Another cheer for MBIE

Dr Bryce Wilkinson
Insights Newsletter
16 July, 2021

In my book, governments that do not publish a competent cost-benefit assessment justifying their spending and regulatory proposals do not take community wellbeing seriously.(Only if the wellbeing benefits plausibly exceed the costs is the policy likely to benefit the public.)

The absence of such an assessment is now common. It suggests that a measure is being imposed on the public for partisan or elitist, paternalistic reasons.

Taxpayers pay public servants to give competent advice in the public interest. MBIE gained a big first cheer back in 2018 when it assessed that the government’s cavalier ban of offshore gas and petrol exploration would cost the community a great deal for no clear environmental benefit.

MBIE almost certainly sent that advice against the wishes of ministers. That is a courageous thing for a department and its officials to do.

Now MBIE has done it again. Last week MBIE proactively released its assessment of the likely costs and benefits of the government’s flagship Fair Pay Agreements policy. This unfair policy will see many workers and employers forced into collective agreements against their will. The only clear beneficiaries are the trade unions and employment lawyers. The biggest losers are likely to be the least employable – the ones who struggle to get paid employment currently.

To its considerable credit MBIE’s sixty-five page assessment was both reasoned and critical. In this age of what appears to be a bullied, cowed and thinly-skilled public service this is a rare thing.

In a nutshell, MBIE did not find that the benefits from the government’s proposals were likely to exceed the costs.

The government’s ostensible justifications for its proposals are mere arm-waving assertions about an ‘imbalance of power’ and a mythical ‘race to the bottom’ under competitive wage setting. Final year IT students in NZ are reportedly being lured across the Tasman by salary offers of NZ$215,000. In New Zealand restaurant owners and horticulturalists struggling with labour shortages. How can these events be due to employers having too much power?

Outside government, supply and demand forces wages to track productivity. The best protection workers have against an employer who tries to exploit them is competition from other employers.

By hiking the minimum wage and these proposals the government seems to be hell bent on removing this form of protection for the least productive workers.

A less Orwellian name for the legislation would be the Unfair Pay Agreements Act.

Stay in the loop: Subscribe to updates