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Chris Hipkins softens his stance on the public sector wage freeze, committing to reviewing the guidance next year; Unions claim the Government has backed down a little more generally

Chris Hipkins softens his stance on the public sector wage freeze, committing to reviewing the guidance next year; Unions claim the Government has backed down a little more generally

The Government is softening its commitment to freezing the wages of most public sector workers who earn more than $60,000 a year.

Following a meeting with unions on Tuesday, Minister for the Public Service Chris Hipkins agreed to review the new Public Service Pay Guidance in late-2022, rather than in mid-2023, as previously decided. 

While the unions were pleased, Hipkins downplayed the change, saying: “We’re in unusual and unpredictable times, and we’ve agreed to bring the review forward by a few months.

"It’s worth taking stock at the end of 2022 to see whether the situation has changed sufficiently to revise the guidance."

Hipkins stressed: “The expectations we set out last week have not changed.”

When asked by National MP Mark Mitchell, during question time in parliament on Tuesday, whether he would consider "backing down, changing or amending" his decision around pay restrains, Hipkins said no (see video below).

Unions claim a small victory 

However, the unions are of the view Hipkins has backed down a little.

The Public Service Association (PSA) said the Government agreed there was “scope to discuss” raising the wages of “all” union members covered by collective agreements in line with increases in living costs.

But Hipkins said: “Cost of living increases are in scope to be discussed during negotiations, as they always were.”

The PSA also said: "There was agreement today that more workers should receive scheduled increases through step-based pay systems. Negotiations enable these pay systems to be implemented.

"The possibility of a multi-employer collective agreement for the public service was discussed. The PSA strongly supports this as a way to align pay and conditions consistently, efficiently and fairly."

Council of Trade Unions (CTU) president Richard Wagstaff added: "There was absolute agreement that bargaining will be in good faith without pre-determined outcomes…

"We made it crystal clear how unhappy and angry union members are feeling in response to the policy announcement.”

Govt says the pay freeze will reduce inequality

Hipkins said, “Both sides were happy to clear up that this isn’t - and never was - a “pay freeze", and there would be a focus on lower paid workers.

“We are committed to accelerating pay equity and parity processes and prioritising wellbeing and workload issues.”

The Government has pitched the pay freeze as a move to reduce inequality and reflect responsible management of the Government's finances. 

However, it's been unable to put a figure on how much the freeze is expected to reduce the cost of wages by, saying this depends on future bargaining settlements.

Green Party MP Jan Logie on Tuesday asked Hipkins to explain exactly how the pay freeze would reduce inequality (see video above).

Hipkins responded: "What the Government is saying is if we continue to provide across-the-board pay increases that see the majority of the money going to people on the highest salaries, the inequality in the public sector will continue to increase, and that is not something that this Government wants to see continue."

Exactly what the Public Sector Pay Guidance says

The Public Service Pay Guidance stipulates those who earn less than $60,000 should be given “modest” pay increases.

Meanwhile the “default position is that there should be no increases to bands” for those on between $60,000 and $100,000. Pay adjustments “may be considered” if the following criteria is met:

  • modest progression within a band; or
  • demonstrable recruitment pressures that cannot be addressed solely through modest progression increases; or
  • the increase is related to the introduction of a remuneration system consistent with this guidance; and
  • whatever increase is proposed is comparatively less than those for low paid staff (less than $60,000).

As for those who earn more than $100,000, the guidance says, “the default position is that there are to be no increases to bands and no pay adjustments”.

“In exceptional circumstances agencies may seek agreement of Te Kawa Mataaho [Public Service Commission] to proposals that are outside the default position.”

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64 Comments

13
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Personally I'd love to see the ENTIRE public service strike in unison, for 1 week to teach these eggheads the lesson of their lives

Would be great (except if you're very sick that week)

DIY catheter or sew-your-own-finger-back-on anyone?

Can't wait for the home colonoscopy kit. Comes with magnifying mirror on stand and 35 MM SLR digital camera with large diameter zoom lens.

A lot of these people live from hand to mouth, so they have to be far more strategic.
E.g. for nurses strike for 8 hours from 3am to 11 am on Saturdays and Sundays. (the strike period falls across two shifts so each shift only loose 4 hours)
The time of the strike would be so antisocial that it would be a nightmare for the DHB.

They would lose their weekend loading payments if they did that. Monday afternoons are the busiest times in hospitals so 1100-1900 would be an equally effective strike for less pay lost by nurses (shifts change at 0700, 1500, 2300).

Just illustrating that they need to be strategic and mindful of the costs to their members.
They need to stop this silly business of providing skeleton staff to keep the hospitals running. This totally undermines their impact and the DHBs take them for a ride on this. During previous strikes the wards were swamped with staff and others wandering round with not enough to do, A strike needs to be a strike not some stupid half baked gesture.

14
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What were they thinking to try and pre-empt negotiations on 3 collective agreements currently underway. Amateur hour and the union negotiators have quite rightly handed out an embarrassing rebuke and now we see a U turn.
If they wanted to turn the fiscal screws on those earning $100 000 why not do it through Tax threshold changes? Picking out these public sector workers while leaving others earning the same amount untouched was an attack on their own voter base. A top bin own goal.

Hitting pause on jobseeker payments to anyone who hasn't held a job in the last 12 months would get GR his fiscal savings and boost productivity, eh?

11
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Amateurs and academics in government. What other explanation is there for such a ham fisted and plain dumb episode. Quite simply the government is not even capable of understanding what they have done let alone what they are doing, should be doing or going to be doing. It is befitting of Monty Python and it would be damn bloody funny if it wasn’t true. But unfortunately for us, true it is. Quite honestly, all the pouting, parrying, platitudes, about turns and huffing and puffing, and sheer ineptitude for good measure, is more than an embarrassment , it is a downright disgrace. Who the heck do these people think they are that they should lead us? Yet another blasted review next year. How absolutely pathetic. Don’t they know, that just like tomorrow, next year never comes. What ever happened to the election night trumpeting, we have been given a mandate etc etc etc. Nothing but bs & jellybeans.

The best that can be said is that they seem to have recognised that's its an inexplicable stuff-up and are walking it back at full speed.

28
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It is interesting to contrast the consistency of the governments actions.
On one hand they have literally helicoptered money into the economy to keep the economy going, boost spending and investment. The most notable consequence was that house prices went through the roof and further impoverished a large and most vulnerable section of society. Have they increased their spending - I very much doubt it. Has it increased inflation. - not a lot.
On the other hand they want to stop wage increases. I suggest that allowing healthy wage increases will do a lot more to boost the economy, lift inflation and investment. It would cost a hell of a lot less than what they poured into the economy.
What the hell are they trying to achieve?
Do they have the vaguest clue what they are doing?
I suppose that the counter factual is that they and their armies of advisors do know what they are doing and what we are witnessing is them achieving their objectives. If that is the case then the situation is orders of magnitude more disturbing and just who's interests are they serving?

What are they trying to achieve? A world where remuneration is based on being kind and fair - not on one based on the productivity of the worker.
Worked well in the USSR.

Universal basic income. Less than successful elsewhere but hey in NZ well get a different outcome.

Listen Chris, they don't know what they are doing. So please stop asking them to do the intelligent thing, because they can't figure out what that is and will keep doing the wrong thing (against advice by everyone) because it makes it seem like they are doing something.

Wonder how many supporters they've lost and potentially won't regain for these shenanigans. People living within their means and then placed into situations where their wage won't get as far as inflation potentially rears its head. I mean... Is this the labour who is trying to promote higher productivity or do they want the public sector all working multiple jobs to stay afloat like most teachers in the USA and sacrificing their productivity through burn out

28
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I'm more right than left leaning but I most certainly think that teachers, nurses and other essential workers deserve pay increases not pay freezes. I cannot understand this move, especially from a Labour government

Yip, boggled my mind too.

I expect that we will probably see a little further public softening of the message as well.

And then union negotiations will probably show that the government hasn't actually abided by the core terms of their initial announcement: they will end up with increases to pay bands within 60k - 100k, but in dollar terms such increases will be less than those for less than 60k. But their original message was 0 increases for these people, not 'proportionality less' than those under 60k.

The strangest aspect of the whole thing is that they wanted it for 3 years, when everyone is expecting inflation to go up in the short-medium term. A 6-12 month freeze would have been more understandable, with 'wait and see how well the recovery actually goes - we could still have another level 4 lockdown' as an excuse.

11
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Surely the biggest issue here -- is that a government who despite being advised their actions would lead to a massive rise in house prices -- still did it -- putting Auckland houses up $200,000 then thought that the best way to support its public service FHB's was to implement a pay freeze for staff earning 60-100K per annum - i suppose thinking an extra 2% is only $1200 before tax and really so insignificant when it comes to that extra $40,000 they need to save -- why bother ? So out of touch with reality after only 3 1/2 years in office --

Typical Labour strategy. Go hard then back track to look like the good and kind guys.

Seen it before will see it again. 2 years is election year. What a surprise yet the steeple will lap it up with their short memories.

I agree. Go hard until the 'push back', then cave. I don't agree with the Govt on this, but wonder how Labour didn't see the loss of support they would get. Totally out of touch.

Step based increases basically work as a cost of living increase. Your performance has to be exceptional to get any more than one step increase, so well performing but exceptional people get the same increase as mediocre performers who squeak through on "meets expectations".
I.e. it's a tool to make real pay rises only possible by shifting jobs, or operating so well you deserve a promotion and move anyway.

As usual the devil is in the detail. How many bureaucrats on $100k/pa? How many between $60k-100k, can't be that many. How many on < 60k. Labour just need to ride out MSM and a re-active union bleat, do some sums. They'll have difficulty with that though.
Unions to support those on $100k plus? Really.

We all know the Govt/RBNZ can create money from thin air, their actions over Covid has well and truly established this. How do they think they can now tell us we have to pay freeze 'essential services' and get away with it? The stupidity is next level.

They havnt (yet) created any 'money' ...however the fact they can needs to be tempered with regard to that which occurs elsewhere.....unless you wish a completely closed economy which somehow I doubt you (or almost anybody) does.

Sorry, isn't RBNZ creating $100 billion+ through QE? Where did that come from?

And your point is...

where is that 50 odd billion (to date)?....it remains within the RBNZ...it has neither been "printed" nor issued....it is an asset swap, an accounting exercise....it is not available to the economy.

"Quantitative easing (QE) is a monetary policy whereby a central bank purchases at scale government bonds or other financial assets in order to inject money into the economy to expand economic activity."

And where does the (hoped for) money injection come from?...increased credit creation by the banks.

AKA more debt.

Spin it how you want, the govt can come up with money when they want. How much was spent on wage subsidies & covid...it was like a blank cheque book.

Important to consider how govt spending actually works... Govt injects new money into the economy when it buys or spends. The asset swaps (bond sales or their opposite, QE) come afterwards and have no material impact.

And how much has the government spent over covid - wage subsidies, funds etc? Where'd that money come from? The government essentially had a blank cheque book, no questions asked...

QE...How much asset inflation has occurred as a result of it? How much money has gone into the economy as a result. No material impact... just on the books...

To put a wage freeze on 'essential workers' teachers, nurses etc. after all of this is pathetic.

Yes Gov spending (fiscal, i.e. wage subsidy) does enter the economy but there is no need for QE to do that....QE serves another purpose, in this instance to prevent defaults ...and I'd further suggest that if it wasnt also being enacted by the major central banks it wouldnt be a realistic option for the RBNZ.

When banks do release it, it is in terms of mortgage debt granted.
Not "into the economy"
Business lending falling

While I’m pretty cynical about this whole affair, I think Hipkins is right about something: we don’t want ‘public sector pay increases’ meaning another $40k for the CEOs and $500 for the front-line staff. That’s what literally no one, left or right, wants to see; it sounds like this was ham-fisted attempt to address that.

Yes that would be both a justifiable and sound initiative, and popular to boot one imagines. There is far too much money at play in the public service penthouses and far too little paid out to those in the boiler rooms, that keep those lofty personages warm, dry and powered. Surely it cannot have been too difficult to produce a policy to achieve such an applaudable outcome.

Freeze over 300k. You're right, it wasn't difficult.

So just say, pay rises to those on 100k or more will be the same or less in actual dollar value to those on under 100k.

Voila!

So it looks like the concensus is that we should load the public sector up with people, then give them all wacking great pay rises every year. Disingenuous from those of us on the right, who are enjoying Labours pain, and a lot of indignation from the left who expect their own kind of people to be amply rewarded at every turnby a left wing government.
This was a claytons pay freeze anyway. Anyone on $60,000 and under wasn't on a pay freeze, people who were due to move up a bracket still go up, and there would be 'special circumstances' where people could get a pay rise. This was the pay freeze when you are not having a pay freeze, and Labour have quickly crumbled as there bluff has been called. I'm pretty sure the fake pay freeze was intended to be a 'look how fiscally responsible we are' sop ahead of the huge expansion of the welfare state that is coming in the budget.
No I don't think that Doctors, Nurses, and 'COVID responders' shouldn't get a pay rise. But I am also not keen that middle managers at government departments who are socking away $120,000 already should get a pay rise every year! More Doctors and Nurses and less 'make work' roles is the answer. You get redundancies in the private sector, and you have years where you don't get a pay rise. But apparently in the public service you should get a job for life and a pay rise every year.
We are becoming like Greece.

... no.

A "Left-Wing" government. Only by comparison to Collins.
Left wing government would not be serving renters whilst subsidising OO to the hilt
or refusing to redistribute wealth or even contemplate speaking of "power" and who has it over whom and what the government might DO about it.
This is a hesitant, dithery government of technophiles who follow whatever public service and Treasury advisors tell them

I don’t think it’s disingenuous from the right. The problem for me is that a “pay freeze” is unlikely to save the government much money at all. It is a very poor policy if that is the aim, because a lot of good people will simply move to another public sector job and get a pay rise that way, while low performers stay put. The result is increased recruitment cost and greater inefficiency as more public sector workers move into new jobs, reducing institutional knowledge. Incidentally I’d like to see the number of policy jobs in Wellington decreased by 1/3 to 1/2 over time with the quality (and commitment to work/productivity) raised through better pay incentives for performance. By performance I mean providing quality advice, as opposed to anything else that might be considered performance by public sector managers.

Isn't it the case that workers pay will still increase according to the steps in their pay agreements? It's just that those pay agreements won't be increased. Not sure about employees who aren't covered by one of those

No because there are not enough steps and many have hit the top step already.

But those not on the top step will still go up. How many is "many"? I doubt all nurses/doctors are at the top of their payscale...

Lightweight phoneys.

I wish Jacinda would go on that TV Program called "who do you think you are". I would put money on it that one of her old English ancestors was a roof Thatcher.

Herald says
Claire Trevett: PM steps in, the melting of the pay freeze begins.

The cynical would says its engineered and prearranged. The saviour rides in and saves the day. Popularity restored. All hail the Princess.

Never attribute to malice that which is adequately explained by incompetence.

I really rate Richard Wagstaff. Every time I hear him interviewed, I think finally, someone talking sense. He will keep the pressure on Hipkins.

Chippy going flaccid on his wage freeze. These guys must get sick of playing bad cop.

Sums up this government's announcements, No thought, No substance, No idea...

They're not even being kind anymore.

Many nurses and teachers are in very staid jobs, and earn great money in relation to the demands of the job.
In private employment there are many who are stretched to the limit and paid much less.

Then the people in private employment should become nurses and teachers and get this plushy pay you say they earn. Very simple.

Indeed. Two professions with well-publicised shortages. Definitely that's because the terms are so cushy.

From the horses mouth - Labour's plan to reduce inequality is to pull down those who are successful, not to help up those at the bottom. Otherwise, they would have simply mandated that 60k is the minimum earning for an FTE in the public service and called it a day.

Ah yes, a slight variation on the tired right-wing mantra of "well why don't you just make the minimum wage $50/hour then?!?!".

Maybe change ‘successful’ to ‘high qualified, skilled and motivated’ when considering health workers.

This is too funny, when a freeze isn't cold at all.

https://www.rnz.co.nz/news/political/442326/public-sector-pay-freeze-uni...

Hipkins said both sides had agreed the restrictions were not a "pay freeze".
Then from Stinky
Prime Minister Jacinda Ardern said there had been confusion about what the "pay guidance" actually meant.

These two saying they didn't do what they just did.

& from the third leg.
The finance minister’s announcement of a public servant wage freeze for those earning over $60,000 hit all the wrong notes, sparked an outpouring of outrage from unions and the sectors involved, and drew comparisons of Muldoonism.

https://www.rnz.co.nz/programmes/the-detail/story/2018794549/pay-freezin...

https://www.telegraph.co.uk/news/2021/05/08/ardern-isnt-lovely-have-beli...
Ardern isn’t as lovely as she’d have you believe
The Prime Minister of New Zealand is fawned over worldwide for her empathetic manner. But increasingly, her actions stink.

Currency depreciation and massive debt:GDP ratios are easy. Anything else is hard. I think they'll take the easy option.