Wage freeze for DiTs is on the table- why we will fight it

24-May-2020

 

Wage freeze for DiTs is on the table- we will fight it

A recent article in the Guardian by a doctor working in the NHS sums up many of the frustrations that are experienced by doctors in NSW Health. At the same time that you are told that you are heroes , the NSW Government escalates anti-public sector worker rhetoric.

Two weeks ago, we reported that the NSW Government was considering a wage freeze for public sector workers other than frontline health workers - such as doctors and nurses. In fact, the NSW Treasurer responded publicly to an ASMOF tweet stating that frontline health workers would not have their pay increase taken away. 


Now the Government has told ASMOF and other public sector Unions that all public sector workers will have their 1 July 2.5% pay increase taken away.

The logic put forward is that public sector workers must “share the economic burden” of COVID 19, but have refused to present any economic modelling which would justify the freeze. Their position mirrors that of the far-right think tank the IPA which supports a wages cut for public sector workers - asserting that public sector workers are “sheltered” from the negative impacts of the lockdown measures unlike the private sector which are the “productive sectors of the economy."

 

A wage freeze would certainly worsen an environment which is already hostile to increases in legal protections for doctors in training. The NSW Governments wages policy, which means that doctors and other public sector workers can not be awarded increases in remuneration or other conditions of employment that increase costs by more than 2.5% per year, has already spectacularly successful in limiting wages increases and preventing important and necessary improvements to conditions of employment. It has made it extremely hard for us to achieve the fair and reasonable industrial gains for doctors in training – like safer working hours.

 

Ironically, the research actually shows that public sector pay freezes could push economy from recession to depression. Economists Jim Stanford and Troy Henderson have shown there is no economic logic to a public sector wages freeze, arguing that arbitrary pay freezes are both unfair and economically counterproductive. Dr. Jim Stanford, Director of the Centre for Future Work said “Pay freezes are being imposed at the very moment when public sector workers such as healthcare workers, first responders, teachers and social service providers are performing vital tasks, at personal risk to themselves, to support Australians through the pandemic. Freezing pay for these essential workers is not just morally questionable -- it's also a major economic mistake”.

Government policy should be driven by economic reality, not political optics.

Not only will the freeze have ongoing costs for public sector workers well beyond six months, the freeze will be a serious drag on post-crisis growth - reducing economic activity at time when the economy needs all the growth it can get.

The authors show that a wage freeze is not made up in later years resulting in a permanent reduction in the nominal wage base. So, workers continue to incur income losses long after the wage freeze has been lifted. This is because the forgone wage freeze is never caught up. If you freeze 2.5% wage growth for one year, the government won’t give a 5.1% pay rise in a year’s time to make up for the lost year. So, you are always that one year of 2.5% growth behind.

Freezing public sector income not only acts against efforts to use public spending to boost the economy, it also hurts future private-sector wage growth.

Henderson and Stanford note that the public-sector wage restraint that occurred after the GFC “led the way” in “ushering in a more serious and lasting downturn in wage growth ... that started about three years after the GFC hit”.

Key findings of their research:

  • At least 35% of the purported ‘savings’ from freezing public service pay is offset by the loss of direct tax revenues that would have been collected as a result of higher income and spending by public servants. And considering other tax revenue losses from the resulting slowdown in broader wage growth, even more of those ‘savings are never realised.
  • Pay freezes in the public sector spill over into weaker economy-wide wage growth through three key channels: a composition effect, a demonstration effect, and a macroeconomic effect.
  • Freezing pay for even short periods reduces the lifetime income and superannuation savings of public sector workers by tens of thousands of dollars, because it permanently reduces their lifetime wage trajectory.
  • A 6-month pay freeze for a typical federal APS worker will reduce career earnings by an estimated $23,500, and superannuation accumulations by another $4000 or more. The longer 2-year freeze contemplated for Brisbane local council workers would reduce career earnings by over $100,000, and superannuation accumulations by $17,500.
  • Misguided public sector wage restraint in the aftermath of the GFC short-circuited an initial recovery in private-sector wage trends in 2010-11 and helped lock in a lasting deceleration of national wages after 2013. Since then Australia has experienced the slowest sustained wage growth in the entire post-war era.

In an earlier report False Economies - The Unintended Consequences of NSW Public Sector Wage Restraint, the same authors looked at the unintended consequences of the NSW Government’s Wages Policy.

They found five unintended, harmful side-effects of the ongoing wage cap, including:

  1. Over the five years from 2011 through 2016, the state’s public-sector wage suppression reduced consumer spending in the state by a cumulative total of some $3.4 billion, harming businesses large and small.
  2. Australia’s national GDP was reduced by an estimated cumulative total of almost $8 billion over the 2011-16 period.
  3. The NSW government’s wage austerity therefore reduced its own revenue (through that reduction in GDP) by an estimated $1.2 billion over the 2001-16 period.
  4. Each public-sector worker’s “workload” increased by 7.5 percent in the last five years – yet the wages policy in fact suppresses true productivity growth in the public sector.
  5. The NSW government’s extraordinary interventions, removing normal wage bargaining rights from a significant and influential section of the state labour market, have contributed to the unprecedented stagnation of wages in the overall state labour market – one that the government itself admits is hampering both economic growth and fiscal well-being.

For nine years the NSW Government has pursued an ideological attack on the NSW public sector and the workers who keep the state running. NSW Labor has given a commitment to ASMOF and other Unions that it will not support this attack on our members, saying that "These workers deserve a medal, not a pay cut."

We defeated the threat of privatisation and united the Union Movement can defeat this attack on your pay.

 Make sure you tell your colleagues and other public sector workers about the potential wage freeze and encourage them to join their Union- we are stronger together.