Low wages and Labour

If you haven't already seen it, go off and read Jordan's excellent post on our low wage economy. The question of wage rates is really one of distribution between wages and profits, and in New Zealand Rogernomics and Ruthanasia established a policy framework which answered that question decisively in favour of the latter. One-sided employment law and monetary policy which ensured that there was always a surplus of workers kept wages stagnant on average (and actually decreased those of people at the bottom end of the labour market), while the fruits of economic growth were funneled straight into the pockets of employers. As a result, the wage-share of Gross National Income shrank from 55% in the early 90's to a mere 43% now, with the difference going straight to corporate profits.

Labour has inherited this problem, and you would expect them to be sympathetic. But as Jordan notes, they have done SFA about it:

Labour's approach, though, has been timid. Some things have remained clearly seen as outside the realm of political possibility. A realised capital gains tax is held to be electoral anathema. Corporate tax increases are off the agenda. Income tax increases apart from those from 1999 are off the agenda. Public spending continues to be held down at levels below those needed to buy top quality health and education services, let alone redress some of the infrastructure and salary deficits in the public sector that have become apparent in the last 20 years. Labour's policy agenda is still well within the neo-liberal international mainstream; there has been no fundamental challenge to the power of capital in the interests of working and middle New Zealanders.

They have, in other words, been tamed. Their ambition to replace National as the "natural party of government" and their fear of a repeat of the Great Business Sulk of 2000 has led to a policy conservativism which completely betrays their origins and traditions as a party of the workers. And so now, when unions are agitating for their fair share, our "Labour" Prime Minister airily says that its for the market to decide. Why are we supporting her again?

But even with their commitment to the market framework, there are policies the government can implement to set a positive trend in the labour market. Chief among these is using its power as an employer. The PSA is pushing for a 5% wage rise for public sector employees whose collective contracts expire this year; the government should give it to them. Likewise, it should undertake to fund the substantial wage rises needed in the tertiary education and aged care sectors. This will increase wage competition, and send a message to the market: either raise your wages as well, or watch your workers drift away to sectors which do. Another obvious move is to continue raising the minimum wage. This will not only produce more wage pressure at the bottom end of the market (as workers push to keep their margin over what they could earn at McDonald's), but it will also help encourage employers to invest in improving productivity rather than simply trying to hire another warm body.

These are only short-term solutions, but they're better than nothing. More importantly, they will show that the government has not abandoned its roots. In an election year, people will be judging Labour on its commitment to workers - and expecting a lot more from them than simply standing back and "leaving it to the market". If the government doesn't take concrete steps to lift wages and ensure a more equitable division of the benefits of growth, their traditional supporters may well start looking for a party that will.