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Cullen Speech: Service and Food Workers Union

Michael Cullen Address to Service and Food Workers Union Komiti Pasifika National Fono – delivered by Paul Swain

Sonoda Campus, Christchurch


It is my pleasure to address your annual National Fono for 2004. This is an historic occasion, not just because it is the first time this event has been held in the South Island, but also because of the presence here of representatives of the Engineering, Printing and Manufacturing Union and the National Distribution Union as part of an initiative to improve communication and co-operation amongst private sector unions.

The last five years have been an important period of rebuilding for the union movement. Considerable damage was done to industrial relations in New Zealand in the 1990s by the Employment Contracts Act. That damage was not just to workers’ conditions and ability to negotiate fairly. It was also damage to the productivity of the workforce.

The course that the National-led governments had us on saw labour as a cost to be minimised. We were heading towards a low wage, low skill, low value economy. Turning that around has not been an easy task.

However, my government has from the start been convinced that the only real future for New Zealand was to raise the skill levels of the workforce, and progressively create a high skill, high added value economy. That is the only kind of economy that can deliver social and economic benefits across the whole community; the only kind of economy that can afford good quality health care and education, decent housing and a secure pension. It is the kind of economy in which all New Zealanders can prosper, build families and communities, rather than just an elite.

We have made great strides towards that goal. In these last five years we have made significant advances in terms of economic growth, and the wide distribution of its benefits through job growth and growth in incomes.

Economic growth has been consistent, and in OECD terms impressive. We have maintained annual growth at around 3½ per cent or more since 2000, with growth for the June year just ended coming in at a very pleasing 4.4 per cent. Much of this growth has occurred in domestic sectors (for example, construction, education, and hospitality), which have benefited from high population growth, low interest rates and, until recently, high farm incomes.

It has also been job-rich growth. The number of people in work has risen considerably in the last four years – a combined rise of 193,000 or 10.8 per cent between the March 2000 and March 2004 quarters. Meanwhile, the unemployment rate has fallen from around 7 per cent in 1999 to 3.8 per cent in September 2004, an 18 year low and the second lowest rate in the OECD.

If we dig into those latest figures there are other encouraging signs. The growth in employment has primarily been in full-time positions, with part time positions decreasing marginally after an increase in the previous quarter.

Seasonally adjusted female employment grew by 1.8 per cent over the last quarter, while male employment was essentially flat.

What these figures also show is that the number of long-term unemployed (those out of work for more than six months) has fallen significantly, from 21,900 in September 2003 to just 16,800 in September this year.

Not only are New Zealanders in work, they are also enjoying increased incomes and increased wealth. For example, total gross labour income increased 7.5 per cent between June 2003 and June 2004. That is what is driving domestic demand, with private consumption expanding 5.7 per cent, and residential investment 13 per cent in the year to June.

So the economic growth we have achieved is not being captured by a small elite, but is being spread throughout the working population and beyond. My government has also distributed that wealth more widely by maintaining and in some instances increasing the value of benefits and pensions, and by increasing expenditure on social services such as health care, housing and education which benefit all sectors of the community.

We are also making significant investments in the infrastructure that serves the community (such as roading) and in the New Zealand Superannuation Fund which will safeguard the future affordability of the state pension.

In addition, over the next few years, our economic growth will enable us to implement the most significant recasting of the tax and benefit system for low to middle income families in decades.

This is not the occasion to go into the detail of the Working for Families programme. However, it is important to understand its impact. Using a poverty threshold of 50 per cent of 1998 household median income adjusted for inflation, Working for Families is forecast to lead to about a 70 per cent reduction in child poverty in the next three years. If we use a higher threshold of 60 per cent of median income, Working for Families is forecast to lead to about a 30 per cent reduction in child poverty by 2007.

Living standards will improve among almost all families earning under $45,000 a year, and a significant number of families earning $45,000 - $70,000 a year. The workers you represent will in many instances come from families that will benefit materially from this package.

I am not suggesting that all is rosy. We will not overcome a social deficit built up over decades in a few years. However, these are the kind of measures that will make a difference for many New Zealand families, especially those who are under considerable strain and finding it hard to achieve a balance between life and work.

So, in short, we are a government that has delivered for ordinary working New Zealanders.

Important changes have been made in employment relations, health and safety, and holidays, minimum wage and paid parental leave entitlements.

In 1999 we repealed the Employment Contracts Act and passed the Employment Relations Act in 2000. Generally, the ERA is working well.

Union membership is now steady on around 22 per cent (21.9 per cent at March 2003). And the latest available figures for the year ending December 2003 show industrial action at historically low levels, with 28 stoppages being recorded last year. That is the second lowest figure for almost the last 20 years – the lowest being 21 stoppages in 2000. This compares with a high of 72 stoppages recorded under the ECA in 1996.

The increased emphasis of the Employment Relations Act on mediation as a tool in the resolution or ‘cooling down’ of disputes has seen mediation services being used in an increasing number of bargaining situations, either before or after stoppages have occurred. Increased access to mediation services has assisted in many collective agreement negotiations, resolving or averting a number of potential or actual stoppages with significant economic consequences. Over the past two years, when mediation has taken place, around 77 per cent of problems are settled there.

As you will be aware, a Bill amending the Employment Relations Act has just been reported back to the House. It contains a range of fine tuning provisions which will add further strength to what is already a very effective piece of legislation.

The select committee that considered the Bill has made a number of key recommendations. These include:

Clarifying the rules around 'free loading' so that it will be a breach of good faith to pass on collectively negotiated terms and conditions to those on individual agreements, where this is done with the intention of undermining the collective. Strengthening the duty of faith – making it clear that it means more than the old common law duty of mutual trust and confidence. Introducing bargaining fee arrangements. Where an employer and union agree, a ballot of all employees who would be covered by the arrangement is taken. Those who do not want to pay the fee are free to negotiate their own individual agreements.

One set of measures in the ER Amendment Act is particularly significant for workers in the service and food sectors. These protect employees when a business is sold or when their work is contracted out. Our aim is to provide more certainty about what happens to employees when a business or part of a business changes hands.

Many countries require the new owner to take on existing employees on the same terms and conditions. No such general requirement is proposed here. However, all employment agreements will be required to address what processes would be followed if a business was sold or work contracted out.

This does not guarantee transfer to the new employer or entitlements such as redundancy, but it encourages employers and employees to think about the situation before it arises. From now on in most industries the requirements about what happens to existing employees if the company they work for is sold or their work is contracted out will be set out in their employment agreement and is a matter between them and their current employer.

The agreement must address what steps the employer will take for employees affected by any sale, transfer or contracting out of the business. Those agreements could range from spelling out explicitly the employees transfer and redundancy rights through to simply saying how these issues will be addressed at the time.

There will be additional protections for employees categorised as vulnerable under the Act. These people work in sectors where businesses change hands often, and employees often find themselves with a new boss but on less pay and worse conditions. The sectors that have been identified are:

Cleaning services or food catering services;

Laundry services or orderly services for the age related residential care sector;

Laundry services for the education and health sectors;

Orderly services for the health sector; and

Caretaking for the education sector.

These most vulnerable employees will be given the right to transfer on the same terms and conditions, and they will at least have the chance to make a case for redundancy if their new employer lays them off.

As a government we have also been active on other fronts. Amendments to the Health and Safety in Employment Act were passed in 2003. Key changes were:

One Act coverage for all employees;

Recognition of stress and fatigue as potential work hazards;

A mandatory requirement to involve employees in the development of health and safety processes at work; and

Two days paid leave each year for health and safety representatives to attend health and safety-training courses.

Last year we amended the holidays legislation to introduce four weeks annual leave from 2007, increase entitlements to sick and bereavements leave; and clarify payment for public holidays.

We have also steadily increased the minimum wage, introduced paid parental leave, and established a fund to improve workplace knowledge, productive relationships and health and safety awareness and understanding.

What all of these measures boil down to is a simple message which we will be taking to the electorate next year: this is a government that is working – working for the economy in terms of building the platform for ongoing growth, working for families in terms of sustaining and improving the services that they need and expect, and working for New Zealand workers in terms of creating an environment in which they have clearly established rights to bargain over pay and conditions, and a very real stake in finding solutions to the challenge of increasing productivity and hence strengthening our economic prospects, collectively and individually.

Thank you.

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