Why do public sector workers get paid $10 an hour more, on average?
Hamilton lab workers took strike action in February over a 30 percent pay gap between private and public services.
Photo:
RNZ/ Libby Kirkby-McLeod
Pay equity claims are probably only part of the reason why public sector pay has pulled ahead of that of the private sector in recent years, commentators say.
The government announced on Tuesday it was raising the threshold pay equity claims had to meet to prove that work had been historically undervalued. It meant 33 claims would be stopped.
Business NZ chief executive Katherine Rich said she agreed changes were needed and, as it stood, the claims process was creating large anomalies between the public and private sectors.
"Increases in public health sector remuneration have created difficulties in the private sector where they can't afford those pay rates.
"Where those private sector employers receive government funding for some services, it is not enough to cover the contracted services they provide. As a result, they are losing staff, suffering from industrial action and face problems in delivering their contracted work."
Last year, Stats NZ data showed private sector wages were up 3 percent over the 12 months, compared to 4.5 percent in the public sector.
The average ordinary time hourly earnings in the private sector was $40.39 compared to $50.65 in the public sector.
The NZ Nurses Organisation said it had been told that private sector pay was typically up to 19 percent less than for those working in the public sector.
Brad Olsen, chief executive at Infometrics, said it was not possible to say how much the divergence between the public and private sectors was due to pay equity claims.
He said a large part of the difference was also recent big agreements with the healthcare and education workforces, which had driven up salaries.
"If we look specifically at healthcare and social assistance, for that entire industry the latest annual increase in December 2024 was 6.2 percent for labour costs, compared to an all-industries increase of 3.3 percent.
"So health is already stronger than all industries on average. For healthcare, the annual increase for private sector healthcare was 5.5 percent and for public healthcare it was 7.1 percent."
Both rates had been running at higher percentages in the past, he said, and there had been wage pressure on the sector due to a shortage of workers, too.
The bigger increases could also have indicated there was a catch-up that needed to happen.
He said it was hard to say whether the change would mean smaller increases in future, but it would extend the timeframes for any deals to be done.
There was a growing sense that there would be more pressure on public sector wages because of concerns about spending, he said.
"Although we've seen a large increase in public sector labour costs in recent years that number will be an area the government is trying to limit further increase because it's got out of kilter with where the private sector is."
Economist Shamubeel Eaqub said the difference in average pay across private and public sector workers was due to the composition of the jobs involved.
Green Party spokesperson for women Kahurangi Carter said the government needed to set the standard when it came to paying women fairly.
"Failing to do so risks a race to the bottom between the public and private sector, resulting in the pay gap significantly widening.
"We can afford to pay women what they deserve, anything less is unacceptable. The claims process was the right thing to do. Not doing this would have resulted in masses of litigation across various industries."
Professor Helen Roberts, at the University of Otago, said it was problematic that some of the claims had been comparing against different sectors.
"People in the public sector will always compare themselves against what someone else is earning but the conditions around work expectation or the risk or the job stability all those other factors that feed into determining what you get paid aren't directly comparable, which I guess is the point."
Roberts said the country as a whole did not do a good job on thinking about how it could close or even acknowledge the gender pay gap.
Australia's workplace gender equity agency had done significant work on monitoring and reporting detail in specific workplaces, which allowed action to be taken in places of genuine inequality, she said.
"I understand the government is trying to cut costs around the process but that doesn't solve the longer-term problem of are people being fairly paid, regardless of gender, given their responsibilities and their skill set?"
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