Flexibility in collective wage bargaining in New Zealand: facts and folklore

Abstract

Prevailing folklore in New Zealand has it that wage bargaining outcomes are unduly inflexible. Implicit contract theory suggests that while wages may be sticky and somewhat rigid within a single wage round, stzckiness will diminish over time as wages become responsive to outside economic forces. This paper examines the hypothesis that the stickiness of wage settlements diminishes over time and develops 4 criteria for testing that hypothesis. Data for all settlements regiqtered with the Arbitration Commission since 1984 are used. Analysis of the data indicates that despite folklore to the contrary, a very important degree of wage flexibility exists.