Low pay isn’t a fixable bug in our free market system, it’s one of its indispensable features, Chris Trotter says

By Chris Trotter*

The National Party will pay a high price for its intervention in the Pay Equity process. Indeed, it is difficult to conceive of a cause celebre more suited to the dominant political passions of the Labour Party. Nor, indeed of the Council of Trade Union’s largest affiliates: the Public Service Association, the Nurses Union, and the two big teacher unions (PPTA and NZEI). The passage, under urgency, and with zero public input, of Minister of Workplace Relations Brooke van Velden’s retrospective legislation, promises additional opportunities for condemnation to all the usual suspects of academia and the legal profession. The Left will beat this drum all the way to the next election.

So, why did National do it?

The easy answer, and the one favoured by the Left, is that National’s decision to press ahead with its fiscal lolly-scramble in 2024, left them with no choice. The foregone revenue had to be recovered from somewhere, and the cost to the state of the 33 Pay Equity claims already in train, and likely to be upheld, estimated by Treasury at $17 billion over the next four years, was the obvious place to start.

Regardless of the political cost? Obviously. Because the alternative – raising taxes – was unthinkable for National. Not only would it confirm all the criticisms levelled at the party’s fiscal policies in the run-up to the 2023 election, but it would also amount to giving the Labour Party a free-pass on tax increases all the way to the 2026 election. In addition, National’s invaluable reputation as the superior economic manager of the two main parties would be severely, perhaps fatally, tarnished. Yes, the damage inflicted on the National Party for reining-in Pay Equity is going to be bad, but the impact of the alternatives would’ve been worse.

Besides, if National plays its cards sensibly, then a fair measure of the anticipated damage arising from van Velden’s policy putsch might be avoided. By openly and patiently explaining the problems associated with the 2020 revision of Pay Equity legislation, National stands a reasonable chance of slowing the momentum, and softening the punches, of its political foes.

Yes, National will be handicapped by the historical fact that it, alongside all the other parliamentary parties, except Act, voted for Labour’s legislation. But, holding up its own behaviour as a telling example of the perils of voting for legislation purely out of a desire to be seen “standing on the right side of history”, might go a long way towards placating the outrage of some conservative women.

Because, like it or not, there are problems with pay equity. Not the least of these is determining, exactly, with which categories of better-paid men lower-paid women should compare themselves. This ‘comparator’ problem has dogged the pay equity issue from the start. Were Nurses entitled to the same sort of wages as Police Officers? Most people could – sort of – accept that comparison. But claiming that social workers should be paid the same salaries as air-traffic controllers? Yeah … nah.

The fundamental problem with pay equity, however, is the problem very few people are willing to say out loud. Specifically, that paying economically and culturally subordinate classes, genders, and races appreciably less than those above them in the social hierarchy isn’t a bug in our free market system, it’s one of its indispensable features.

Making the argument for paying workers the same wage for doing the same job is a lot easier than making the argument for offering equal pay for work of equal value. This is because the determination of value isn’t simply a matter of economics, it is also, and many would say primarily, a matter of culture. Labour markets are not just governed by the laws of supply and demand, but also by considerations relating to the identity of the workers being supplied, and the quantum of remuneration they had a right to demand.

The revolutionary implications of Pay Equity are easy to see when the attention of society is drawn to the vast pools of working-class people for whom low-pay is just a hard fact of life – and likely to remain so. In spite of the Covid Pandemic demonstrating just how “essential” these workers are to the functioning of our society, the idea of offering them wages commensurate with their critical contributions, is laughed-off by just about everybody – including themselves.

The celebrated 2012 case of Kristine Bartlett, the aged-care worker who contested successfully the fairness of her own and her workmates’ remuneration, is itself a demonstration of just how subversive of the labour market Pay Equity has always been.

The power of the legal arguments advanced by Bartlett’s union advocates, which the courts could not reasonably deny, forced the hand of the then National Government, which interposed itself strategically between Bartlett and her employers. At a cost of $2 billion, the 55,000 aged-care workers’ settlement was deemed preferable, by politicians, employers, and probably by the unions themselves, to the profound economic, social, and political consequences of a general “levelling-up” of low-paid workers’ wages.

Those who find this ingrained social acceptance of the unfairness of our labour market hard to accept should take a look at what is happening in the US state of Florida. A statewide crack-down on “undocumented migrants” has precipitated a massive outflow of the low-paid Latino workers who usually harvest Florida’s crops. Responding to what is fast becoming a critical, statewide, labour shortage, the Florida Governor, Ron DeSantis, has proposed relaxing the laws restricting child labour.

Working-class teenagers are seen as the logical replacement for vulnerable Latino migrants. Will they be paid the same as the workers they’re being asked to replace? Of course not. They will be paid a wage appropriate to their age. The crops will continue to be harvested, at a lower cost, and for a higher profit. Equal pay for work of equal value would ruin the industry, the state, and, if adopted across the whole of the United States, its entire economic system.

Act has always known this. That van Velden openly admits to harbouring longstanding concerns about the extended legislative powers pumping-up Pay Equity claims, testifies to her own, and her party’s, clear-headed understanding and acceptance of free-market norms. And that Christopher Luxon and Nicola Willis were willing to go along with Act by using parliamentary sovereignty to shut out the courts, re-write the rules, and send the claimants reeling back to square one, indicates that when push comes to shove, being on the right side of history matters much less to National than keeping the Coalition Government’s, and the rest of New Zealand’s employers’, books in order.

For the next eighteen months, Labour and its allies will beat their progressive drums with unflagging enthusiasm, and the Left will stamp and holler. Come election-day, however, they may be unpleasantly surprised by how many voters end up endorsing National’s and Act’s hard-nosed economic priorities.

*Chris Trotter has been writing and commenting professionally about New Zealand politics for more than 30 years. He writes a weekly column for interest.co.nz. His work may also be found at http://bowalleyroad.blogspot.com.