To borrow a phrase, there seems to be some sort of compact between the government and the trade union movement to “lie in unison” about business reactions to proposed changes to employment law.

Labour minister Margaret Wilson and the Council of Trade Unions have been reciting the mantra that business claimed the Employment Relations Act (ERA) would see “the sky fall in” and that the “spinners of doom” would make similar predictions about the latest proposed employment law changes.

What did business representatives actually say?

Speaking for the Business Roundtable, my assessment was that “the overall basis for judging the ERA is not whether it has caused the sky to fall in but whether it risks causing death by a thousand cuts.” I added that “The acid test of whether this assessment is right is whether the ERA and associated changes will achieve the prime minister's goals for New Zealand of average incomes in the top half of the OECD range and an unemployment rate of 3 percent”.

These goals are not in sight. On the government's own figures, the growth rate of the economy is likely to fall away relative to the performance of the last 10 years. In the five years from 1991, the unemployment rate fell from 11 percent to 6 percent. In the subsequent seven years it drifted down to 4.4 percent and is not predicted to fall further, and the Maori unemployment rate remains a totally unacceptable 10 percent.

Those misrepresenting history would do well to recall their own earlier predictions.

The Council of Trade Unions told us that the Employment Contracts Act (ECA) would lead to “anarchy” and “the Pol Potisation of the union movement”. Wages would collapse and later they would explode. Margaret Wilson, then a law professor at Waikato University , said the ECA denies workers “the means to organise to protect their collective interests”.

Ms Wilson's predictions have not got any better. She predicted less industrial disruption under the ERA. Days lost in disputes have increased.

Partly because firms and workers valued the freedoms created by the ECA, partly because the ERA remains enterprise-focused, and partly because some of the worst features of the original bill were watered down, the impact of the ERA has been limited. Even so, a survey in the NZ Journal of Industrial Relations found that nearly a third (28 percent) of employers regarded the act as having a negative effect on their businesses.

What the ERA has not done is boost union membership and collective bargaining to any extent. But there is no reason for either to be favoured – as opposed to being a matter of choice. Only one worker in five now belongs to a union in New Zealand ; most want to be treated as individuals rather than as parts of a collective ‘lump of labour'. Ms Wilson's goals of increasing union membership to 30 percent of the workforce and doubling collective agreements have no rationale other than to appease union bosses.

The contrast with British politics could not be starker. Tony Blair has all but broken the umbilical cord between the union movement and the Labour Party, and kept in place the Thatcher government's labour law reforms.

Despite their ‘new age' pretentions, the unions' agenda hasn't changed: it is to strengthen union power by moving employment arrangements back towards the old days of compulsory unionism, compulsory arbitration and multi-employer contracts – all artefacts of the class-warfare conception of employment relations. Elements of these, plus more European-style employment protection rules, feature throughout the new proposals.

None of this is in the interests of firms, workers and the unemployed. A World Bank study in the 1980s found that countries with inflexible labour markets suffered a penalty of 1.4 percentage points in their annual growth rates, a massive sacrifice in potential wage growth over a worker's lifetime. Despite their shortcomings, the OECD commended New Zealand 's earlier labour market reforms and has criticised the government's moves.

Contrary to the government's claims that it is “listening to business”, there is no sign of it in the new bill. Even modest proposals like the removal of the union monopoly on collective bargaining, a probationary period before personal grievance provisions apply, and a salary bar on unjustifiable dismissal claims have been ignored.

The government knows that its claims to being serious about growth are a charade. Recognising that its employment law changes, including an extra week's holiday, are negative for productivity and growth, it has been talking about setting up a productivity council to give advice on how to offset their effects!

The Herald had it exactly right in a recent editorial. Further steps to ossify our labour market won't cause the sky to fall in. Rather, “The country will pay the price in a little less competitiveness (from multi-employer agreements), a little less employment by small and medium-sized firms (obligations in the event of sale) and less confidence among investors that this is a country which rewards energy and enterprise”.

For more information, contact:

Roger Kerr
Executive Director
Ph: 04 499 0790
Email: rkerr@nzbr.org.nz

David Young
Communications Manager
Ph: 04 499 0790
Email: dyoung@nzbr.org.nz

Web: www.nzbr.org.nz