Labor’s wages policy is admirable in intention but addled in execution

After the years of fire, flood and pandemic, many NSW public service workers deserve pay increases. Labor certainly wants to pay them more but its solution is problematic: the independent agency charged with scrutinising the cost of election promises has warned Labor may struggle to secure the savings needed to afford higher wages.

The Parliamentary Budget Office (PBO) – providing costings of election policies in the lead-up to NSW elections established by the Labor premier Kristina Keneally in 2011 and maintained by Coalition governments ever since – has evaluated the promises of both parties in this final week of the campaign and found a 1 percentage point wage rise on the current cap would increase government costs by $2.6 billion over three years if offset savings weren't found.

The pay packets of 430,000 government employees (with health workers and teachers making up almost 60 per cent of the workforce) are at the heart of the election’s main political skirmish over a cap on wages growth for public servants. It was introduced by the Coalition soon after it won office in 2011. The cap was first set at 2.5 per cent. It was reduced during the COVID-19 crisis, then lifted to 3 per cent as inflationary pressures grew last year. An additional 0.5 per cent is on offer next financial year if “productivity improvements” can be achieved to absorb the cost of the increase.

Labor wants to remove the 3 per cent cap and pay more, arguing that will allow greater flexibility in negotiating public sector wages and work practices. So far, Labor leader Chris Minns has not adequately identified what specific savings or productivity improvements he has in mind.

For its part, the Coalition has been a prime beneficiary of its wage cap policy, primarily because it freed up some budget expenditure. But although helping the government’s bottom line, the cap also imposed lower standards of living on frontline workers including nurses, teachers and firefighters whose wages have failed to keep up with inflation for most of the decade.

NSW’s 3 per cent wage cap remains the highest of the states. Victoria is still reviewing its 1.5 per cent wage cap and Western Australia has adopted a 2.5 per cent cap with an extra 0.25 per cent for negotiated reforms. Other states do not have a formal public sector wage policy, although Tasmania set a target of 2.5 per cent increases in its most recent budget. Queensland, however, went its own way 12 months ago, approving enterprise agreements for nurses, teachers and police officers totalling 11 per cent over three years.

The NSW wages cap of 3 per cent is more than generous, but some workers need and deserve pay rises. The unavoidable and harsh reality is that such increases come with a price. That said, there has to be room to manoeuvre. The believes nurses in particular should be recognised, firstly for the work they have done during the pandemic and, secondly, to provide a monetary incentive to address the crisis caused by so many of them leaving the profession.

If Labor believes nurses deserve better salaries, Minns should tell them how much they will receive, when they will get it and how taxpayers will pay for it. As it stands, Minns has said little specific, preferring instead vague homilies about Labor making structural changes to how it determines wages for public sector wages with a focus on negotiations with unions.

Even then, the PBO questioned Labor’s ability to deal with unions: “The historical experience in NSW is that this has proven difficult in practice.” Minns should know the jumbled jargon of industrial relations is a poor substitute for clear, open policy.

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