Collective agreements get more pay rises

Posted By TEU on Oct 2, 2014 |


Does it pay for you to be on a collective agreement rather than an individual agreement, asks CTU economist Bill Rosenberg? The evidence available suggests that yes, workers on collective agreements get bigger and more frequent pay rises.

They may of course get other benefits aside from a better deal on pay, such as better job security, leave, redundancy pay, and consultation processes, and more say in their working conditions.

From June 1993 to June 2014, according to data from the Centre for Labour, Employment and Work (CLEW) at Victoria University, the average pay rise per year for members on collective agreements was 2.6 percent a year.

For all workers, according to Statistics New Zealand’s Labour Cost Index (LCI) it was 2.1 percent a year.

If that doesn’t sound like much of a difference (half a percentage point a year), consider this. The average wage in June 1993 was $14.80.

If it went up by the rate of the LCI, it would have been $23.00 in June 2014. If it went up at the rate of collective agreements it would have been $25.39 in June 2014 (it was actually $28.23 because of increases paid for individual merit to workers on and off collective agreements, and changes in industries, occupations and the like).

For private sector workers, the rise over that period was 2.8 percent for members on collective agreements but only 2.1 percent on the LCI. For those in central government, the comparison was 2.4 percent versus 2.3 percent, and for local government, 2.7 percent versus 2.2 percent.

So by sector, there is a consistent picture of collective agreements doing better. This has been true over various periods too: collective agreements were better even over the Employment Contracts Act period of 1993-2000. There is a similar story for industries.

Using LCI survey data we can also look at the proportion of workers who get different levels of pay rise. This produces the startling finding that collective agreement members are about twice as likely to get a pay rise as workers who are not on a collective agreement.

In the year to June 2014, 98 percent of collective agreement members got a pay rise while only 48 percent of workers not on a collective agreement got one. Looking back to 2003, that has consistently been the case, and around the worst of the global financial crisis (in late 2009, early 2010), the ratio reached over three times.

Then, collective agreement members kept getting steady increases while the proportion of workers not on a collective agreement who got a pay rise fell back to 31 percent.

This is not because collective agreement members got lots of low increases while others got few, but higher increases. Collective agreement members were for the great majority of the time getting more pay increases in all sizes of pay increase.

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