Analysis by Keith Rankin.
This year, the heated non-debate in Aotearoa New Zealand about pay equity, has left important answers unquestioned.
Equal Pay versus Pay Equity
The first point that must be made is to distinguish ‘equal pay’ from ‘pay equity’. Equal pay means, for different identity groups, the same pay for the same work. The concept has been mainly applied to sex, and to employees paid by the hour; with equal pay, a woman with the same qualification and experience receives the same hourly pay rate as a man.
In New Zealand, this was mandated into law in 1972 – the 1972 Equal Pay Act – and has been an unwavering centrepiece of New Zealand’s labour law ever since. Before 1972, women gained a ‘market wage’, and men – presumed to be current or future ‘family breadwinners’ – received a privileged wage. (This privileged wage was enabled, especially from December 1938, by a regime of import protection – tariffs and customs’ duties – which meant that New Zealand breadwinners were sheltered from direct competition with foreign workers earning much lower wages.)
As recently as last week, supporters of ‘pay equity’ (including the great-grandson of Elizabeth McCombs), were claiming that ‘equal pay for equal work’ is a current aspiration rather than a long-standing reality. (Refer First female MP would have been ‘appalled’ by pay equity changes, says great grandson, The Post, 11 August 2025: “I grew up with … ‘women [and] girls can do anything’, you know – equal work, equal pay. It just seems absurd that my daughters and granddaughters are still fighting for the same thing that my great grandmother and her sisters fought for.” The Post article, in making no attempt to mention the 1972 introduction of Equal Pay, was perpetuating a kind of politics based on assertion rather than knowledge. Also note this RNZ article: Unofficial People’s Select Committee Starts Pay Equity Hearings, Scoop, 11 August 2025. ‘Equal pay’ is mentioned three times. Of those three, the only mention relevant to the theme of ‘pay equity’ was by the Minister, Brooke van Velden. No effort was made by the authors of the story to reconcile the contradictory references to ‘equal pay’. Not even basic fact-checking, re 1972.)
Pay equity is something different from equal pay. It is corrective remuneration in a case where a whole occupation is underpaid on the basis of employer-discrimination against an identity group. In the situation which has been politicised in Aotearoa in 2025, that identity group is women. A pay equity correction is made by the authorities proclaiming and enforcing a new relativity re some ‘comparator occupation’ whose work is deemed equivalent.
Clearly, like the privileged men’s wages of the distant past, success here would be a privileged wage in the sense that it is imposed by ‘the state’ onto the labour market. Before such a pay-equity correction can be authorised, the alleged discrimination itself needs to be verified (beyond reasonable doubt?). Under present and past law, to be allowed to establish inter-occupational discrimination, the claimant occupation’s employees should be predominantly women. I would define female-dominant as meaning at least twice as many women as men in non-managerial roles. (On this basis, primary school teaching would meet the criterion; but secondary school teaching would not.) To prove discrimination, you have to be able to make a very strong claim that the reason for alleged under-remuneration is the sex-ratio, meaning that if two-thirds of the workers were men then that under-remuneration would not have occurred. (Is it credible that female secondary-school teachers are significantly meeker than male secondary-school teachers?)
By definition, remuneration based on pay-equity is a departure from a market-clearing outcome, so a pay-equity settlement would need to address the problem of an overpriced market; such as an employer subsidy (for an occupation in the economy’s non-tradable-sector) or an export subsidy (for an occupation in the tradable-sector). We note that the pre-1972 ‘privileged wage’ paid to men had coincided with some forms of protection, such as import protection. In a 2020s’ fiscal environment, we have already seen that higher nurses’ pay has led to fewer nurses being hired; that is, given the financial constraints imposed on the principal hiring authority.
We need to note that the fact that an occupation is female-dominant does not in itself mean that there must be inter-occupational pay-discrimination. Conversely, it is also possible that some occupations which have a majority of male workers may be subject to adverse discrimination; occupations with large numbers of immigrant workers come to mind.
Equal pay in 1972 was a revolution which both reflected societal changes (from the 1930s) of sex roles – from prescribed household economic roles towards individualism within households and towards greater diversity in household structures – and also facilitated such changes, even towards the adoption of subjective notions of what ‘male’ and ‘female’ actually mean. While the practical effect of equal pay was to replace the legislatively privileged male real wage with an unprivileged market wage, the wider effect was to incentivise individual labour force participation, making paid work (as distinct from ‘pay’ itself) come to be understood more as a ‘benefit’ and less than the ‘cost’ that it unequivocally is in neoclassical economics. Households needed to supply more hours of work. And paid work came to be interpreted as ‘liberation’. (We note that New Zealand’s benefit system remains the major discriminator against women; the Ministry for Social Development continues to uphold the view that unemployed people with employed partners cannot receive a job-seeker benefit.)
Ironically, in the year after the Marshall-Muldoon National government introduced Equal Pay, Roger Douglas, a junior minister in the Third Labour Government, introduced a comprehensive New Zealand Superannuation Scheme; a scheme which was fully predicated on the traditional view of the male householder as a breadwinner supporting female and junior dependents. It was Robert Muldoon, once again, who rescued the progressive new individualism over the increasingly quaint and regressive ‘working-class male-breadwinner’ social milieu; Muldoon scrapped New Zealand Superannuation in its infancy, replacing it in 1976 with National Superannuation, a Universal Basic Income for seniors (defined, practically, as all New Zealanders aged over 60); this was a comprehensive reinstatement of the ‘Universal Superannuation’ legislated for by the First Labour Government – the Savage government – in 1938.
New Zealand is still one of the few countries in the world to have any kind of rights-based Universal Basic Income, although today the age of eligibility is 65; and it now has the name of Douglas’s very different scheme, New Zealand Superannuation (NZS). As important way in which NZS reflects the liberal ambitions of Equal Pay is that it creates a liberal retirement-income regime, individualised, facilitating individual choice over when to retire; and acknowledging the societal contributions of those in their ‘working-age’ lives (including many women) who did not ‘make lots of money’. (Sadly, one of the first things the Labour Government quietly did in 2020 was to disqualify people – about 90% of whom were women – from accessing NZS as a ‘non-qualifying spouse’; this former provision for retired couples ensured that partners aged under 65 of persons aged over 65 could gain an income-tested version of NZS.)
The rise of the Funded Sector
It’s always been a bit of a puzzle as to why, in the late 1980s, barely 15 years after Equal Pay, the Trade Union movement started to clamour for something else; for Pay Equity. Part of the answer is that ‘organised labour’ changed fundamentally after 1984, under the auspices of ‘Rogernomics’ and ‘Ruthenasia’. And part of that fundamental change was the decline of the traditional male-dominated trade unions which in some cases fought valiantly, but in a fated struggle, to retain high wage jobs for their members.
In its place, we saw the rise of ‘white collar’ unions, which proved to be a substantial feminisation of unions. We saw a dichotomy between what is now called the ‘funded sector’ and New Zealand’s traditional export-focused private sector with its freezing workers, railwaymen, seamen, wharfies, miners, and workers in protected manufacturing industries such as car-assembly. The ‘funded sector’ is a wide interpretation of the ‘public sector’, where employment opportunities are directly linked to governments’ fiscal programmes and policies; it includes crown entities, state owned enterprises, state-contracted organisations such as the ambulance service, and local government.
There emerged substantial numbers of women in a new ‘upper working class’; women in their twenties and thirties earning relatively low salaries, employed in the ‘brave new funded sector’ following the neoliberal reforms. While most of these women were glad to be seen and treated as equals in their workplaces, many were pushed into fulltime work while they had young children; the mortgage had to be paid. So, we also then saw the emergence of a substantial childcare industry (and the decline of kindergartens and play-centres), which is – in effect – also part of the funded sector. As is, also, the growing age-care industry, especially the nursing homes (distinct from the new retirement villages which cater for retired elites and members of the privileged generations – born circa 1935 to 1960 – who have been downsizing from mortgage-free standalone houses on large sections).
Differences between male and female pay on average are linked to the nature of the funded sector itself, as the dominant employer of women; and in particular the unnecessary realities of prioritising ‘fiscal consolidation’ over ‘duty of care’ and societal investment.
The feminist premise which underpins pay equity
Feminism has two contradictory premises. The first premise is that women are the ‘meeker sex’, and therefore require collective intervention to support equitable outcomes for female individuals vis-à-vis male individuals. The idea is that women have been muscled out – figuratively and almost literally – from opportunities for individual self-realisation and influence. The alternative premise is that women are not meeker than men; indeed, that there is no ‘meeker sex’. The idea is that women have achieved lives equally as fruitful as men; but that the many individual and collective achievements of women have not been adequately reported by (mainly) male historians and journalists.
Neither premise is entirely incorrect. Thus, the two feminisms differ more on emphasis than on one being true and the other false. Pay equity is informed by the first of these feminisms. And the substantial and visible successes of women in public life in the last fifty years or so suggest that changes such as Equal Pay have enabled women’s many very real contributions to become more visible. One feminism favours directive policy; the other favours enabling policy and equitable recognition.
The Pay Equity argument is subject to an important ‘catch-22’. To gain the desired policy outcome women have to argue that women are subject to adverse discrimination because of their meekness. Yet, for women to successfully pursue this argument, they have to reveal women to be anything other than meek.
Indeed, the female leaders of the labour movement (who have been substantive leaders of organised labour since at least the 1980s) have revealed that women can be and have been at least as assertive – indeed stroppy – as men. Further, we have for many years now seen that such female-dominant professions as nursing and primary school teaching have assertively advocated for their interests for many years. And it’s not new. Magazines such as Woman Today and Working Woman were doing this in the 1930s. And we openly acknowledge the contributions of strong women in the past, self-realisers and community-realisers, such as Jean Batten and Dame Whina Cooper.
On the matter of catches-22 see ‘Turning women’s wages into a political piggy bank’, Newsroom, 12 Aug 2025. The argument here seems to be that pay-equity claims would first have to be initiated to establish if the claims have merit; but that the prior establishment of merit has become a pre-requisite for a claim to be initiated. I would like to have seen that ‘catch-22’ argument put to a government spokesperson. The resolution here would be the reality of ‘degrees of merit’. Some merit would have to be present from the outset; the adjudication of the claim would then evaluate sufficient merit to adjudicate in favour of an intervention.
My understanding is that there remains a clear pathway to lodging a ‘pay equity’ claim – and hopefully available to any employee group who feels they are underpaid on account of their predominant sex, religion, ethnicity etc – but that it must place emphasis on evidence indicating adverse discrimination. It can never be enough to evoke correlation; causation is the idea that an occupation is subject to low remuneration because of the demographic mix of its employees, meaning that a less-meek employee-mix would, of itself, yield higher wages and better working conditions.
Wage activism and pacifism in New Zealand’s history
New Zealand once (from the 1890s to the 1980s) had a directive system of setting ‘award wages’; the 1894 Industrial Conciliation and Arbitration Act, “The brainchild of Minister of Labour William Pember Reeves”. It morphed into a system of relativities; wage increases would be set for one occupation, and wages for other occupations were effectively indexed.
Or there would be general wage orders. As a result of compliant male-dominated trade unions, by the mid-1960s wages in New Zealand were substantially lower than they should have been, given substantial per capita economic growth. When in 1968 the Arbitration Court mandated a zero wage increase despite five percent CPI inflation, the creaky system of general wage mandates collapsed. It was up to the new Finance Minister, Robert Muldoon, to pick up the pieces, which he did successfully. From 1969 to 1973, wage increases outpaced productivity growth. The new regime was what the stronger unions had wanted – ‘free-collective-bargaining’ – and it took place during the inflationary 1970s. Real wages in New Zealand reached their post-war peak in 1981, although after-tax wages had to wait until 1982 to be corrected through a substantial new tax scale.
While wage relativities between occupations were finally scrapped in Ruth Richardson’s 1991 Employment Contracts Act, in that same neoliberal era a system of salary-relativities was introduced for Members of Parliament and senior public servants. Their pay would be ‘indexed’ to the pay of corporate executives, in full knowledge that the deregulations of the late 1980s would start a process in which the remuneration growth of business executives would substantially outpace the remuneration growth of ordinary private sector employees. The MPs had hitched themselves onto an inequality bandwagon.
We note that, in the very uncertain 2020s, workers in the ‘funded sector’ have been relatively privileged. There now appears to be a new aristocracy of labour, and it is large parts of the highly unionised funded sector. In the 1950s in New Zealand, the aristocracy of labour were the seamen, wharfies, miners, and meat-workers; and the strongest unions represented their interests over the interests of workers more generally. That ‘aristocracy’ was undermined in the 1960s by relativity processes largely connected to Labour Governments in the 1940s and 1950s. In the 1980s an elite ‘salariat’ formed, a new kind of aristocracy of managerial labour; more like traditional ruling-class aristocrats in their consumptionist mores. Nowadays, from the 2000s, we have a unionised funded salariat – the core of a new ‘upper working class’ which is closely linked to Labour politics – and an inherently insecure and under-unionised passive ‘lower working class’ precariat.
Economic ‘games’ (a technical term in economics) – such as ‘pay equity’ activist games – have become increasingly tone-deaf. This is especially true for this week’s secondary school teachers’ strike action – which appears to be a somewhat piqued reaction to its thwarted ‘pay equity’ submission – for a profession with employment security and reportedly having already achieved six-figure average salaries. And it is ‘tone-deaf’ in the context of what both National and Labour have framed as the present ‘cost-of-living’ crisis. Clearly, New Zealand can never match Australia for teachers’ salaries; that ship sailed more than 35 years ago, when suffocating macroeconomic policies created a decade of near-zero growth in New Zealand but not in Australia. For decades now, New Zealand has been to Australia much as what Poland or Czechia is to Germany. The fact that 63 percent of secondary teachers are female cannot be, in itself, a justification for raising the pay relativity between secondary-school teachers and (say) prison workers or defence force workers. Those other occupations have their issues, too.
Inflation, Cost-of-Living, and Economics 202
Setting wages on the basis of occupational relativities rather than in accordance with the market forces of demand and supply has not served New Zealand particularly well. In the 1960s compliant wage-setting had been counter-inflationary. In the early 1970s, the necessary wage catch-up almost certainly contributed to escalating inflation, though international factors were then the main drivers of inflation. I remember 25% CPI inflation in the United Kingdom in 1976, significantly higher than for New Zealand’s peak year.
In the late 1970s, following a coup in academia (most associated then with the name Milton Friedman, and the Chicago School), ‘expert thought’ about inflation was returning to the monetarist ideas which gained currency during the mercantilist era; ideas associated with the likes of Jean Bodin (16th century), John Locke (17th century), David Hume (18th century), and David Ricardo (19th century). Money was understood then to be gold and silver coin (specie); inflation was understood as a fall in the price of money; effectively a fall in the price of gold or silver. In the 1970s, after the gold-exchange standard was abandoned, the ‘fall in the price of money idea’ was adapted to modern fiat money, with Friedman’s provisos that a seemingly insignificant (at the time) over-restriction of the money supply could cause a ‘great depression’, and a seemingly insignificant (at the time) over-expansion of the money supply could cause a ‘great inflation’. In Economics 202 (intermediate macroeconomics), this idea is embodied in the Rational Expectations Hypothesis for which Robert Lucas won a Nobel Prize in 1995.
While the rational expectations’ theory is false in one key respect – the idea that it is normal for an inflationary ‘spiral’ to accelerate in the absence of macho policies of monetary restriction and credibility brinkmanship (noting that the present Governor of the Australian Reserve Bank is ‘macho’ in this respect) – it does offer a valid understanding of ‘demand-shocks’ and ‘supply-shocks’ as the beginnings of inflationary events; as the beginnings of ‘secondary inflation’.
A demand shock, such as an ‘over-stimulus’ (or a bout of animal spirits), brings about primary inflation. Whereas a supply-shock is not inflation at all; it’s simply an unexpected or unwarranted cost that has to be absorbed, such as the 2021 Covid19 supply-chain disturbances and the disruptions to food supplies in 2022 due to the Russia-Ukraine War. Secondary inflation can be understood as the adjustment ‘ripples’ emanating from the primary event. The idea that such ripples naturally accelerate – through an expectations’ mechanism – is metaphysical nonsense. Ripples settle – in this case through market mechanisms – unless invigorated by misplaced policy settings.
(A critical missing ingredient of the theory of inflation is the notion of ‘supply-elasticity’, also known as ‘surge capacity’. A sustainable anti-inflation program needs to create a destressed norm, which allows settled economies to respond to shocks – such as wars – in a responsive ‘quantitative’ way, through output flexibility rather than being thrown into inflation or deflation. The monetarist theory of ‘too much money chasing too few goods’ overemphasises the ‘too much money’ and underemphasises the reasons why there may be ‘too few goods’. Recent restrictive monetary policies have created supply rigidities by requiring the emigration of skilled workers, and by forcing sawmills and similar industries to downsize their capacity; see More Jobs at Risk in Tasman Sawmill Closure, 21 August 2015.)
One of the most-cited examples of a supply-shock in the literature is the ‘accommodation’ of a primary wage bid, such as a Pay Equity bid. The best way to think of a primary wage bid is to consider an economy that’s in a settled state (‘equilibrium’), and (for some ‘perverse’ reason) a group of workers seek to gain an advantage over other groups of workers. (Of course, ‘the economy’ is never in a ‘settled state’; nevertheless, careful analysis can establish whether any particular wage bid is stabilising or destabilising. An example of a necessary wage shock was the previously mentioned catch-up wage growth in New Zealand from 1969 to 1973.) A classic example of a destabilising wage bid is one which a strong union seeks to forge a new relativity.
To a classical macroeconomist, pay-equity claims in general – and including pay-equity-like claims such as the present teachers’ dispute – look very much like (if the employer grants the wage demands, that is) a textbook supply-shock which can initiate a spiral of accelerating inflation. The monetarists’ medicine to any ensuing secondary inflation (or to anticipated secondary inflation) is to suffocate the economy by ‘restricting the money supply’ ‘as much as it takes’ to terminate or prevent that event. (To use the ‘ripple’ analogy, it’s a ripple-suppression policy.)
In addition to the suffocating nastiness of that policy medicine, the interest-rate method of anti-inflation monetary policy adopted since the 1990s, such aggressive policy itself is a supply-shock (a ‘cost-of-living’ shock, albeit a non-textbook shock). An upwards intervention in the price of borrowed money adds to the cost-of-living, creating secondary inflation much as textbook supply shocks can create secondary inflation. The treatment of the ‘inflation cancer’ is itself such a cancer. Sometimes – though not typically with medical cancer – the best treatment is to wait with a watchful eye; to allow the ripples to subside.
Careless and tone-deaf Trade Union actions can precipitate the adoption of harmful and unnecessary policy interventions.
From a Trade Union viewpoint
The first thing a trade union should do is to contest the economic analysis of ‘the other side’. If it cannot or will not do this – if it cannot demonstrate that a pay claim is benign to the wider working and non-working classes – then it should not pursue the claim. The current teachers’ pay claim has made little attempt to contest the prevailing ‘cost-of-living’ narrative. This in a fait accompli political environment of ‘fiscal consolidation’ (aka ‘austerity’) and sensitivity to high prices. Unions’ priority should be to contest these uncontested and under-contested narratives.
All I have heard from the secondary teachers’ Union is that ‘the government could have done other things’ in 2024 – such as not granting ‘tax cuts’. They say that what their members have been offered is “less than the rate of inflation”, meaning a real pay cut. They have a credibility problem here, because in real terms (ie after adjusting for CPI inflation), the 2024 income tax adjustments were a tax increase rather than a tax increase; those income tax adjustments only partly compensated for CPI price increases.
The second problem is that only a part of the CPI-inflation that we have experienced is actual inflation. It is likely that the major part of the CPI increases this decade have been due to (ongoing) primary supply shocks, and not to (secondary) inflation at all. The sad thing about supply shocks is that we all have to bear them. Though some try to make others bear these real costs; for example, those who favour forever-wars tend to want others to pay the costs. (We should of course recommend ways to minimise future supply shocks; for example, to advocate peace over war, sustainability over profligacy, sufficiency over the quest of a few to make more-and-more money by selling more-and-more stuff.)
Our trade unions need to ‘read the room’, and to offer analysis and critique of the problematic narratives which enmesh us, and prevent the human world from evolving in the gentler and more sustainable ways which most of us favour. They should not be pushing the interests of one identity group over others.
Pushing for pay relativities vis-à-vis other occupational groups is not the answer; rather it’s part of the problem of some groups trying to ‘get ahead’ while others cannot or should not. Women – certainly modern women – are not meek. The assertive pretence of female meekness cannot achieve much. Thoughtful analysis and courageous counter-narrative can achieve much more. Governments – and the funded sector generally – need to see ways beyond their own financial housekeeping, and to emphasise their ‘duty of care’ and societal investment roles. If privileged wages in the funded sector are the answer, the wrong question was probably asked.
We have Equal Pay – equal pay for equal work. And we have a Universal Basic Income for seniors. Those are achievements we should celebrate, and draw inspiration from. Women assertively pursuing the narrative that women are paid less than men because women are meeker than men, could instead be critiquing the false macroeconomic narratives which represent the real problem.
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Keith Rankin (keith at rankin dot nz), trained as an economic historian, is a retired lecturer in Economics and Statistics. He lives in Auckland, New Zealand.
