Fair Pay Agreements and retail sector

Last Tuesday the CTU launched a report by economist DrGanesh Nana on the evidence as to the impacts of industry (or sector)collective bargaining. We commissioned the study to promote Fair Pay Agreementswhich the Government is currently considering. Fair Pay Agreements aim to forma floor of wages and conditions for an industry, and to advance industrytraining.

BERL found (as has the OECD and most countries in Europe),that this form of bargaining is good for employment, helps to close the gapbetween productivity growth and wage increases, reduces inequality, and hasother non-wage benefits such as “job security, working time regulation, qualityof working environment, and provision and access to training”.

The sectors where CTU unions want to achieve the first FairPay Agreements are supermarkets, security, and cleaning. This commentary looksat the Retail sector.

The minimum hourly pay for a 21 year old shop assistant withsix months’ experience in 1981, set under a form of industry collectivebargaining (Awards), would have been $4.71 an hour, worth $18.62 today. Pay foran entry level supermarket salesperson aged at least 21 would have been $4.13an hour in 1980, $18.89 in today’s terms. Both are well above what many retailworkers in similar roles would be receiving today: the minimum wage or a fewcents above it. It is above the current national average rate for entry levelsales across all parts of the retail sector, which is $18.22 according toRetail NZ.

One reason for poor increases in earnings was the EmploymentContracts Act 1991 which abolished Awards and industry collective bargaining,allowing employers to take advantage of their increased power to make big cutsin retail wages, allowances, pay progression, overtime pay, and conditions.Research by former CTU Economist Peter Conway showed income losses forsupermarket workers as big as 44 percent over 8 years.

In real terms, the average Retail hourly wage peaked in 1982and did not get back to that level until 2015: 33 years later. It fell sharplyin a 1982-1984 wage freeze and kept falling until 1995. Even with a relativelysteep rise from 2014, it is still only 9.8 percent above its 1982 level.

The share of income generated in the Retail sector that itsemployees receive has fallen steeply since 2009, amid rising profits. There hasbeen strong labour productivity growth which Retail wage earners have not fullyshared in. Productivity grew by 104 percent (more than doubled) between 1978and 2018, but the buying power of wages rose only 20 percent. Even from anemployers’ viewpoint of wages adjusted in terms of their firms’ revenue,between 1978 and 2017 average wages rose only 41 percent, compared to a 97percent rise in labour productivity.

There is a large gap between wages, workers’ livingstandards, and what employers can afford. As BERL, the OECD and many Europeancountries have found, industry collective bargaining such as through Fair PayAgreements must be a major part of a fairer and more productive future.

Download the full bulletin: CTU Economic Bulletin 211 – June 2019

/Public Release. View in full here.