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Worker confidence critical for NZ

‘‘The feeling of being powerless in my role is very real.’’

It is not unusual to read about business confidence and consumer confidence – both are seen as key statistics for our economy and how well we are doing as a nation.

We also hear a lot about the mood of the chief executives of our biggest companies.

However, we hear a lot less about the mood of the 2.8 million people who rely on wages or salaries to pay the mortgage.

That is despite the fact that they contribute tens of billions of dollars of economic value as well as a massive slice of government revenue. Not to mention the small matter that wages and salaries are the way most families keep a roof over their heads and food on the table.

Four years ago we set out to correct this data gap with our work life survey. At the start of every year we would survey about 50,000 people from our database to ask them about their experience of work in the year before. These people are union members, non-members, small business owners, and the selfemployed. This year we had 1500 responses in a day-and-a-half.

The message about the past 12 months is clear – people’s work lives are the worst they have been in four years.

Part of that is due to the pressures of Covid-19. More people are facing increased workload and worse work-life balance. Seventy per cent report their incomes are falling behind the cost of living as Covid pushes up prices.

But Covid has only uncovered the structural weaknesses in New Zealand’s employment landscape. For example, nearly two-thirds of respondents said their ability to manage a threemonth period of unemployment was ‘‘poor’’ or ‘‘very poor’’.

That is not a situation that arises overnight, it is the result of long-term low wages, high costs and insecurity. It is a structural issue and, what is worse, it is an issue that makes us incredibly vulnerable to an economic downturn as a people and as an economy.

‘‘Wage scarring’’ is an economic term used to describe how losing a job impacts a person’s income in the long term. It happens when people who lose their jobs have to take whatever job comes their way as quickly as possible because they have bills to pay and no savings.

It leads to poorer financial outcomes for them, and it leads to worse economic outcomes for us as a nation because people’s skills are not deployed efficiently and productivity falls.

It makes recessions worse and harder to get out of.

In 2017, intergovernmental economic organisation the OECD identified New Zealand as a nation in which people face significant risk of wage scarring when they lose their job. It found wage scarring was worse in New Zealand than elsewhere and even three years after redundancy, income was about 20 per cent lower for workers who had lost a job compared with those who stayed in work.

Individually this is a tragedy, for the economy as a whole this is a disaster. Evidence from economists at Motu states that during a recession such as the global financial crisis this wage scarring costs the economy $15 billion a year. That is roughly equivalent to what we spend on law and order, transport and defence added together in a year.

Reading through the hundreds of comments people have made on our survey, you get an overwhelming sense of anxiety and of insecurity. People who have work are doing more hours just to stay afloat: ‘‘I have to work full time during the day and take on weekend and night shifts at a second job to make ends meet, so I’m currently working approx 80 hours a week to make ends meet which leaves little time for my kids.’’

Their financial insecurity is palpable: ‘‘The stress comes from trying to pay bills when costs are rising but wages aren’t. I’m approaching retirement and I’m really worried how that will go.’’

Their work leaves them with no control over their lives:

One public response to our survey from an ‘‘expert’’ was for people to ‘‘vote with their feet’’ and find another job. As if it was as simple as swapping laundry powder.

Let’s be clear: When so many working people are feeling the same way in hundreds of different sectors and jobs, the answer is not that they should all ‘‘find a new job’’. The answer is structural.

People have lost so much control over their work lives in the past few decades. Weakening of employment law and support for people out of work has eroded their power to negotiate a fair go and has made the consequences of not being in work much greater.

Nearly a third of people in our survey had their wages set by their employer without negotiation. Think about that: We are in the midst of a labour shortage and at least a third of people cannot leverage that into a basic good faith negotiation.

One-third of people surveyed either lost their job or lived in fear of losing their job in the past year. Again, in an incredibly tight labour market. Both of these facts point to a serious imbalance of bargaining power between working people and their employers.

There are two things the Government can do this year to redress that imbalance. The first is Fair Pay Agreements. The premise of these is simple. Let people across a whole sector bargain together for minimum standards. When so many people have no say in their terms and conditions despite a shortage of labour, the current way of bargaining is broken. FPAs will go some way to fixing that.

The second is Social Unemployment Insurance (SUI). Even with FPAs, the household economic resilience we need to stop wage scarring will take a long time to rebuild. The Government needs to implement a SUI scheme that provides people who lose their jobs with a backstop of up to six months, so they can get back on their feet properly. So we don’t lose their skills or their value to low skilled, low wage work.

Both of these policies are on the agenda for the coming year but neither should be taken for granted. If the Government does not see this through, we will see working people’s confidence take another hit. That is bad for everyone.

Business

en-nz

2022-01-18T08:00:00.0000000Z

2022-01-18T08:00:00.0000000Z

https://fairfaxmedia.pressreader.com/article/281668258343472

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