THE PRESS FRIDAY, FEBRUARY 14, 1986. High wage settlements

Press, 14 February 1986, Page 16

THE PRESS FRIDAY, FEBRUARY 14, 1986. High wage settlements

The continuing high settlements in the wage round are giving concern to the Government, as indeed they should. It is easier to find reasons for the high wage round than it is to know whether another wage round would be as high. Unhappily, it is also easier to foresee some of the consequences of the high wage round than it is to know whether lessons to be learned from the bad effects will be absorbed and applied. The Government is relying on some of the consequences to bring the country — employers and employees alike — to greater sense on wages. This may be too much to hope for, at least in the short run. The most obvious influences on the high wage round are the long period of the wage freeze and the frustrations which built up during that time, the rate of inflation, and the report of the Higher Salaries Commission. The report will be remembered not only for the size of the increases that it awarded to top public servants, members of Parliament and others, but even more for the timing of the release of its report. The increases removed, as has been observed already, some of the moral force of the Government, as it tried to reason with unions about moderating wage demands. ■ . . "- ' Although the wage freeze was an obvious influence, a s more subtle influence lay in a long period of Government pressures on wages. The present Government attempted to introduce as much free bargaining in the wage round as the country has known for decades. It would have been better to have introduced free wage bargaining at a time when inflation was low and when there was generally less of a sense of frustration among employees. The trouble is that such an ideal state of affairs is unlikely to present itself for a political or economic experiment in New Zealand for the foreseeable future.

The Government apparently believes that people will learn the hard way. The lesson will be that high wage settlements will lead to uric&iripetitiveness in * exports * and to uncompetitiveness in local manufacturing against imports; and that jobs will be lost as manufacturers lay off labour to keep costs down. These are hard and difficult lessons.

In a country in which people have grown used to looking to the Government to solve economic problems, people might not in fact take the lesson that the Government hopes they will take. Memories of import controls die hard and, while there is still a swing

against the interventionist policies of the previous Government, it would be a bold prediction to say that those days will never return. There is still some latent sympathy for the days of Sir Robert Muldoon in the National Party and among National Party supporters. Within the Parliamentary Labour Party there is a small group that hankers after old-style Labour ways; and, within the Labour Party organisation, there is some wonderment at the ways of this Labour Government. The Government, after all, has to rely on the support of voters, and it cannot be sure that people are going to draw the right conclusions from their experience. So is the only answer for the country over high wage settlements to envisage a return to Government pressures or controls? It is true, that the wage and price freeze brought about*a marked reduction in inflation. The reduction in inflation helped some exports of manufactures, though it may be argued that the export incentives were a greater influence on exporters.

The country has not performed well economically for many years and the various other controls, not just the wage and price freeze, undoubtedly distorted much of the economy to meet what were supposed to be temporary problems but proved to be lasting ones. The present experiment has not yet proved that New Zealand will be in sounder heart economically; but it would seem to need a little more time before a judgment can be made.

By the next wage round, some of the frustrations of the wage and price freeze will have spent themselves. By the next wage round the responsibilities of free wage bargaining should have sunk in. The question is whether a new sense of responsibility will have been developed by then. In the meantime, the present wage round is not over and what happens in the freezing industry will be important both for the industry itself and ? for the country as a whole. Ability to pay is a plea often made by employers; in the freezing industry and in the farming industry as a whole the question of ability to pay may assume greater significance in these than it has in other wage negotiations. By the end of this year, ability to pay may have taken a more prominent place in the thinking of many more industries, as well as in central and local government.