5 Apr 2018

Workers fail to get their fair share of economic pie

10:48 am on 5 April 2018

Workers are failing to get their fair share of the economic pie, with a study showing rising productivity has not been fully reflected in pay packets.

Workers in office.

Photo: 123rf

The Productivity Commission report found the labour share of total income slipped between 1978 and 2016, from 65 percent to 56 percent.

"Wage growth hasn't kept up with productivity growth in a one-for-one sort of way," Productivity Commission director of economics and research Paul Conway said.

"Even though productivity growth is still a key driver of wage growth in New Zealand."

Mr Conway said new technology, globalisation and employment changes had allowed employers to grab more of the income gains, though the fall in New Zealand was not as sharp as in other countries.

The Council of Trade Unions (CTU) laid the blame for the fall in workers' income share squarely on labour laws that weaken employees' bargaining power.

If wage and salary earners received the same share of the income generated in 2017 as they did in 1981, CTU economist Bill Rosenberg said workers would on average have been $11,500 better off.

"That is quite a substantial fall in the share of income that is going into the pockets of workers and their families."

New Zealand wage and salary earners have one of the lowest shares of income in the OECD, and workers deserve better protection to ensure they get their fair share, Dr Rosenberg said.

Employers disagree, arguing greater worker rights was not the answer.

"Temporarily, you might argue, it would help nominal headline wage growth, but it doesn't fix the underlying problem of competitiveness," Employers and Manufacturers Association chief executive Kim Campbell said.

Mr Campbell said education was the key, as firms needed people with the right skills to use the equipment and turn it into highly productive work.

Mr Conway said the emphasis should be on adapting to the changes brought by new technologies, rather than resisting them.

"That can bring a big uplift in our well-being, it can make our lives a bit easier."

"But on the other hand there are issues about who bears the brunt of that adjustment."

"So we want to make sure we take the good of that and mitigate against the bad, or ensure that the benefits from that are widely spread," Mr Conway said.

He said the good news was that New Zealand had not been as badly affected as other countries by the rapid development of new technologies, and that politicians and policymakers did have a little time to ensure most New Zealanders enjoyed a better standard of living over time.