Treasury urged Government to delay creating Jim Bolger-led working group

Wednesday, 18 July 2018

Former Prime Minister Jim Bolger (left) is heading a working group on fair pay agreements. Treasury warned Workplace Relations Minister Iain Lees-Galloway that the lack of work by officials meant the working group was effectively being asked to design the controversial policy.

Treasury warned Workplace Relations Minister Iain Lees-Galloway that a working group on fair pay agreements was being asked to design policy, which if mishandled, could harm workers.

Fair pay agreements represent a step towards industry-wide collective bargaining, aiming to set minimum standards for pay and conditions across an industry or occupation.

But little detail is known about how the agreements would work or who might be covered. Employer groups have lobbied hard against the measures, potentially the most contentious part of the new Government's industrial relations reform.

On June 5, Lees-Galloway revealed that former National Party leader and Prime Minister Jim Bolger would head a working group on fair pay agreements.

A Cabinet paper released by the Ministry of Business, Innovation and Employment (MBIE) includes a stark warning that too much was being asked of the 10-member group.

Treasury said more work developing the policy needed to be done before the working group's formation, with the risk that the 'significant' policy shift could harm workers if mishandled.

'Fair Pay Agreements could make substantial structural changes to the labour market…misapplication of the policy could have large negative effects on productivity, worker terms and conditions, and employment.'

Treasury noted that the work which had been done at that point 'has not identified an occupation or industry in which the proposed system would address wage or productivity issues' and that the Bolger-led working group was being asked to answer 'foundational policy design questions' on the agreements.

'Given the significance of the proposal, we recommend extending the departmental policy development process to enable further analysis of the causes of the wage and productivity concerns identified in the paper, options to address those concerns, and the conditions for the success of industry-level bargaining.'

Lees-Galloway told the Cabinet economic development committee that the working group was an 'integral part' of developing the policy, which had to be 'workable' for both employers and employees.

In a statement, he acknowledged Treasury's concerns.

'However, I don't think that Government has a monopoly on good ideas,' Lees-Galloway said.

'It is important to me that any changes stand the test of time. This requires buy-in from businesses and workers. We get buy in through their input into the design of the system from the start. I think we will get a better proposal than one developed solely by policy analysts.'

The working group spans business and unions as well as an employment lawyer, an economist and an academic.

Lees-Galloway's hope that the labour law reform will be lasting comes amid a pushback by employer groups, including members of BusinessNZ, the chief executive of which sits on the Bolger-led working group.