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Bill Birch Feature: Labour Unions Dominate Policy

Trade Union Power In NZ Labour Party Now Dominates Both Labour Market Policy and Candidate Selection

by Rt Hon Sir William Birch, Minister of Finance

Trade union domination in the governance, top policy councils and candidate selection processes of the New Zealand Labour Party has become an increasingly serious threat to the future economic growth and prosperity of the nation.
In 1976, Eddie Isbey was the only Labour MP who had been a trade unionist. Today, 32% of Labour MPs are people who used to hold union positions. On Labour’s List for the 1999 election, 21 of the top 50 candidates (42%) have held union positions.

Trade union determination to take control of the Labour Party arose in the wake of the reforms sponsored by Roger Douglas and Richard Prebble. It was greatly reinforced from 1991 on by the response of working people to my Employment Contracts Act.

People were no longer forced to join unions. They could, for the first time, choose their own bargaining agent, or negotiate an individual contract. Firms and staff, no longer dragooned into national awards, could agree arrangements to suit themselves.

Working people used that democratic freedom to walk away from unions in droves. I don’t know what industrial democracy cost trade unions in lost subscriptions. I have heard estimates ranging all the way from $50 million to $150 million a year.

Labour’s industrial relations policy is not about jobs or incomes. It is about restoring the lost power, privilege and income of the trade union movement. The unions want their power and cash back. They are using dominance of the Labour Party to get it.

What were the arguments made against the ECA by its Labour and union opponents?
They said it would create industrial anarchy, falling wages, rising unemployment, less job security, lower productivity, and a casualisation of the workforce.

Labour’s Pete Hodgson talks of “reversing the worst ravages of the last 9 years”. What have been, in fact, the economic and social consequences of the Act since 1991?


Under Labour in 1985-90, before the ECA, the economy lost 120,000 jobs. The number jobless rose by 110,000, and unemployment eventually peaked at 10.7%.
Since the ECA in 1991, employers have created 269,000 new jobs. The number unemployed is down by 44,000, and unemployment has fallen to 7%. That’s better than Ireland and Australia, and way ahead of the major European countries.
The gains of the Act have however clarified one central fact. Education, training, and motivation are today central to employment. Pakeha unemployment, for example, peaked at 8.3% but was back down to 5.1% by the June 1999 quarter.
By contrast, Maori and Pacific Island unemployment, which peaked at 27-30%, has halved but remains in the 12-18% range. Unemployment is no longer about failure to create productive jobs-it is now about lack of marketable work skills.


Since the ECA, average hourly wage rates have risen from $14.93 to $17.72 in nominal terms, a gain of 15.7%—and they have also risen more than 5% in real terms, after removing the illusory appearance of gain created by inflation.


The most comprehensive study of New Zealand productivity ever published in this country, by Erwin Diewert and Denis Lawrence, reports a “productivity surge” since 1993, and identifies the ECA as a likely contributor to those gains.

The World Economic Forum’s 1999 Global Competitiveness Report rates New Zealand second in the world after the US as a country where it is easy to start a new business, and 9th in the world for growth prospects from 2000-2008.

They forecast our average annual GDP growth per capita at 3.86% in that period, compared with Australia in 15th place, six places behind us, on 3.64%, and Japan in 19th place, Korea 21st, Thailand 23rd, Sweden 29th, and France in 39th place.


Before the ECA, under Labour from 1984-90, strikes cost the economy an average of 541,000 lost days a year. After the ECA, the annual average for 1991-98 came down to 46,500—a mere 8.6% of the work days lost per year under Labour.

Working days lost in 1998 were the lowest for 64 years. But unionisation and national awards linger longest in public sector monopolies. In the year to March 1999, 73% of all employees involved in stoppages were in the education sector.


There is no evidence of increase in the proportion of workers employed on a casual or non-permanent basis. Only 7% of people working part-time would prefer full-time work, according to Statistics NZ’s Household Labour Force Survey.
What does Labour Want?

Under the ECA, enterprise bargaining is the norm. A firm and its own staff negotiate the bargain that best suits their own local needs. Only 2% of collective agreements cover more than one employer. That is the essence of the ECA’s flexibility.

Flexibility is critical to jobless Maori and Pacific Island people. They need contracts that help them find a toehold in the workforce. Then they can begin to win the skills that bring promotion and rising incomes, instead of living on a benefit in perpetuity.

Flexibility does not, however, suit the unions. Under Labour, anybody who wants a collective agreement must join a union, and must use it as their bargaining agent. Individual contracts must have the same terms as the union’s collective contract.

Unions under Labour will be given the power to force firms to negotiate on multi-employer agreements, then bring staff from the whole group out on strike to support the union position in a dispute with an individual firm that is party to the agreement.

New avenues would be opened up for extended court action by unions against employers, where court intervention rather than bargaining would set the terms of agreement, giving courts wide powers to impose anything they see fit on the parties.

That agenda is not about creating jobs or improving incomes. It is about increasing the power of trade unions. The only jobs created will be for extra trade union staff.


On the other side of the world, Britain’s Labour Prime Minister Tony Blair and Germany’s left-wing Chancellor Schroder, in the document Europe: The Third Way, call for more flexible labour markets as a key to growth and employment in Europe.

Given the success of that approach, Helen Clark might normally be expected to adopt it with equal enthusiasm-it would be good for her, for the party and the country as a whole. It is, however, no longer an option for the Labour Party in New Zealand today.

Trade unions have made themselves the dominant influence in Labour’s Caucus, its policy-making councils, its 1999 Party List, and the funding and management of its 1999 campaign. When they call the tune, there is no choice. The Labour Party dances.


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