New statistics released by Victoria University's Industrial Relations Centre (IRC) reveal the latest trends in collective bargaining.

In summary, the study discloses an average annualised wage increment in collective agreements for the year to June 2011 decreasing to 3.1%. The private sector has seen a drop in collective bargaining coverage to an all time low of 9%, while public sector coverage continues to increase to 58%. Further, there is a continuing shift towards MECA (multi-employer collective agreement) bargaining, covering two out of every 5 collectivised employees in New Zealand.

Average annual wage increments

Wage rate figures taken from 760 collective agreements nationwide for the year to June 2011, covering 145,330 employees, represents an average annualised increase of 3.1% (down from 4.2% the previous year).

Generally, the public sector accounted for stronger wage growth than the private sector. The private sector recorded an average annualised wage increase of 2.8% for 2011.

A significant factor affecting wage rates across both sectors is the duration of the relevant collective agreement. Shorter term collective agreements (less than 12 months) generally contain the lowest pay increases, on average 1.5%. No doubt this is largely because these agreements have been negotiated (and perhaps renegotiated) after the onset of the economic downturn in New Zealand.

The highest average annual increases (at 4.9%) are found in agreements for terms of 13 to 18 months, covering 14.3% of all collectivised workers in New Zealand. Agreements for two years or more pay an average annualised increase of 3.4%. Figures for the year to June 2011 suggest that 60% of collectivised employees are covered by agreements for two years or more duration; while only16% are covered by agreements for 12 months or less.

The last decade has seen a shift in collective agreements away from specifying certain wage rates for specific roles or grades, towards identifying a range of wages within which a workers pay rate falls. In most industries, these wage rate bands are narrowing due to a decrease in maximum rates and corresponding increase in minimum rates.

Traditionally, collective agreements have not contained productivity or performance related pay clauses. However, currently more than a quarter of all collectivised workers are covered by provisions linking pay increases to performance targets. Further, certain collective agreements (covering 17% of collectivised staff) provide for a combination of productivity payments, bonus and/or salary reviews, thereby linking remuneration to performance.

Collective bargaining coverage – private v public

Total coverage figures for June 2011 demonstrate an overall increase in collective bargaining coverage, up 2.4% from the previous year. Collective agreements featured in the study ranged in size from those covering less than 50 employees to others covering more than 500 employees. The larger collective agreements (covering 500 or more employees) accounted for two thirds of the employees surveyed, but represented only 5% of the total number of collective agreements studied. The majority of collective agreements (62%) covered less than 50 employees.

In March 2011, collective bargaining coverage in the private sector had fallen to 9%, while public sector coverage had increased to 58%. This heavy concentration of collective bargaining in the public sector is mirrored by directly proportional levels of union membership.

Shift to MECAs

IRC statistics indicate a continuing trend towards MECAs, with 40% of all collectivised employees covered by MECAs for the year to June 2011 (up from 22% in 2009).

Most of the current MECAs are found in the public sector, particularly in health and education sectors and core Government. Current figures for collectivised employees covered by MECAs are: four out of five in the health sector; more than 75% in education; and 65% of core Government employees.

Only 13% of collectivised employees in the private sector are covered by MECAs. This figure is broadly static, up from 12% in 2010, with the remainder of unionised workers being employed on single employer collective agreements.