Pay equity was becoming unrealistic, both in cost and credibility

Thursday, 15 May 2025

The government is announcing changes around pay equity.

Catherine Beard is the director of advocacy at BusinessNZ.

OPINION: BusinessNZ has been a strong voice for pay equity and supports a robust framework that ensures it. That’s why we supported the introduction of a method to achieve this in 2017 alongside the unions and the government.

Had the 2020 legislative changes not dramatically expanded the process and introduced cross-industry and sometimes wider vocational comparisons of completely different roles, the scheme would have continued enjoying this tripartite support.

The moves the Government has made to reign in pay equity had to be done because it was becoming unchecked and unimplementable, both in terms of cost (not just for the public sector, but also impacting on the private sector) and in terms of credibility when it came to comparator jobs.

Job comparisons and pay rates within industries and organisations are helpful, but some comparators have reached beyond common sense. We have seen clerical workers compared to civil engineers, librarians compared to air traffic controllers and have recently heard a union is trying to compare early childhood workers to lawyers.

Not only has the process boosted wages across large numbers of state sector employees, particularly in health and education, but in negotiating those relatively large wage increases, agencies like Health NZ have not factored in the need to increase the budget for contracted health services with the private providers.

So, we have private sector rehabilitation providers (physios, etc.) and medical technicians contracted to supply services to government, but unable to afford the big lift in wages negotiated by Health NZ for its in-house physios and medical technicians.The end result has been staff strikes in the laboratories and staff leaving the private sector health workforce because their employers can’t afford to match wages paid by the state. This is already affecting ACC contracts for rehabilitation and blood testing services throughout New Zealand.

Allied health workers strike in 2022. Pay equity agreements by Health NZ for such workers have contributed to pay pressures in the private sector, writes Catherine Beard.

It has put community owned and operated health providers (hospitals, GPs, physios etc), particularly in rural New Zealand, into budget deficits, because Health NZ didn’t budget for an increase in wages for suppliers of their services. The community health trusts in the South Island are under a lot of stress because of this.

The changes the Government has made will take the scheme back to what was agreed between the CTU and BusinessNZ in 2017, before the Ardern government made changes that opened the floodgates to claims and allowed for increasingly bizarre comparators for wages.

BusinessNZ agrees that women should not be paid less than men when they are performing similar tasks that require similar skills and abilities, just because they are in a female dominated sector.

There is definitely a need for pay equity to be considered, but it must be based on facts and data, and there are plenty of private providers that scope job responsibility and skill levels over a wide range of jobs, such as the international Hay/Korn Ferry or Strategic Pay methodologies.

The systems used in pay-equity settlements to date (eg MBIE’s Equitable Job Evaluation system) are home-grown and lack the scale of these databases. Unlike the international systems which use anonymised data from millions of jobs, they are reliant on the chosen comparator being willing to share job and pay data, something they have been reluctant to do because of perceived risk of disclosure.

This has resulted in the same small number of comparators being used over time, often without being updated as the larger pay surveys would do. Statistically, this is unsafe, leading to risks of overvaluation of jobs.

This has led to the methodology the unions have used becoming subjective and opaque, and I am sure the “reasonable person” would see the obvious differences in the skills, training, risk and responsibility between very disparate jobs.

There is also a productivity problem with the way it was working. Why would someone invest a whole lot of time, effort and student debt to become a civil engineer if they could earn the same by being a clerical/administrative worker.

Do we want to incentivise women to be clerical workers, or do we want to incentivise them to become civil engineers? Which role will be a better career option for women, particularly when you consider AI will remove a lot of clerical jobs from the economy? Which job will add the most productivity to the New Zealand economy and help us become a First World country again?

What can we afford and who is going to pay are also questions that need to be considered, which is why our comparator occupations need to be rational rather than aspirational?

There is no magic money tree. We either pay more in taxes, or more in user charges.

For a trade union perspective on the pay equity debate, see this article by the CTU’s Melissa Ansell-Bridges.