom?

Wood said those improvements had to be delivered by Labour governments through legislation while in other countries there has been more of a balance between statutory minimum entitlements and core entitlements that are negotiated.

“In Australia, for example, 70% of workers are covered by sector-based bargaining and many of those entitlements come through that process. It's actually a little bit more flexible from sector to sector.”

He said some of the most productive and innovative economies in the world have a higher level of sector-based bargaining and pointed to Australia’s productivity growth which had been 46% higher than New Zealand’s.

He said there was good evidence that encouraging more collaborative relationships between employers and employees at the sector level helps productivity to grow.

“It's about putting the focus on profitability, not through low wages, but through the things that drive productivity: innovation, R&D, plant and machinery, all that kind of thing.”

Contractors

Green MP Jan Logie said the lack of coverage for contractors had been raised by workers and unions as an urgent issue.

She pointed to a recent report from the Auckland University of Technology which found that around 20% of hospitality workers were not receiving their minimum legal entitlements and many were too scared to raise the issue with their employers.

Wood said the boundary line between contractors and employees was a “system-wide issue” and it didn’t make sense to try and deal with it through the FPA bill.

However, Business NZ and unions had provided him with joint recommendations on “a better and clearer and fairer test” to ensure that employees are not misclassified.

He said further consultation and legislation on contractors could be expected within the current term of government.

When asked if he would increase the number of labour inspectors, Wood said he was open to the idea but wanted to ensure the government was intervening at the top of the cliff. This would be by making sure employers had good information about employee rights and employees and unions are well equipped to be able to raise issues confidently where they need to be.

The Productivity Commission’s recent report on immigration called for a 400% increase in the number of labour inspectors, to bring NZ into line with international benchmarks.