Workers are winning pay increases at rates above inflation

Tuesday, 23 August 2022

Senior firefighter and union member Nick O’Brien speaks to The Timaru Herald about firefighters striking. (Video first published June 17, 2022)

Workers across multiple industries are taking advantage of a tight labour market to win pay increases that outstrip inflation, currently at 7.3%.

But unions say the settlements are long overdue, and will only bring wages back in line to previous levels.

In Auckland on Tuesday more than 100 manufacturing workers from Visy took strike action in support of a pay increase of at least 10%.

E tū organiser, Ines Mitgutsch, said the workers were working long hours and struggled to survive on current wages.

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A tight labour market has meant unions can push for pay increases above current rate of inflation, but unions say the wage growth is long overdue.

“The company needs to pay its workers fairly and come to the table with a decent offer,” Mitgutsch said.

The Visy workers are only latest to demand a pay increase above the rates of inflation.

ACM road crew settled a pay increase over 12%, Air Nelson workers settled for over 10%, Sealord and Assa Abloy settled for increases of over 9%, E tū records showed.

E tū assistant national secretary Annie Newman said the success rate was “way higher than pre-Covid” levels.

“Where workers have strength and a strong collective, we are seeing them in a much better bargaining position to get what they want, due to the widespread shortage of labour,” Newman said.

Workers were not trying to take advantage of desperate employers, but use their position to get long overdue gains in the workforce, she said.

“Many of these workers are working excessive hours of at least 60 to 70 hours a week. What they want more than the money, is the ability to spend more time with their family. It is not the cost of living, but the cost to live a decent life.”

Council of Trade Unions chief economist Craig Renney said the high pay increases reflected years of wages not keeping up with inflation.

“If your last pay rise was 2%, and inflation for that year was 5%, than you are 3% worse off. If in the next year inflation reaches 7%, then you will need a 10% pay increase just to get back to the level you started at,” Renney said.

It was disingenuous for economists to disapprove of workers receiving pay increases, when chief executives received huge annual salary bumps, he said.

“If workers can’t ask for a pay rise when the economy is bad because it might cause inflation, and they can’t ask for a pay rise when the economy is good because it damages profits, then when can they ask for a pay rise?”

Infometrics principal economist Brad Olsen said historic levels of labour competition meant workers were in pole position to demand more.

While many businesses had become used to wage increases in line with inflation, that became a lot harder to achieve with increases of 7.3% and even higher, he said.

But a dramatic increase of wages across multiple sectors could cause issues for the economy down the line, he said.

“Wages are sticky, when they go up they do not tend to come down.

“If we see economic activity soften, and higher wages met lower revenue, then the same wage packet may not support the same number of people,” Olsen said.

While some firms had made substantial profits in the last few years, many businesses had not, and would struggle to keep up with large wage increases, he said.