• Putting a Proper Value on Work

    The success enjoyed by the trade unions recently in establishing that, across the economy as a whole, we can put a minimum value on particular categories of work has been of immediate benefit to thousands of low-paid workers, and particularly to carers, many of whose wages have been held down because of their gender.

    But that success has also brought out of the woodwork those who are pathologically hostile to workers’ interests.  The ubiquitous Mike Hosking in the Herald, for example, was quick to decry the unions’ efforts to extend that principle to other categories of work.

    The trade unions are hopelessly out of date, he argued.  There is no alternative but to have wage rates set by individual employers since only they can accurately assess the market forces that bear on them and that determine what they can afford to pay.

    But every business has to take account all the time of a range of costs for which there is a going rate.  Rent or other accommodation charges, taxes, rates and other levies, interest paid on borrowings, raw materials, power and transport costs – the list is almost endless.  In each such instance, the business simply has to pay (perhaps after some negotiation at the margin) the rate that is set.  And businesses simply get on with it, without any objection in principle being raised by the Mike Hoskings of this world.

    So why should it be different when it comes to just one particular, and arguably the most important, category of costs?  Today’s economy does not grind to a halt because individual employers cannot themselves fix what they are prepared to pay for power or fuel, or any other of the going rates with which they are faced.  Why should it be any different in respect of a going rate for certain categories of work?

    Hosking says that each individual employer must be free to drive down the wages they offer to the level that suits them.  He seems to see the cost of labour as being different from other costs because the employer’s power in a one-on-one negotiation over wage rates means that each individual employer can have a crack at getting a competitive advantage by offering a wage rate that is lower than that paid by his competitors.

    There must also be the suspicion that, as Hosking imagines it, employers see the employment negotiation as essentially a contest between themselves and their workers to decide who gets the lion’s share of any revenue the enterprise might earn.

    It is precisely that mentality that underpins the low-wage structure of our economy.  It is no accident that, in New Zealand as elsewhere, the share of profits in the economy has grown much faster over recent decades than the share of wages.

    There is no recognition of the price we all pay as a result of this disparity or of the great benefits – economic and social – that would accrue if wage settlements were not always the subject of often acrimonious individual negotiations, but were based on a generally acknowledged economy-wide value for particular types of work.  If that meant a higher overall wage level, that would boost purchasing power in the whole economy, to the great benefit, not least of businesses, as well as other parts of the economy. We would all be better off if the low-paid do better.

    Even more importantly than the economic arguments, there is no understanding of the fact that wages are quite different from other costs, in that they have a huge social significance by directly impacting on the livelihood and living standards of many thousands of New Zealand families.

    Low wages, along with unemployment, are the principal cause of poverty, and especially child poverty, in our country.  That poverty creates miserable conditions, stress and blighted lives for the hundreds of thousands affected, but it also means a whole range of social ills that cost society time, effort and money to deal with.

    A more orderly and agreed process for setting wage rates, based on a full appreciation of the value of labour, would be a step in the right direction, both for the economy and for society.  The unions should be supported in their efforts to achieve it.

    Bryan Gould

    27 April 2017

     

     

5 Comments

  1. Patricia says: May 1, 2017 at 11:51 pmReply

    Didn’t the old Arbitration Court do that? If I remember rightly we all got a cost of living increase which was based on the inflation index. The increase that the unions got for their workers was in addition to that. How can the Mke Hoskings of this world argue otherwise is beyond me. The good life New Zealand once had was based on fairness for all, not the dog eat dog attitude of today. I would argue that virtually all the ills society suffers today is based solely on poverty. When you think that once a family could live on one income and now two is not sufficient and we have to have working for families to assist families then something is really really wrong in the state of Denmark.

  2. Bryan Gould says: May 2, 2017 at 8:27 amReply

    Hear, hear Patricia. Bryan

  3. Nic the NZer says: May 2, 2017 at 8:33 amReply

    This simply highlights how ignorant Mike Hosking is about the market economics policies he supports. In theory businesses are supposedly price takers (and volume setters) and should be unable to dictate wage rates regardless of their costs. If your saying businesses are having wage setting power (if or not this is based on what they can afford) then your jobs market is definitely not in a Pareto optimal state (one where the wage/work trade off is a good deal for both parties). The technical term for this is ‘market failure’.

  4. Draco T Bastard says: May 11, 2017 at 4:37 amReply

    “There is no alternative but to have wage rates set by individual employers since only they can accurately assess the market forces that bear on them and that determine what they can afford to pay.”

    Which is, of course, a massive misunderstanding of the market. There is only one price for a product or service and that is ‘the market price’. If an employer can’t afford an employee at that price then the only two options that they’re supposed to have is either don’t hire another person or innovate so that they get the increased productivity without having to increase employment.

    As I pointed out to Wayne Mapp here https://thestandard.org.nz/nrt-too-hard/#comment-1311865

  5. Bryan Gould says: May 11, 2017 at 5:03 amReply

    Agreed. Kind regards, Bryan