Gig economy suppressing wages more than migration: Reserve Bank
The "gig economy" could be having more of an impact on wage growth than record-breaking migration, Reserve Bank officials claim.
Although the number of people employed in New Zealand has been rising by around 3 per cent a year for five years, wage growth has been weak, with the labour cost index rising just 1.7 per cent in the year to June 30.
Much of the commentary on the weak growth in pay rates has focused on New Zealand's record breaking net migration, which has added 220,000 or 6 per cent to the working age population in five years.
But the Reserve Bank and other analysts are now pointing both to changing work patterns for undermining job security and lowering wages.
Workplace productivity has also been falling. JBWere strategist Bernard Doyle said on Thursday that "New Zealand has been in a productivity recession since 2012".
While Uber, the ride sharing and private hire technology company has become the symbol of technology impacting work patterns and job security, other platforms are impacting the accommodation, retail and hospitality sectors.
Reserve Bank governor Graeme Wheeler said as work patterns were becoming more casual, employees appeared to be trading wage increases for job security.
"Business models are changing. You're seeing it in the retail sector, you see it in the transport sector... you see it in the hotel sector," Wheeler said.
"You basically can contract on the spot market for a lot of services," he said, adding that the phenomena had a "quite significant" impact weakening wage growth.
John McDermott, the Reserve Bank's head of economics, said while the surge in migration had added supply to the workforce, it also boosted demand for goods and services. This meant the overall impact on wages might be small.
"While we think [immigration] has had a small net impact [on wages] other factors, productivity gains, which have been very low, and technology changes are probably having a bigger impact on the wage story than the net migration story [is]".
The comments came as the Reserve Bank outlined the breadth of work it was doing to understand why inflation was proving to be as low as it is.
In recent days analysts at both Moody's and Standard & Poors have separately pointed to technology changes weakening the power of employees, as one of the key reasons why wage growth has been lower than the level of job creation would suggest it should be.
During a presentation in Wellington on August 4, Patrick Winsbury, a Sydney-based analyst for Moody's said increasing parts of the economy were being impacted by the so-called "Uberisation" of the workforce.
"When I talk to younger people in my neighbourhood, and the jobs they're taking on, and what's being offered, a lot of it's these Uber-style jobs, such as in the software industry, where you really have no security of tenure," Winsbury said.
"You don't have the social welfare element locked in."