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Issue 138 June 2009



No time to stagnate

Most of us look forward to an annual pay increase each year, if only to keep up with the rising cost of living. For many though, the chances of that are looking increasingly slim over the next year.

Reports indicate a number of organisations have recently frozen wages and salaries, while others are considering pay cuts. It’s a tough ask on already hard-working and often financially stretched staff, but when the alternative is no job at all, there’s little option but to grit your teeth and get on with it. Or is there?

It’s a conundrum that our panel of HR professionals grappled with this month. We asked them if cutting wages is the answer for Kiwi organisations struggling with the effects of the recession, or whether businesses should bite the bullet and keep paying well to break the vicious circle.

This vicious circle is what US economist Paul Krugman calls ‘falling wage syndrome’. Writing in the New York Times recently, he says although many workers are still getting pay increases, the phenomenon of falling wages is proliferating. And that, according to Krugman, is a bad thing.

What’s wrong with workers accepting pay cuts in order to save jobs, he asks, before explaining the answer lies in one of the paradoxes plaguing the economy right now. He outlines a scenario that has the workers at XYZ Corporation accepting a pay cut, thus allowing management to cut prices to make the corporation’s products more competitive. Sales rise, and more workers keep their jobs. Sounds good so far, so what’s the problem?

On the surface it would appear that wages cuts raise employment, but Krugman argues that this only occurs at the level of the individual employer. If everyone takes a pay cut, nobody gains a competitive advantage and there’s no benefit to the economy.

He points out that falling wages, and hence falling incomes, actually worsen the problem of excessive debt. To pay the mortgage and the bills we cut back on spending elsewhere. And the upshot of this downward pressure on consumer spending is economic stagnation. It’s hardly a recipe for recovery!

It’s a dilemma, and one our panel did not all agree on—despite a couple of them harking back to their days of studying economics in search of an answer. So what do you think? Why not write and tell me—my email address is on this page.

—Lyndsey Swan

Feature articles

Silver lining
Perceptions are hard to change, says Phil Maguire, but he and his team at Oceania Group are working hard to change the way their industry is seen. He talks to Lyndsey Swan about the people who care for our elderly and the challenges and joy of their work.

Attitude counts
They’re often put in the ‘too hard’ basket, but employing people with disabilities has benefits for all involved. Helen Frances talks to a couple who offer a positive start to disabled workers, and a young woman dealing with rheumatoid arthritis.

Please re-lease me
Executive leasing is experiencing a boom in some regions, but in others the number of available contracts has greatly diminished. Jackie Brown-Haysom checks out the impact the recession is having on this market.

Tough times + simple technology = true love
If there was ever a time for HR to be looking at how it can do more with less, it’s now, says Liz Tibbutt. She explains how technology can help HR to increase its level of service and make a stronger strategic contribution.

Talent, technology, tactics
Organisations with successful talent management programmes are able to respond quickly to challenges. Anastasia Ellerby gives practical guidance on how these organisations manage their talent and what tools they are using.

The ABCs of business success
Strengthening workforce skills can build employee engagement and provide a framework for future success. Philippa Reed introduces a new opportunity for employers to promote workplace literacy and numeracy.

Bonus—a dirty word in the public sector
Recent controversies over incentive payments in the public sector have the potential to set back employee engagement and effectiveness in our crown agencies, writes Philippa Youngman.

Pushing the envelope
CEO performance reviews are often more about reviewing remuneration than appraising performance, says Gordon Davidson. He outlines a better way of doing CEO performance appraisals.

Adding service to software
Payroll should play a support role and not take centre stage. John Gill explains how, with the right software, you can take the pain out of a complicated task.

Test your knowledge
There have already been several legislation changes this year, and some new case law. Are you up to date with it all? Angela Atkins put together this quick quiz for you to test how much you know!


Workplace dilemmas: Actions speak louder
Getting your workplace involved in charity work sounds like a good idea, but does it really pay off? Karen Boyte considers that, and also looks at ways to get your staff engaged and ready to communicate.

Remuneration: Salary reviews in hard times
When times are tough, it’s sure to have an impact on your salary budget. Susan Doughty outlines some creative strategies for dealing with tightening purse strings.

Recruitment: Experience the winner
Although unemployment is increasing as firms cut staff, the skills shortage is far from over in some areas. Employers need to shift the focus from youth to experience if they want to maintain a viable workforce, says Dave Stewart.

Wellness at work: The cost of illness
The potential payoff to the economy from preventing illness in the workplace is huge, according to new research from Southern Cross which sheds new light on the cost of illness.

HRINZ news: Seeking relevance for today’s business
The new editor of the New Zealand Journal of Human Resource Management (NZJHRM), Dr Jarrod Haar, shares his thoughts on how the changing landscape of business should propel our interest in understanding the challenge of theory and practice in HRM.

Learning & development: Easy learning
Building workforce capability through e-learning makes better use of a worker’s time, space and place, and offers access to rich resources, say John Clayton and Richard Elliott.

Public sector: Too late is too late
The Employment Relations Act requires an employee to raise a personal grievance within 90 days. When a school principal raised a grievance over 16 months after resigning, it was deemed too late, says Paul Robertson.

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