EMPLOYERS AND MANUFACTURERS
14 MARCH 2006
EMA OFFICES, KHYBER PASS, AUCKLAND
BY ANDREW LITTLE
Thank you for the welcome you have afforded my colleague, Bill Newson, and me, and for the opportunity to speak this morning.
This opportunity is an important one. So often, the representatives of organised labour and those of employers exchange views and debate issues through the media or in our own forums in each other’s absence. We seldom get the opportunity to discuss and debate issues that go beyond individual enterprises face to face.
And yet the challenges we all face – to have good and better businesses, and good and better standards of living for all –means we all have a stake in what happens.
We may not agree with each other – at least not always – and I don’t expect you will agree with some of the things I have to say this morning, but hopefully today we can get past some of the sloganeering and attempt some understanding.
This morning, I want to talk about:
· The EPMU’s wages
· Changes in the EPMU.
· Wayne Mapp’s private members’ bill on probationary periods of employment.
Last year, the EPMU made a deliberate decision to campaign hard on achieving wages settlements above the going rate of inflation. We deliberately set a target figure, in this case 5%, and ensured we organised and negotiated to achieve the result.
By the end of the year, the results spoke for themselves. Eighty percent of nearly 400 settlements reached since the end of February 2005 resulted in increases last year of 5% or more. In some cases, the term of the collective agreement was pushed out to 13, 14 or 15 months; in other cases, the 5% was achieved through a combination of an increase in the rate of pay and a lump sum cash payment; but in the majority of cases, the settlements were a 5% increase on a 12 month term (or 5% for the first 12 months and another percentage, usually between 3.5 and 4.5% for the second 12 month period).
We were routinely met with some common objections, both in the public arena and across the negotiating table to what we were doing.
“You can’t just apply the same percentage increase to every business”.
“The union should be focussing on productivity and generating wage increases from that”.
“You are trying to predetermine the outcome of the negotiations and you are not negotiating genuinely”.
There were very good reasons why we started the campaign last year. The simple fact is that wages in New Zealand are too low.
We have reached the dangerous point at which wages in New Zealand are diverging so greatly from comparable rates in Australia that we are seeing a steady flow of skills and labour across the Tasman. People are not leaving New Zealand, as some would have us believe, because tax rates are lower in Australia – they are not; they are going because wages and standards of living are higher.
The reality for New Zealand is that if we do not start to address the issue of wage levels here then we will eventually price various skills out of the New Zealand labour market. We started seeing this in the health sector with nurses; a lot of New Zealand-trained nurses simply had no interest in sticking around in New Zealand because they could get significantly better pay overseas.
At the time we started our campaign last year, there was no reason why, as a country, we could not afford better wages in many cases. The economy had grown significantly since the late 1990s and corporate profitability had gone up significantly. Indeed, the Reserve Bank calculated that company profitability increased on average 11% a year for four years from 2000. Throughout 2004 we saw a huge leap in the value of the NZ stockmarket. Over the same period of time, wages increased just over 10%, barely keeping pace with the rise in the cost of living.
It wasn’t just economic data that drove us. We could all see the wealth being generated throughout the economy and the growing income disparities, especially between senior management and professional occupations, and the sorts of occupations of our members.
There was no question. The country’s wealth was increasing but most wage and salary earners were not sharing in it.
Last year was a start towards lifting incomes and attacking wage disparities.
So, what about this year? For the last four or five months, there have been many dire prognostications of doom and gloom. What became talk of an economic slow down has become talk about hard landings and recessions. There is, of course, no evidence of either.
Employment is holding up. Consumer spending is holding up. Inflation is showing signs of moderating, heading back down to the 3% level. Of interest to manufacturers and exporters, the exchange rate is even heading in the right direction.
The recent round of public company reporting shows that profitability is holding up. The top five companies on the New Zealand stock exchange by market capitalisation shows the average increase in profitability down to 31 December 2005 was 9% on the previous year’s earnings. Taking the top 20 companies and excluding one – Carter Holt Harvey – the average increase in profitability measured against the same period the year before was 7.5%.
Even though we see economic growth slowing, it is slowing to reasonable levels. Depending on which predictions you rely on, economic growth is still expected to come in at anywhere around 2% or even, according to some, 2.5%. This might be below the levels we have been used to for the last five years, but it is still sound growth.
Having said all this, I do not wish to minimise the impact that I know the manufacturing sector, especially here in Auckland, is beginning to feel. There have been some lay-offs. And some of those have been significant. I think particularly of Jack Links, the beef jerky plant here in Auckland; the Australian liquidator of ION Automotive is now managing that business to closure with the loss of around 500 jobs; recently Southwards engineering (now owned by Australian company Atlas) announced 170 job losses mainly in Wellington but with 25 or so in Auckland. Some of these have happened because the markets that these businesses were supplying have simply collapsed. Other job losses notified to the union are because firms are now acutely feeling the competitiveness with countries like China, India and, in the case of Jack Links, Brazil.
The question I ask is, where those companies have had 5% pay increases (or thereabouts) last year, would having a lower pay increase have deferred the decision to lay off? In no case that I have seen has an employer said that had they not had to increase wages last year, they would have been able to put off the decision.
So, the need to continue to increase the value of wages and to seek a fair share of the country’s economic wealth remains. None of this precludes us working with employers on hard issues like productivity growth. But the challenge of productivity growth – lifting the value of what our members produce – starts with employers genuinely willing to make a difference.
Productivity growth entails a range of decisions by the employer – investment in plant and technology, investment in skills and training, a focus on work organisation, engagement of the workforce in business change, a willingness to devolve responsibility.
This stuff starts with the employer. Productivity cannot be used as a euphemism for simple cost cutting exercises. It is about growing value and wealth, and the benefits need to be shared with the workforce.
We do have some major challenges in New Zealand to lift productivity. In some cases, changes can be achieved at the enterprise level. In other cases, an industry-wide approach is probably needed.
The critical challenge, if I might be so bold, is one of leadership, and business leadership in particular, and quality of management. Organisations like the EMA and ours rightly argue about public policy issues and regulatory settings, etc. And there is plenty we agree on in relation to, for example, the need for better infrastructure…
But some things are just a matter of good or better management at the enterprise level. If as a union we are daily quibbling over our right to represent our members, or they are constantly required to defend their right to be a member of a union, then we don’t have the basis to work on the things that matter – making our members’ working lives more satisfying and more rewarding.
This brings me to the next area I wish to speak on this morning – the EPMU itself.
The union has been undergoing significant change these last few years. The principal motivation has been to ensure we have an organisation geared to working on an industry basis nationwide and more engaged with its membership, especially our workplace delegates.
We have established delegate forums to provide education on key issues and to get input on strategic issues; we have established 11 industry councils which are made up of rank and file members as well as paid officials and which develop the union’s strategies on the industries we are part of (these include strategies for unionisation, lifting conditions, addressing health & safety, dealing with skills and training issues, dealing with government and regulatory issues, engagement with employers, etc).
The aim is for our organisers in the field to be able to deal with any business in a particular industry on the basis of a clearly understood set of aims and objectives for that industry.
These changes have entailed changes to our leadership structure. Whereas before, we were organised into three regions (Northern, Central and Southern), each with its own regional management structure, we are now a single national structure. Each senior official at Bill Newson’s level (there are three at this level) have national responsibilities – these are staff responsibilities and industry responsibilities.
For each industry, there is a dedicated official, known as a national industry organiser, whose responsibilities involve being a subject matter expert for their particular industry, and making sure the agreed strategy or strategies for the industry are prosecuted. Hey are supported by a beefed up research capacity.
Organisers work in teams, led by Lead Organisers who ensure the work of the team, including fulfilling industry strategies, is carried out.
said earlier that some of the stuff that is talked about in
relation to productivity can only be done on an
industry-wide basis. We have geared our union to engage on
We await that opportunity.
PROBATIONARY PERIODS OF EMPLOYMENT
As I understand it, National MP Wayne Mapp’s private member’s Bill to remove employment protections during probationary periods of employment will be read in Parliament for the first time.
It will come as no surprise that the EPMU is opposed to the Bill.
For one thing, it claims to fix a problem that doesn’t exist.
It says it will “introduce a 90 day probation period for new employees”.
Actually, it does more than this. It strips away protections against unfair dismissal and unfair treatment for employees in the first three months of a new job.
The law already allows for probationary periods. It has done for many, many years.
Section 67 of the Employment Relations Act already provides for probationary periods of employment to be agreed to. And the new test for justifiability of dismissal in section 103A of the Act requires an objective test “in the circumstances”.
The fact that an employee is on a probationary period is likely to be relevant in assessing justifiability of dismissal.
The Bill, if it represents anything, would be an erosion of important rights often at the most vulnerable time of an employee’s working life – when they are starting a new job. The legislation mirrors the more insidious new law in Australia that takes away employment protections for employees who are part of a workforce of 100 or fewer.
Wayne Mapp’s Bill, if it is ever passed, will cost employers. Here is what will happen.
The law would increase the risk for employees changing jobs. Why, if you’re a worker in the middle of your working life, would you risk the possibility that if you change your employer you will have 3 months of uncertainty, a period during which your new employer could drop you for no reason and with no recourse. Some people will be reluctant to change jobs when to do so might be good.
Others, such as senior employees, like CEOs and senior executives, will have the bargaining power to negotiate premiums to cover the possibility that they will be dropped at…well, the drop of a hat. It may well be that unions will use their bargaining power to negotiate arrangements to cover new employees during the vulnerable period.
The reality is there is no need to make working life harder for the most vulnerable. Actually, what is needed is for employers to genuinely manage new employees on probationary periods. They need feedback and advice if they are not making the grade.
Wayne Mapp’s Bill will simply incentivise sloppy management.
New employees, and for that matter, any shop floor employee, do not have the potential to put the business at risk by their actions. Contrast this with senior employees. A bad CEO can bring a business down.
If the law needs to do anything, it needs to recognise where the risk to the business actually lies.
Wayne Mapp’s Bill targets the wrong guys. It should focus on the big end of town. The reality is that today, most senior salaries, salaries hundreds of thousands of dollars, can only be understood as carrying a risk premium that if the manager does not perform they can be terminated quickly. The law should reflect this rather than pick on the less powerful.