This system would allow minimum terms and conditions of employment to be set across whole industries or occupations. An FPA process would be triggered if either a “public interest” test is met, or if the lower of 1,000 workers or 10% of the workers in an industry or occupation are in favour of commencing negotiations for an FPA.

Union representation in negotiations would be compulsory for workers. Employers would have to be represented by industry or employer organisations. If agreement could not be reached in negotiations, a statutory body would determine the outcome for the entire industry or occupation (with only limited, temporary exemptions).

It is claimed current labour market settings have seen a decline in the share of New Zealand’s gross domestic product (or “share of the pie”) going to workers. This concern is a myth. The share of GDP going to workers did decline in the late 20th century, but this fall largely occurred in the 1970s and 1980s. Since the 1991 reforms, the decline in workers’ share of GDP has been arrested and is now trending upwards.

This concern relates to an alleged rise in income inequality and a “hollowing out” of middle-income wages since the 1991 reforms. This concern is also misconceived. Though income inequality has been rising in many other countries since the early 1990s, income inequality before taxes and transfers has declined in New Zealand since the 1990s.

FPA postulates that the current regime sees “good” employers being disadvantaged by “bad” employers by undercutting them in a “race-to-the-bottom”. This concern is also a myth. The data show that average wage rates have risen faster than inflation across all income deciles. Workers’ wages are simply not being bid down by employers on an ever-decreasing basis.

FPA relates to New Zealand’s comparatively poor productivity growth rates. It is true that New Zealand has a productivity growth problem. However, this problem spans the last 50 years. There is no evidence linking low productivity growth over the last decade or two with our current labour market settings.

We have asked Siva Kilari (Active community leader & Universal Granite proprietor) about FPA, and he explained this bill in four simple steps as below…

First, there is a significant risk of slower productivity growth from FPAs locking in inefficient practices and reducing labour market flexibility. These problems will be amplified by the disruption from automation and innovation to the future of work. History also suggests FPAs will harm industrial relations, which will also impact adversely on productivity.

Second, if the FPA process is successful in forcing up wages, there is a risk that FPAs will cause job losses in firms unable to recoup the costs of higher wages from customers. The burden of job losses is likely to fall disproportionately on the unskilled. Higher wage rates will raise the hurdle for the unemployed, particularly inexperienced (i.e., young) and unskilled workers.

Third, the FPAWG’s recommendations will take away workers’ freedom to choose not to be represented by unions in their wage negotiations.

Finally, there is a serious risk of harm to consumers from firms increasing prices for goods and services to recoup increased labour costs arising from FPAs. And the effect of increased prices will be felt most acutely by New Zealand’s least well-off.

He also mentioned, every employer would like to interact with his employees directly. This will allow to bridge & maintain a positive relationship. Certainly, these acts are not helping them in any manner, he said.

Let’s see what outcome FPA will bring & who will benefit. People? Government? Or The Unions?

-Siva Killari, is an Auckland based entrepreneur, investor, developer, and a community leader.