By Mike Treen
Official data on wage movements in New Zealand point to a real wage decline of around 25% between 1982 and the mid-1990s that has never been recovered.
There have been two series measuring wages in the period – the Prevailing Weekly Wage Index (discontinued in June 1993) and its replacement the Labour Cost Index. I have created a continuous series based on the LCI series back to 1982 (by adjusting the PWWI numbers before December 1992 when PWWI at 1000 was equivalent to the LCI at 868). These numbers are in turn deflated by the CPI index covering the whole period.
What is revealed is that by the mid-1990s real wages had declined at least 25%. There has been no recovery since then and real wages remain 25% below their 1982 peak. This result can be directly attributed to the combination of the massive deunionisation as a result of the anti-union employment laws and the recession that accompanied it in the early 1990s.