New Zealand workers are flexing their muscle under New Zealand Prime Minister Jacinda Ardern’s center-left government, demanding more pay after a decade of wage restraint.
About 30,000 nurses went on strike last month for the first time in 29 years, forcing hospitals to cancel nonurgent surgery. Tax department workers are also striking and elementary-school teachers have voted to walk out of classrooms later this month in pursuit of a 16 percent pay increase.
While ministers in Ardern’s Labour Party-led coalition do not support the industrial action, they have said that nine years of underinvestment by the previous center-right government has led to a deterioration in working conditions and pay in parts of the public sector.
Private-sector businesses and economists expect the new worker-friendly era will lead to faster wage inflation and increasing costs.
“I understand the frustration of working people in New Zealand,” New Zealand Minister of Finance Grant Robertson said in an interview. “There has been a change of government. That change is going to be looked at by people in the labor market to say: ‘What does that mean for us?’”
Despite nine straight years of economic expansion, wages in many industries have remained subdued. Average hourly earnings have risen 6.5 percent over the past three years while the economy has grown 11 percent.
Ardern has introduced reforms that could give unions more bargaining power across industries and she has also begun to aggressively lift the minimum wage.
New Zealand pay packets have also been suppressed by record immigration that has boosted labor supply.
That might change as more workers depart for bigger economies such as Australia, where average annual wages are 23 percent higher, according to the Organisation for Economic Co-operation and Development.
Data released yesterday showed that the jobless rate was at 4.5 percent in the second quarter, near a nine-year low, and that pay rates rose at close to the fastest pace in a decade.
The New Zealand Treasury projected that annual wage increases would average more than 3 percent over the next four years, after slowing to 1.6 percent last year.
Asked if there is anything wrong with that, Robertson said: “Nothing.”
Still, the Reserve Bank of New Zealand (RBNZ) is likely to remain vigilant, because accelerating wage inflation might be a sign the economy is becoming overheated, Bank of New Zealand senior economist Craig Ebert said in Wellington.
Higher costs might hit company profits and force them to stop hiring, or they might try to protect margins by pushing up prices, he said.
“Things seem to be getting stretched in the real economy, inflation seems to be responding and the wages aspect of that will be reinforced by a lot of government policy,” Ebert said. “That’s the point at which the RBNZ should be thinking about responding” with higher interest rates.
Nurses have campaigned against a lack of spending on health that they have said has increased workloads and put patient safety at risk.
They on July 12 went on strike for 24 hours after rejecting a NZ$500 million (US$339.6 million) offer from the government that would have raised wages by 12.5 percent over time.
Elementary-school teachers yesterday said they would strike on Aug. 15 for the first time in 24 years.
The government has said it does not have a limitless pot of money for state workers as it juggles other costs while pledging to maintain budget surpluses and keep debt levels contained.
Private-sector bosses are watching with unease, concerned that pay demands could drive up costs and squeeze profits throughout the economy.
The government’s plan to raise the minimum wage more than one-fifth to NZ$20 per hour by 2021 and proposed industry-wide fair pay agreements that signal a move to collective bargaining have added to the disquiet.
The businesses should understand the need to reward workers, Robertson said, adding that while many employees have received good pay increases, others have not.
“Workers deserve a fair share of prosperity,” he said. “That’s fundamental to this government.”
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