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Govt agrees $2 bln pay equity package for aged and residential care workers

Tuesday 18th April 2017

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The government will implement a historic pay equity pay deal for aged and residential care workers worth $2.05 billion of extra pay for some 55,000 people – close to 2 percent of the total New Zealand workforce. 



Prime Minister Bill English and Health Minister Jonathan Coleman announced the deal, which will bring some 20,000 workers on the minimum wage of $15.75 an hour to a wage of $19 an hour. 



That represented a 21 percent increase worth $106 per week before tax, and $5,511 per year. 



Across the board, aged and residential care workers would receive increases of between 15 percent and 49 percent as the package is implemented from July 1, depending on their skill levels. 



The deal “will deliver a significant pay boost to some of the country’s most dedicated, hard-working and yet lowest-paid workers”, said English, who expected there may be other groups who could argue for pay equity. 



However, the criteria for achieving an increase under the new framework would require claimants to pass over high hurdles. 



Coleman warned that ACC levies may increase over the next decade to help pay for the settlement although they are already set for the current financial year. 



It could also allow increased cost for means-tested residents of aged care facilities. 



Regarding whether today’s “large commitment” would be included within the new spending allowance the government has set aside for the 2017 Budget or would be treated separately, around 90 percent of the settlement costs were included in the government's recent HYEFU forecast, and the balance will be included in the Budget 2017 fiscal forecasts. The Terra Nova settlement will not be included in the Budget 2017 operating allowance.



The agreement follows the so-called Terra Nova legal action taken by the E Tu union on behalf of aged care worker Kristine Bartlett, challenging pay rates in her sector on a claim that they were influenced by the fact that most of its workforce are women. 



After the Court of Appeal continued to find in Bartlett’s favour, the government stepped in two years ago to start a negotiated settlement process rather than risk leaving it to the Supreme Court to rule a final determination. 



Separately, a tripartite group representing the government, employers and trade unions has been nutting out principles to apply to pay equity claims. 



While the full $500 million annual impact of the pay equity package won’t be felt in the government’s books until five years’ time, it is expected to have ripple effects beyond the public sector jobs affected. 



Bank of New Zealand economists said they expected a “non-negligible” impact on inflationary pressures from the third quarter of the current year. 



“There is also the potential for similar pay-equity claims to be brought by other government-related sectors, where pay rates are argued to be low simply because they are dominated by females,” BNZ said. 



Kiwibank economist Zoe Wallis said the settlement looked likely to add around 0.6 percentage points over the next five years. 



“This would mean that all else equal, overall wage inflation could increase from 1.6 percent year on year to 1.7 percent year on year due solely to the changes,” said Wallis. “So while it sounds like a big increase (and it is for those people impacted by the changes) the overall effect on headline wage inflation will be much less, and actually is relatively muted.” 





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