Employment Relations Conference

  • Max Bradford

Waipuna International Hotel, Auckland

Your conference is focused on investing in people for better results. Better results in employment relations lead to better results for New Zealand as a whole.

Employment relations and investment in people are a cornerstone of our continuing drive for international competitiveness.

If people in your enterprise are not motivated and rewarded, and do not feel part of your team, the chances are you will not be successful in business.

It is the responsibility of employers and employees to identify employment and training arrangements which maximise the skills of the workforce and maximise productivity.

The Government's responsibility is to provide a flexible, unconstrained environment allowing businesses to maximise productivity and meet new demands of competitive world markets.

It is also the Government's responsibility to create a fair bargaining and employment framework allowing employees and employers to negotiate working and training arrangements which best suit them.

That is why, in 1991, the Government introduced an industrial relations framework which allows businesses to be open and responsive to market forces while encouraging businesses to invest in people.

I cannot exaggerate the difference the Employment Contracts Act has made in New Zealand over the past six years. The confrontational, strike-prone, inflexible industrial relations characterising the 1970s and 1980s has been replaced by a system where workers and management can work to a common goal without third party interference.

It encourages employers and employees and their chosen representatives to be directly involved in negotiations.

It enables rewards and incentives to be tailored to individuals or teams, depending on their needs.

It means employment contracts are relevant to employers and employees themselves. You may remember the weird standards imposed by centralised negotiation which were often irrelevant and did more for discouraging employment than high taxes..

Since the Act became effective in 1991, output has gone up by 20 percent, around quarter of a million additional jobs have been created, and the unemployment rate has fallen from 10.9 percent in September 1991 to 6.4 percent today, with the long-term unemployment rate falling fastest.

By comparison with the mid 80s, strikes have declined substantially. Strikes reached a peak in 1986, with over a million (1,329,054) working days lost. Since 1991, working days lost have generally been under 100,000. Only 72,928 days were lost in 1996.

We have laid firm foundations for our future competitiveness.

That is what the Employment Contracts Act was - a foundation. And that's all it will be unless we keep building.

If there's one thing we can't afford it's complacency - a belief that all the main reform tasks have been completed or, worse, that some are simply too hard to be contemplated.

At a time when the need to be internationally competitive has never been more pressing, it is disturbing to see signs New Zealand is slipping behind.

An Economist magazine survey recently ranked New Zealand eighth best place in the world to do business, but predicted a slide to 13th by the year 2000.

The Geneva based World Economic Forum showed a slip from third to fifth in terms of world competitiveness.

Australia's GDP increased 3.8% in the last year, compared to New Zealand's 2.9% growth, with similar inflation outcomes and lower interest rates.

A couple of years ago, long-term interest rates in New Zealand were over one percentage point lower than in Australia. Now we have lost that advantage.

Labour costs in manufacturing have risen faster in New Zealand than in Australia.

Our balance of merchandise trade with Australia has deteriorated since 1994.

The Australian Financial Review noted in an editorial that we are not pushing reform into the remaining closeted parts of the economy, including electricity infrastructure, agricultural marketing boards and the sizeable welfare state remnants. As a result there is an emerging perception that New Zealand is standing still or sliding in the international business attractiveness stakes.

We are reluctant to assess whether state ownership of airports and electricity generators is best for our economic future, while the rest of the world - in particular our Asian neighbours - become increasingly competitive and economically aggressive.

The world economy has caught up and in some cases passed many of the policy initiatives we undertook. We used to be ahead in telecommunications deregulation and competition.

Ten years ago we had some of the lowest energy costs in the OECD. We don't any longer, as many of our competitors have implemented more far reaching reform in their energy sectors than has New Zealand in the past few years.

The Victorian government's drive to improve its economy shows no sign of letting up. Along with other governments in Australia it is forging ahead with privatisation and internationalisation initiatives.

New Zealand is a smaller economy, and will soon lose its attractiveness to investors if it fails to maintain a margin of excellence over competing economies. New Zealand has to stand out from the pack.

We made great strides ahead of the pack in the late 1980s and early 1990s, and the reward was spectacular in terms of jobs and economic growth.

But staying at the front of the race for international competitiveness is a marathon effort, not a short, sharp sprint.

The pack is catching up and will pass us if we don't lift our pace again. New Zealand has to be a long distance runner with all the work and stamina that involves.

The challenge now is to return New Zealand to the cutting edge of the world economy. That is a challenge for everyone from employees, to employers, to business and Government.

Furthermore, it is a challenge for the Government not only in one or two areas such as labour and energy, but across the board. I firmly believe an integrated approach to a second wave of reform is needed in order to achieve 5 to 10 percent of productivity improvement each and every year.

As the deputy-secretary of the US Treasury said recently:

One of the most foolish things said about the international economy these days is that because capital moves so quickly and so freely, government policies have little influence. In reality, precisely because of greatly increased capital mobility, the difference between having the right and wrong government policies has never been greater.... And just as good policies are rewarded as never before, mistaken policies are punished more severely.

In the past few years other countries have been diligently and successfully working to improve their competitiveness.

A number have made changes to their industrial relations structures to encourage investment in people, and introduced new ways of utilising that investment.

The Australians have been making evolutionary changes to their industrial relations system since 1988 to promote enterprise bargaining. They already have collective enterprise bargaining in nearly half their workplaces with 20 or more employees. Their latest changes have given a further boost to enterprise bargaining. Australian manufacturers are optimistic about the flexibility they will be able to achieve under the new legislation.

In my view the Australian Workplace Relations Act is as far reaching as New Zealand's ECA.

Given Australia's new impetus from its industrial relations legislation, and other work they are doing to reduce their cost structures in order to compete in the Asian market, New Zealand has to be concerned about its own position.

We need to keep adjusting our all policies to improve our ability to compete.

In the labour market, our focus is on maintaining flexibility along with fairness, to minimise any constraints on business's ability to compete.

The ECA was intended to create greater efficiency, productivity and economic activity by enabling rapid adjustment to changes in the labour and product markets.

I am working on a number of aspects of the Employment Contracts Act which appear to be in need of some fine tuning to ensure the original intention of the legislation is not undermined over time.

I am making a careful analysis of how consistent Employment Court and Court of Appeal decisions have been with the Employment Contracts Act, because there are signs that some Employment Court decisions may be adversely affecting employment prospects and flexibility in our labour market.

Some Court decisions are clearly inconsistent with the principles of the Act.

There is plenty of anecdotal evidence that small and medium sized employers are shying away from employing new staff because of the uncertainties in the personal grievance procedures created in part by some Employment Court decisions.

On the one hand, it is argued that dismissals that are substantively justified are being overturned on procedural grounds alone. On the other hand, it is a question of justice that employees must be able to obtain protection from unfair and discriminatory actions by employers.

There are signs of some unhealthy practices by employees as well. How often have you heard of legal advisers offering to take a personal grievance for an employee in return for a split of the proceeds on the flimsiest of pretexts? Too often employers will settle out of court to avoid the bother and expense. Often for the small employer the experience is enough to deter them from offering employment at all.

Many of the obligations and rights of employers and employees in relation to dismissal procedures are unclear, being scattered through a range of legal decisions and subject to ongoing legal challenge. A review of these obligations will clarify them and make them explicit in the Act.

The intention is to encourage employers and employees to resolve disagreements themselves and so reduce the costs and uncertainties associated with the present procedures.

The Holidays Act is another constraint on the ability of employers and employees to make their own choices and their own adjustments to circumstances.

Today's flexible work patterns have out-grown the restrictive prescription in the Holidays Act. There is no intention to reduce present statutory entitlements to holidays, but there must be room for greater flexibility about how these holiday entitlements are applied. I believe we can reach a position which would enable people to meet their needs more effectively.

I am opening up that debate to let those with an interest argue the case for more flexibility.

A skilled workforce

Reducing constraints to the creation of new jobs is one side of the equation.

The other side is the positive business of producing goods and services which must compete in an international market in which tariff barriers are being progressively reduced and products and services are marketed world-wide.

Some commentators have observed that it is the survival threat of international competition which impels businesses to make changes. The Employment Contracts Act does not drive change, but rather provides scope to achieve major change to workplace practices.

It is up to the people on the ground to respond to change in order to produce the goods and services as competitively as possible. They need to be equipped to do so effectively.

Our economy is increasingly based on technology and information, and those working in it require greater levels of education and training.

Yet some employers have found that workers have inadequate levels of literacy and numeracy for even modest attempts to introduce quality control.

The OECD comments that our relatively low skilled workforce is probably in large part responsible for our poor record of productivity growth. It is positive about the range of policies we have adopted to increase labour market flexibility and reduce unemployment. But it stresses that the highest priority should be given to improving workforce skills and education.

Clearly the problem is not simply one of resources. New Zealand spends 6 percent of GDP on education compared with 4.9 percent in Australia, yet Australia scores well above New Zealand in international comparisons of education performance.

A recent international study of the achievement levels of 13-year-olds in maths and science ranked New Zealand just above average out of 41 countries, at 24th place for maths and 22nd for science, whereas Australia ranked at 16th and 12th place respectively.

I know my colleague the Minister of Education is working hard to improve our educational levels. He has released a green paper on the national qualifications framework, and the Coalition Agreement has signalled a number of reviews, including a comprehensive review of the tertiary sector.

Many employers put resources into skills development ranging from literacy and numeracy needed to cope with quality programmes, to specialised training required for the particular enterprise.

You may be aware of the Industry Training Organisations which organise vocational training for particular enterprises. The Government put about $62 million into ITOs as a co-payment with industry.

My colleague the Associate Minister of Education recently celebrated the fifth anniversary of the Industry Training Act. He reported that the number of people in industry training has increased 97 percent since 1992 - almost 33,000 people in formal training in a wide range of industries.

As in bargaining, the Government plus employers and employees themselves share responsibilities for the education and training of our workforce.

Ultimately, it is the responsibility of all of us to improve our productivity in the workplace for the benefit of New Zealand's overall competitiveness.