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NZ Initiative comes out swinging against labour reforms

By Pattrick Smellie

July 9 (BusinessDesk) - Industries with large workforces will be most at risk of being hijacked by small numbers of workers seeking nationally binding, collectively bargained employment arrangements whether or not the majority wants them, the business-backed think tank, the New Zealand Initiative, says.

The Work in Progress report, penned by the group's chair, former law firm head Roger Partridge, and former Business Roundtable economist Bryce Wilkinson, argues not only that the Fair Pay Agreement proposals will cost jobs while failing to lift New Zealand's historically poor productivity, but that the main arguments used to justify the reforms are either wrong or that the policy answers lie elsewhere.

The report, released this morning, comes a fortnight after the Council of Trade Unions published a report from the economic consultancy BERL that found no international evidence that collective bargaining had a negative impact on economic growth.

The CTU report identified supermarket workers, security guards and cleaners as three employee groups who should be the first to negotiate FPAs under reforms that Workplace Relations Minister Iain Lees-Galloway has yet to take to Cabinet for approval. Policy recommendations are expected after the January report of the Fair Pay Agreement Working Group, led by former National Party Prime Minister and architect of the original 1990s labour market deregulation, Jim Bolger.

The working group recommended that FPAs be triggered if either 1,000 or 10 percent of workers in an industry or sector - whichever is the smaller number - vote to seek a nationally bargained collective agreement. Workers on individual contracts would be automatically covered by those negotiations whether or not they chose to be and would be represented by a trade union to which they may or may not belong. Employers would be represented by their national associations.

FPAs would be able to reflect regional differences. Firms could contract out of FPAs under a 'favourability principle' by offering better terms and conditions than the national agreement.

The NZ Initiative report attacks the quality of the working group's analysis in reaching those recommendations.

In particular, far from labour's share of national income falling in recent decades, it has been rising slightly since the early 1990s, the NZ Initiative shows, using the group's own numbers. That is the period after the Bolger-led National Party government deregulated the labour market through the Employment Contracts Act. The trend continued under the 2000 rewrite by Helen Clark's Labour government, the Employment Relations Act, which softened aspects of the 1990s reforms.

The NZ Initiative also challenges the claim that there has been a "hollowing out" of wages and salaries for middle-income earners, when wages have been rising across all groups of workers, with larger increases for the lowest paid compared to middle-income earners reflecting increases in the minimum wage. The report does not dispute that wages for the highest paid have also risen faster than for middle-income earners, but argues that does not constitute a "hollowing out".

Likewise, there is no evidence of the alleged 'race to the bottom' for wages and conditions in New Zealand's labour market data, the NZ Initiative says.

"Average wage rates have risen substantially faster than inflation since 1998 across all income deciles."

Partridge and Wilkinson argue that New Zealand's very high participation in the labour market and low unemployment rates by OECD standards are enviable proof that more flexible labour market arrangements have served the country well. A return to collective bargaining would "by design ... ignore the needs and circumstances of individual employers and their workers trying to meet the demands of a competitive domestic and international marketplace", they say.

"How likely is it that an FPA will permit bespoke changes to shift arrangements desired by one innovative firm in an industry, but not by others; or permit changes to terms and conditions unanimously agreed to by the workforce of a specific employer but which make different trade-offs – and therefore infringe the 'favourability principle'?" the report's authors ask.

The report seeks to bolster its findings with a foreword from one-time union leader-turned-professional company director Rob Campbell.

However, Campbell professes himself "unconvinced by either side" of the argument.

Employers have failed to take advantage of the "relatively liberal regime" in order to drive "constructive change, inclusion and productivity," he said.

"The harsh truth is the old collective compulsory arbitrations system produced rigid relativities which worked against the low paid."

Unions seeking to change that had to fight other unions to win, he says.

"Finding a path to accepted social living standards through a collective, arbitrated system is more than long and winding - it is a cul de sac," says Campbell.



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