GUEST BLOG: Ian Powell – Pay freezes, health systems and medical specialists

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What has a pay freeze got to do with a universal public health system? Actually quite a lot. Health systems, especially public hospitals which handle the more complex and urgent cases that the rest of the system can’t fix, are by their very nature labour intensive. Overwhelmingly delayed or denied access to public hospitals are due to workforce shortages of at least one occupational group.

To the extent that pay impacts on workforce morale, retention or recruitment it also impacts on the accessibility, quality and effectiveness of a health system. This is no more the case than for medical specialists.

Blindsiding decision

On 5 May in a move that blindsided so many, especially those directly affected, Public Service Minister Chris Hipkins announced that public servants earning more than $60,000 would only be offered pay increases under select circumstances for the next three years. Further, there would be no pay increases for those earning more than $100,000. Pay increases would only apply to those earning less than $60,000 (about 25% of all public servants).

The pay freeze isn’t established by a change of law or regulations. But this isn’t the only way to achieve a pay freeze. The Public Service and Finance Ministers are giving ‘guidance’ to the employers of public servants. But this guidance is the kind of guidance you have when there is no guidance. Public sector employers are required to adhere to it.

Finance Minister Grant Robertson said this decision was necessary to keep a lid on public debt, which had skyrocketed during Covid-19 to pay for expensive measures like the wage subsidy. This was as good as it got as justification. He chose not to mention his government’s generous Amazon subsidy.

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Robertson’s justification was then quickly contradicted by the admission that there was no estimate of how much money would be saved by the freeze and the subsequent release of the Crown accounts which revealed that the Government’s financial books were $5.2 billion better off than forecast in December.

Divide-and-rule attempt with unions

The Government probably thought that it could divide-and-rule with the gesture of focussing on lower paid employees although most appear to have seen through this ruse. There would have also been hopes that the influence of the compliant Council of Trade Unions President Richard Wagstaff would help.

A promptly published opinion piece from him so soon after the announcement suggests collusion. Wagstaff whitewashed the implications of the Government’s decision refusing to acknowledge that it was a pay freeze .

The state sector unions saw through this and their response was strong. Reportedly some were furious with Wagstaff’s response including an email to affected affiliates arguing that the Government’s decision wasn’t a pay freeze. This meant that Wagstaff found it necessary to make a u-turn with a subsequent statement more expressly critical of the Government.

Government austerity flip-flop

As Bernard Hickey astutely points out the pay freeze should be seen as part of a broader shift by Government to austerity in its response to the Covid-19 pandemic; a political and economic flip-flop. Writing in his The Kākā Dawn Chorus (6 May) under the pointed heading ‘The brilliant and perverse absurdity of Labour’s austerity Budget of 2021’ the political economist said:

The Labour Government is painting Budget 2021 as a “fiscally responsible” plan for Covid recovery that allows public debt reduction from the mid-2020s. It set the scene this week by cancelling $926m of Covid spending plans, freezing most state sector wages and shelving big transport projects to start reducing debt within two to three years.

But Finance Minister Grant Robertson is falling into the same austerity trap triggered in 2011 by Bill English when he launched his ‘zero’ Budgets of 2011, 2012 and 2013 too soon after the Global Financial Crisis and Christchurch earthquakes. The return to austerity and ‘keeping a lid on debt’ successfully reversed the trajectory of public debt and squeezed the size of Government down from 35% of GDP to 30%….

Exactly the same thing is happening again, despite the change of party in power and Labour’s rhetoric about improving wellbeing in the long run. It is choosing debt reduction over a much more concerted effort to reduce child poverty, improve housing affordability and invest in climate emissions-reducing infrastructure.

Who are public servants

What isn’t always appreciated is the breadth of who public servants are. They are not just people employed by government ministries and working in offices writing policies, analyses and such things. The term public servant is very broad especially since the Public Service Act adopted last year extended public service coverage to the health (district health boards) and education sectors.

Those employed by DHBs include medical specialists, junior doctors, nurses, scientists, physicists, psychologists, physiotherapists, radiation therapists, dieticians and social workers. Teachers and police are among the largest groups outside the health system. To one degree or another many of them were affected by workforce shortages leading to stress and fatigue at best before having to carry so much of the burden of responding to the pandemic.

The moral outrage caused by the ungrateful pay freeze on these employees is well described by journalist Andrea Vance in her Sunday Star Times column today .

Impact on medical specialists

Medical specialists employed by DHBs are the highest paid public sector employees covered by a collective agreement (I was the advocate for all but the most recent). This highly specialised workforce has been in a dangerous state for both their own health and their patients for several years. Both National and Labour led governments have to take prime responsibility for this situation.

The best estimate of the level of specialist shortages is around 25% (shortages are always much higher than official vacancies). Meanwhile the demands on this workforce continue to increase. There is no demand tap that can be turned off especially when acute admissions are increasing at a higher rate than population growth.

Fatigue is inevitable but burnout even worse. The recently released survey conducted by the Association of Salaried Medical Specialists (ASMS) reports a 50% burnout rate, almost identical to the previous survey conducted five years ago. Attrition rates are higher than can be explained by normal retirement patterns.

For the patient on the operating table this means that there is a realistic likelihood that the pathologist or radiologist who provided diagnosis or the surgeon or anaesthetist in the theatre is burnt out.

Unfortunately New Zealand doesn’t train and retain enough specialists to fill this gaping 25% hole. Improving retention is often the best cure but not in this desperate situation. Recruitment is more critical but this requires competing in the international market particularly with Australia.

But, with a core salary gap estimated by BERL economists to be over 60%, New Zealand is in serious trouble. Highlighting the point is that the bottom steps in Australian state scales are higher than the highest step in New Zealand. This means that we can’t even say we are in an Australasian medical labour market; New Zealand is in an Australian market.

Seeking a salary increase of over 60% for DHB employed specialists would be (non-arguably) clinically mad. But there is another way of solving the crisis by constructing a new competitive scale starting at around the level of the bottom Australian steps. The establishment cost could be significantly minimised by transferring to the lower end of the new scale especially as nearly half of DHB specialists are on the top two steps.

With the right combination of union willpower and government responsibility this is doable. It would ensure that DHBs could compete with Australia for international recruitment and that we can also disincentivise our specialists don’t migrate across the Tasman. It would enable DHBs to resolve shortages, significantly reduce burnout and increase patient accessibility and safety. But no chance of this under the pay freeze.

Irony

For those who can afford it the private health system can be a more accessible and safer option. But this is unaffordable for the lower paid public servants that the Government claims to be so concerned about.

The most astute assessment of the Government’s pay freeze as come from right-wing blogger David Farrar. Both appreciatively and wittily he offered Robertson and Hipkins honorary membership of the right-wing Taxpayers Union. This says it all really.

Ian Powell was Executive Director of the Association of Salaried Medical Specialists, the professional union representing senior doctors and dentists in New Zealand, for over 30 years, until December 2019. He is now a health systems, labour market, and political commentator living in the small river estuary community of Otaihanga (the place by the tide). First published at Otaihanga Second Opinion.

15 COMMENTS

  1. The false economic atmosphere we have been living under is coming to an end. The hundreds of billions that have been borrowed to pay workers who couldn’t actually work during the worst days of our COVID lock downs was not growing on trees but was always going to haunt our recovery. On one hand we’ve been told how the Government had spent less than budgeted on the other our foreseeable debt is spiralling out of control. Which is it. This clumsy attempt to pay the piper by putting blue collars on everyone in the public service and simply close the wage gap is just dumb in my opinion. If they think freezing the wages of our more talented public servants will help productivity they have completely lost it. Let’s watch as our best people slowly drift off shore to join those already gone. COVID has kept them here but won’t be in play forever. Just because our parliamentarians can live on their salary they think overworked doctors should do the same. Duh.

  2. The government has opened the border to Aussie but kept it closed to Asia so we cannot get replacement nurses from the Philippines and doctors from India to replace the ones that go to Aussie for higher wages. At the moment Auckland hospitals alone are short about 200 nurses and an unspecified number of doctors.

    • Since we have less Covid in NZ, it’s not surprising how our low wages can’t attract Ozzy doctors and nurses, and OZ instead take our best and brightest because they have better pay and conditions.

      As for getting more medical personal from Asia they tend to come with many other family members with them then the solution contributes to the problems as then need more doctors and nurses for specialist care for more children and pensioners arriving from Asia who do not get free medical care and pensions in their own countries…..

    • OZ also taking our fruit pickers and offering them real wages and conditions and a $1000 bonus, while NZ employers keep saying how lazy the locals are…. well OZ seems to want them! Time to end our immigration Ponzi for overseas workers to disguise our low wages and neoliberal dogma to exploit NZ free social services and give them away to hundreds of thousands from overseas… so the next generation of Kiwis have nothing. No job, low wages, huge completion for services, overflowing prisons, justice, health systems, schools, roads.

  3. Thanks Ian for a helpful and informative evaluation of the Pay Restraint proposal form the Govt. The reality is that either Labour has misjudged how many people would be negatively affected by their decision, or they remain wedded to outdated neo-liberal economic theory. The former can be fixed by a quick U-turn and a proper engagement with the Public Sector unions. The latter is a deeper and much more concerning problem. I hope it is the former: sadly, the PM on Breakfast today argued in such a way as to make it the latter. A clash is coming: it wont be pretty…

    • +1
      It’s probably the latter unfortunately but it’s a big problem because you just can’t go round offending a Minister’s ‘officials’ (aka the Public Service Bureaucratic Elite).
      Think of what that might cause.
      You might have frontline public servants actually able to do their jobs.
      There’d be all sorts of mayhem and damage to egos. There’d be ‘officials’ no longer able to push back against an elected government’s intent and policies. Things such as demographic profiling that the Prime Minister and her underlings publicly stated were a no-no wouldn’t be able to carry on anyway. The master-of-the-universe culture in places like MSD would no longer be able to trickle down. The status quo wouldn’t be able to survive. Some might even have to get of their chuffs and do things. It could even mean deliberations on the future of work might have to come to an end and the likes of people like Faafoi (and lately Little) could no longer use the excuse of having to wait for the careful and considered advice from their officials. Why it could even turn the whole concept of ‘the operational matter’ on its head.
      Then where the hell would we be?
      (/sarc)

  4. Astounding Robertson now says there isn’t a pay freeze?
    Wow just what is this government capable of?
    Promise after promise zero delivery now attacking one of the hardest working sections of our society,it’s hard to believe this is happening.

      • It’s arrogance and middle finger flashing on a scale not yet seen before. Incredible! Don’t know about you but as voter and taxpayer, I feel dismissed like shit by this govt. No respect for who actually pays their salaries.

        • “I feel dismissed like shit by this govt.”

          Funny, that’s exactly how I felt about National!
          You, like many hear, forget an important point raised by Ian…

          “Both National and Labour led governments have to take prime responsibility for this situation.”
          Yes, your very own National party, gotta leave a sour taste in your mouth.
          Not concerned about the media driven term “wage freeze” because as part of the MECCA collective agreement within the DHB’s we still have our remuneration for yearly and step graded increases, something a few on hear clearly know absolutely nothing about, yet are very quick to pull the trigger. Many hear remind me of Mike Hosking, shoot from the mouth without facts.

  5. The problem in my view as I’ve said before they may be well intentioned but quite simply they don’t know what to do.
    They are not fit to govern and sadly they need to go.

    • Maaaaate, the trouble is the alternatives are worse.
      Better they just got a bloody big shock at the next election by way of voters ensuring they’re unable to govern alone – even IF it does have to include a load of wokester [FUCK I hate that word ] Greens and a Maori Party that’s still finding its way.
      Don’t be sad though maaate! However I hear counselling services are in short supply and better obtained if you can afford to go private.
      These fellas did done brung it on themselves and they’ll not be short of a few treats and trinkets when they avail themselves of other career opportunities post parliament.
      Some of them could even go on to be Mayors, or even hop back into the public service in senior rolls – either in central or local gummint.
      And look on the bright side of things. JA in her latest dalliance with the MSM has realised that there’s no such thing as ‘some think’, and that it’s ekshully something.
      Not sure when she’ll master the difference between bought and brought though, but maybe there’s a future earn for Karyn Hay as a coach. It’s be well deserved. She might even be able to give advice on writing a book.

    • Need to go and replaced by National, no thanks. I’m not happy with the wage freeze, however as a teacher there were no wage raises for all of the National’s nine years as government. Look at our political parties they all look pretty irrelevant. The Greens to woke and flaky , Labour purporting to represent working people and are really social democrats at best and National, an out of date conservative pary who pander to big business and is bereft of an original idea. I despair

      • Good sum up of the political situation, however I don’t think anybody can think Labour supports working people or “labour’ anymore as they are doing everything to support NZ as a low labour country just like the Natz policies and Green policies, aka offshoring, on shoring, cash labour, wage freezes, supporting laughable skilled work which is all low cost labour, undermining real skills with no attempt to investigate the brain drain, reducing educational levels across the board from primary to tertiary.

        Labour are popular because they are squeezed between the Greens new policy of identity navel gazing while expecting the workers or anybody with a house to pay for it all and the Natz who are just Labour but with more visible asset transfer in operation.

        As for Natz – how do you recover from $100k donation to become list MP’s? 2 Chinese are more valuable than 2 Indians and Pakeha MP’s are apparently fucking useless and need to go, to make way for the more valuable MP’s who can bring more donations to the party.

        What is actually needed is Mana or Mana alternative to come back and be the new labour and Green and NZ First party to offer an alternative solution to NZ’s problems, ak policy supporting these political parties previous goals of fair labour, better environmental action and sustainable immigration that actually helps NZ as a society not continued cheap labour ploys and over running NZ’s social services, for private profits.

  6. Workers are incentivised to come to NZ and have children and be on a low incomes here. Family tax credit is paid regardless of your source of income. It looks like you can work in NZ, have kids, not be a NZ citizen or permanent resident but just work here 12 months and still be paid a minimum of $588 p/w from the government. https://www.ird.govt.nz/-/media/project/ir/home/documents/forms-and-guides/ir200—ir299/ir271/ir271-2022.pdf?modified=20210308210433

    NZ immigration policies are playing havoc on our health system, maternity system, and businesses as we seem to be encouraging rich foreign folks with poor skills and low incomes to come to NZ and get welfare here – the less successful the foreigners are, the more NZ likes to support them.

    It is not immigration’s fault, it is the government policy and woke, who seem to be gunning to get more foreign nationals into NZ and onto our welfare system and crying racism if anybody more successful aka $100k+ jobs and on higher incomes are put first in the immigration queue.

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