Analysis by Bryce Edwards
Is Labour supposed to be the party of labour or of capital? It’s often hard to tell these days, and many in the labour movement and the political left are feeling betrayed this week by the Government’s announcement of a pay freeze for public sector workers.
The Government has essentially directed all their departments and agencies not to give any employees earning over $60,000 any further rises for the next three years, except in “exceptional circumstances”.
It’s effectively a pay cut for the vast majority of public sector workers, as the cost of living and inflation will drive down the value of their incomes during that time. It will apply not just to those in government departments (or the core public service) but also to workers in other government agencies such as schools, hospitals, the police force, prisons, defence forces etc.
Why is Labour doing this? According to Public Service Minister Chris Hipkins it will save money, and allow the Government to pay off debt. Finance Minister Grant Robertson has attempted to frame the move as being about improving inequality, because the directive doesn’t apply to the bottom quarter of income earners in the public sector. But the reason is probably to send a strong message to centrist or more conservative voters that the Government is fiscally conservative and not too pro-worker.
If Labour needed any sign that this anti-worker stance was achieving the desired impact, blogger David Farrar (National-aligned and also founder of the Taxpayers Union) was able to assure them that they’d done the right thing, praising them for doing even what even a National Government would never dare to do – see: Robertson and Hipkins become honorary members of the Taxpayers’ Union.
Condemnation of Labour’s pay freeze
Others see Labour’s pay freeze as an outrageous assault on a work force that doesn’t deserve such a punishment. Yesterday’s Stuff newspaper editorial took one of the strongest stands for public sector workers, saying that their hard work throughout the last year of crisis has been unrewarded and spurned by an ungrateful government – see: Pay freeze stretches public sector loyalty.
Here’s how the newspaper sees Labour’s message to the workers: “well done, New Zealand, you magnificent team of five million. Well done to the essential frontline staff who worked so long and hard in the fight against Covid-19. Well done to the border workers; the MIQ, customs and immigration staff; also the defence force, police and healthcare workers. Well done all. We offer our thanks but no other reward. In fact, as part of that ongoing struggle against this stultifying pandemic we offer only more pain, and the prospect of no pay rise for four years. You’re welcome.”
The editorial points to a new survey out this week by Colmar Brunton, which “highlighted unprecedented faith in our public sector, largely because of its response to Covid-19”. You can see the survey here: Public Sector Reputation Index 2021.
Financial journalist Frances Cook made a similar point yesterday, parodying the Government’s message to Covid workers: “Thanks very much for your service, everyone please clap. But also take a pay freeze you greedy fat cats” – see: Of course I go to work for money, and so do you (paywalled).
Cook explains that the freeze is an “astonishing kick in the guts” because it is actually a “pay cut” in real terms for public sector workers: “Keeping this pay freeze in place over three years is brutal, especially considering they’ve already been under a pay freeze for the past year. Then factor in inflation, which according to Reserve Banks records is on average just over 2 per cent per year, and the people who worked tirelessly to protect us through a pandemic are actually going backwards. In real terms, those in the public service are facing a pay cut of about 6 per cent. It could be more, as some economists are predicting higher than usual inflation over the next few years.”
Economist Brad Olsen is reported as saying that for public sector workers the freeze is “a bit of a slap in the face. An interesting kind of kindness” – see Susan Edmunds’ Do people really earn more in the public sector?. This article also deals with some statistics on average salaries, and public and private sector increases in recent years.
Writing in the Herald today, political editor Claire Trevett also points out everything that is wrong with Labour’s decision, suggesting the Government has “served itself up what may end up being the biggest steaming pile of trouble of its term” – see: Labour in trouble with public sector pay ‘freeze’. She argues that the decision is out of step with traditional leftwing principles and that by attacking core supporters such as teachers and nurses they are “biting the hand that feeds”. Unsurprisingly, this has resulted in “a very rare firestorm against Labour from its own supporters on social media.”
Trevett says the decision was especially “foolish” because “no compelling reason was given beyond a show of almost symbolic fiscal rectitude”. And this was made worse, when “the very next day the Crown accounts showed the books were $5.2 billion better off than forecast in December”.
Some analysts have therefore taken the announcement as confirmation that Grant Robertson is still obsessed with fiscal conservatism. Branko Marcetic points out that this austerity orientation puts Labour out of sync with even conventional politicians and economists around the world at the moment – see his column: Labour’s public sector pay freeze isn’t just a betrayal of frontline workers – it’s a rejection of mainstream economic thinking.
The political editor of Stuff, Luke Malpass, has also been highly critical, suggesting that it has been a case of the Government “looking tough for the sake of it”, and that it has “backfired” on Labour – see: Pay freezes and fair pay agreements: the unions get their biggest win in decades.
Here’s Malpass’ main point: “The fact that neither Finance Minister Grant Robertson nor Public Service Minister Chris Hipkins appeared to have any idea how much this initiative would save suggested that it more fits into the political symbolism end of things. Labour clearly thought this would sound good – and Robertson would be keen on any amount saved – but given that Wellington bureaucrats are a relatively small proportion of those affected, it now just looks a bit capricious.”
TVNZ’s political editor Jessica Mutch McKay also paints the decision as a cynical one designed to symbolise how conservative Labour can be – see: Ardern penny pinching on nurses and police pay makes no sense. She explains: “It’s a bad move because: 1. Everyone has had a tough year. 2. The government can’t even say how much money it will save by doing this 3. It’s a poor political move by Labour because it irks the unions.”
Outrage from workers and unions
Progressives and those in the union movement have been outraged by the freeze. Especially the Public Service Association (PSA). Writing for the Spinoff, Alex Braae reports that “it’s quite possible the Public Service Association is the angriest it has been towards the Labour Party in literally decades”. He quotes the union’s National Secretary Erin Polaczuk saying “We expect better from this government” – see: Shock and anger at public sector pay freeze. And Braae suggests that Labour may have mis-stepped with the policy: “it may well be that the government has simply misjudged how warmly people feel towards public servants.”
Braae invited public sector workers to provide feedback about the freeze, which he has published here: Furious feedback: Bulletin readers respond to public sector wage freeze. Summing up the emails he’s received, Braae says: “It has also been almost unanimous: A reaction of anger, disappointment and betrayal, particularly after the sacrifices and hard work of 2020.”
The PSA also spoke out yesterday about the lack of consultation on the pay freeze, as well as the Government’s failure to communicate it to the unions or staff – see Henry Cooke’s Public servants ‘blindsided’ by hearing about pay freeze in the media first.
Other public sector unions have also lashed out. For teacher reaction, see Caryn Wilkinson’s Educators slam three more years of pay restraint for public servants. For the reaction of health workers, see Jordan Bond’s Fears Kiwi nurses and doctors will leave NZ due to salary freeze. And the views of the Police and Corrections workers unions are represented in George Block’s article, Cops, prison officers slam public sector pay freeze ‘bombshell’.
Sympathy for the workers goes well beyond the union movement. Newstalk ZB’s Kerre McIvor criticises the announcement, saying: “Talk about a kick in the guts. There’s money for everyone it seems, except the workers” – see: Public sector pay freeze rightly labelled ‘bombshell’.
Will unions and workers fight back?
Are the unions angry enough to actually cause trouble for the Labour Government? That’s yet to be seen. Yesterday the PSA put out an open letter to the Government to say “Your pay restrictions at this time are unacceptable”. And CTU President Richard Wagstaff told the Herald: “Don’t expect us to take this lying down”, and “We will not be accepting this. We won’t be accepting a pre-determined announcement by the Government” – see Jason Walls’ Union bosses to Government: We won’t take public pay freeze ‘lying down’.
Blogger No Right Turn has labelled the freeze “a vicious attack”, and called for a “public-sector-wide strike” if the Government don’t agree to negotiate “a fair pay agreement for the entire state sector” which includes decent rises in pay – see: Incoherent.
PSA member and socialist Cory Anderson argues that workers should fight back against the announcement, pointing out they don’t legally have to accept what Labour is trying to impose: “We can, and should, make this announcement a dead letter. Collective agreements are not dictated but, in law, negotiated” – see: Make the pay freeze a dead letter.
Anderson likens the situation to the increased class conflict of the late 1960s: “It was a nil general wage order in 1968 that sparked workers’ struggles in New Zealand after decades of quiet through the 1950s and 1960s. Could this new attack do something similar? It is too soon to tell, but there are reasons for us to be confident in a push back.”
A Blue wash?
The pay freeze wasn’t the only announcement made this week concerning workers’ rights. Yesterday the Government released its decisions on how unions and employers would interact to set fair pay agreements – see Hamish Rutherford’s One in 10 workers could trigger fair pay agreement process, in step towards collective bargaining.
The timing of the two announcements this week was obviously no coincidence. In retrospect, it seems likely the Government ensured this relatively pro-worker announcement was preceded by a balancing anti-worker announcement, so Labour couldn’t be accused of being too leftwing or in the pocket of the unions and can keep Labour’s new-found and former National voters onside. Basically, the announcement was a way to “blue wash” the Government, selling it to conservative supporters, especially to inoculate Labour from business criticisms over the new fair pay agreement framework.
This cunning method is applauded by blogger Martyn Bradbury, who argues that it has allowed Labour to more easily introduce “the greatest increase in worker power for 30 years” – see: Universal unionism vs 100k gold plated public servants – a masterclass in Machiavellian theory.
However, there’s no consensus that the fair pay agreements announced yesterday will have such a big impact. Business journalist Hamish Rutherford writes today that although the FPA will be better for the unions, the pay freeze will actually be more consequential for workers, especially in the short term – see: Pay freeze and fair pay agreements; this week was more about unions than workers. He says, “Given the sheer number of public sector workers likely to be hit by the pay freeze, this week appears to have been much more about improving the strength of unions than it was about helping workers.”
But will the pay freeze work for the Government, helping convince the public that it’s fiscally competent? Heather du Plessis-Allan doubts that, arguing the message will backfire, creating the idea that the Government has run out of money – see: Pay freeze shows Government can’t manage the books.
Here’s du Plessis-Allan’s main point: “they’re hoping to convince us voters that they are good financial managers: that they’re prepared to rein in spending. But they have misjudged this badly, because it is sending completely the opposite message. Reining in spending is a good thing, but if you don’t have enough money for something as important as lifting the wages of our hardest working public servants to decent levels, if you’re run out of money that badly, then you’ve just sent a message to voters that actually you are having trouble balancing the books. Because where’s the money gone?”
Many commentators also argue that the clampdown on pay will be detrimental because public sector workers will simply shift to the private sector, or even to Australia. With the Government embarking on some serious reforms, this could all occur at the worst possible time.
And, will the pay freeze actually work to keep costs down? The Government won’t even say how much money it is expecting to save from the freeze. And they haven’t included contractors in the freeze either – see Phil Pennington’s Pay freeze hits public servants but not contractors. According to this, the average public sector worker earns $40 an hour, while the average contractor earns $137 an hour, with the Government spending more than a billion dollars a year on contractors.
Some commentators are actually expecting that the pay freeze will lead to the use of more contractors – especially as talented but dissatisfied staff leave government agencies only be brought back on expensive short-term contracts. For more on this, see Dileepa Fonseka’s Why is a Labour government encouraging its employees to become contractors?.
Finally, for satire about pay cuts and inequality, see my blog post, Cartoons about public sector worker and CEO pay.