Speech to NDU biennial conference

National Distribution Union Biennial Conference, Alexandra Park Raceway
19 October 2004

Good morning and thank you for inviting me to talk to you today as you begin your two-day biennial conference here in Auckland.

As Minister of Labour, I’m focused on improving the performance of the labour market and the quality of New Zealanders’ working lives. Today I want to talk about the state of the New Zealand labour market and some of our achievements in this area over the last few years. I want to look at some of the ways that we are trying to improve the quality and productivity of New Zealand workplaces, increase participation of the skilled workforce, and improve the quality of work opportunities and the role of unions in this process. Also, I'll go over some issues around the Employment Relations Law Reform Bill and the Holidays Act.

The Government’s Growth and Innovation Framework is about tuning the economy for growth. In November 2002, our economic objective was to return New Zealand’s per capita income to the top half of the OECD rankings and to maintain that standard. It is about the whole economy, including:

• Getting good ideas to market
• Developing skills and talent
• Increasing global connectedness
• Strengthening the foundations of the economy.

But it is also about extending the scope of our economic activity into the emerging high growth, high value sectors which are the hallmark of successful economies. Key areas of focus are biotechnology, creative industries and information and communication technology.

Next I want to look at a few aspects of the labour market, which has largely surpassed all expectations during the last 3 - 5 years. We now have one of the highest job growth rates and one of the lowest unemployment rates in the OECD. This performance has been on the back of strong economic growth over this period.

So let’s look at some of the key statistics:Economic growth has been high – at around 3.5 % per annum since 2000 and was 4.4% to the year ended June 2004.

This growth has been concentrated in domestic sectors (e.g. construction, education, hospitality), which have benefited from high population growth, low interest rates and previously high farm incomes.

Strong economic growth has driven job growth. The number of people in work has risen considerably in the last 4 years – a combined rise of 211,000 or 11.8% between March 2000 and June 2004 quarters.

High job growth has seen the unemployment rate fall from 6.3% in March 2000 to 4.0% June 2004, a 16½ year low.

With lower unemployment, we’ve seen the labour market and skill shortages emerge. A labour shortage is now the main constraint on output for one in five firms – and a net 34% of firms reported increased difficulty finding unskilled labour in the September 2004 quarter – an all-time high – so job security and wage growth have steadily increased.

Since 1999, the Government has introduced a series of initiatives designed to improve our economic performance. There are too many to go into here, but taken as a whole, these recognise the interdependence of workers and employers, promote and sustain economic growth and assist in achieving a fair distribution of resources.

Our achievements in the labour portfolio, have mainly been improving the regulatory framework that supports the labour market. Going forward, I’m focused on active labour market policies that underpin our future economic performance and I want to talk more about these policies shortly.

Some people regard labour market regulations as a constraint. I don't. Skilled labour is internationally mobile. We are in a globally competitive labour market. We see this every day as people move to where they can get the opportunities and rewards they want. We need opportunities and working conditions that are attractive – both to New Zealanders contemplating leaving or returning, and to people from overseas. In both cases, New Zealand needs to stand out from the crowd.

Getting the best out of employees usually means treating them fairly. Most of us want employees to work in a safe and healthy workplace, where they have reasonable opportunities for rest and recreation, where they feel they can participate in the success of their enterprise, and improve their living standards as a result.

Labour market regulations help by providing the foundations for this. Important regulatory changes have been made in employment relations, health and safety, and holidays, minimum wage and paid parental leave entitlements.

Employment Relations Act – in 1999 we repealed the Employment Contracts Act and passed the Employment Relations Act in 2000. Generally, the ERA is working well. We always said there would be a review of the ERA after an appropriate length of time to see if it was meeting its aims and objectives and the Employment Relations Law Reform Bill was introduced last year. I will talk more about the specific changes shortly.

Health and safety - amendments to the Health and Safety in Employment Act were passed in 2003. Key changes are:

• One Act coverage for all employees -crew aboard ships and aircraft and rail workers, mobile workers and volunteers carrying out work activities all covered
• Stress and fatigue - specifically referred to as potential work hazards
• Mandatory requirement to involve employees in the development of health and safety processes at work
• 2 days paid leave each year for health and safety representatives to attend health and safety-training courses.

Holidays legislation

• 4 weeks annual leave from 2007
• Increased entitlements to sick and bereavements leave - 5 days sick leave per year and 3 days bereavement leave on the death of a family member. Also 1 days paid leave on the death of any other person close to the employee
• 11 public holidays a year continues
• Payment for work on a public holiday is time and a half for the time actually worked and a paid day off in lieu.

Minimum Wage

• Steadily increased the minimum wage every year since 1999 with a 5.9% pay increase from 1 April 2004 to $9.00 an hour (workers aged 18 and over)
• The minimum youth wage (workers aged 16 and 17) increased from $6.80/hr to $7.20/hr
• The Minimum Wage Act was also amended in March 2003 to allow for a minimum training wage to be set for trainees aged 16 or over whose training agreement requires them to do at least 60 credits a year towards a qualification on the National Qualifications Framework. The trainee minimum rate is the same as the set youth minimum wage.

Paid Parental leave:

• Entitlement to 12 weeks paid parental leave was introduced in 2002
• Enhancements to the scheme introduced 2004 - extending ppl from 12 to 14 weeks – to be phased in over a two-year period from 1 Dec 2004
• It will now be easier for employees to qualify for paid parental leave
• Employees who have worked for the same employer for six months or more will now qualify for ppl
• (Currently employees have to be in paid employment with the same employer for more than 12 months).

Employment Relations training:

• Employment Relations Education and a contestable fund established in 2000 contributing to improving workplace knowledge, productive relationships and health and safety awareness and understanding. Two million dollars is available via the contestable fund each year
• Examples of courses and projects include health and safety training targeting small businesses, silviculture workers, farm workers, residential construction workers and adventure tourism workers; training for union delegates and courses on problem solving. 48 organisations have approved employment relations or health and safety courses.

ACC:

• Re-nationalisation of accident compensation in 2000 and repeal of the Accident Insurance Act 1998, which privatised the Work Accounts.

LABOUR MARKET THEMES:

• Workplace productivity
• Immigration policy and training and skills development
• Employment Relations Law Reform Bill
• Holidays Act.

In February 2004, the government established a Workplace Productivity Working Group to advise on ways for industry, businesses, unions and employees to work smarter and more productively.

Over the last couple of decades, many New Zealanders have associated productivity increases with cost-cutting and job losses. Our focus on workplace productivity is different. We’re looking for business practices that improve timeliness and quality, minimise costs and waste, and involve employee participation in innovation and technology. We’re looking at ways to improve the return on investment in our workplaces – whether it is new plant and equipment, new workplace practices, new technologies, new skills.

Improving workplace productivity is increasingly important to maintain our quality of life. Skill shortages are also a significant problem. For these reasons, we now need to focus our efforts on how to get more from our current labour force by being smarter about how we work.

The workplace productivity working group was tripartite - business, union and public sector representatives - and was a good example of a partnership model in action. It examined successful business practices and looked at how to promote the importance of improving workplace productivity to government and the community. Its consultation processes included a workshop in May, which included union participants. There has also been a series of focus groups around the country.

A number of New Zealand firms are now achieving productivity gains with business practices that improve timeliness and quality, minimise costs and waste, and encourage employee participation in setting and reviewing company goals. The working group considered initiatives of successful local and international companies as it looked at future policy options. The working group has now reported back to me and the government will launch a formal response to the report in November.

Unions have an important role to play in terms of workplace productivity and have played a role in bringing employment issues to the attention of the Government. They have contributed constructively to tripartite discussions on the issues. As we grapple with the changing nature of the labour market, unions too need to adapt to reflect these change and to ensure they are meeting employee's needs.

Unions have a role in the long-term development of this country. There is a place for the organised voice of the workforce in policy development. Unlike the previous government who removed even the mention of unions under the ECA – this government values the input of unions to policy development. As you will know, most of the successful European economies have quite formal and successful arrangements of this nature with their union groups. And in New Zealand there are a number of examples of this approach in practice eg union representation on industry taskforces, union involvement in initiatives such as the workplace productivity working group and in employment relations education training.

Unions also have a role to play in establishing successful employment relationships – both as representatives of their members and as sources of information about successful employment practices.

The government has set up several schemes and strategies to ensure that New Zealanders are able to up-skill more easily. These policies span training and development, and a more strategic approach to tertiary education.

The Tertiary Education Strategy provides a five-year blueprint for a more collaborative and co-operative tertiary system that contributes to upskilling of New Zealanders.

One key objective of the strategy is to develop the skills New Zealanders need for our knowledge society. This strategy recognises the importance of high-level generic and specialist skills.

The Tertiary Education Commission implements the strategy through linking industry training, adult and community education, and university and polytechnic courses together.

This provides a stronger framework for connecting with key stakeholders and identifying skill needs.

The Education (Tertiary Reform) Amendment Act 2002 formalised a leadership role for ITOs in relation to industry skill and training needs. ITOs are now playing a stronger leadership role in planning for the long-term interests of industry.
This involves putting mechanisms in place to ensure early warning of emerging skill shortages in order to identify how these can be solved.
Education and training providers, ITOs, government agencies and other relevant stakeholders can then take appropriate action promptly.

The Industry Training Strategy has grown in strength and importance with large increases in both trainee participation and achievement of national qualifications. There has been a large expansion in investment by both government and industry:

• In 2003, 126,870 trainees participated in industry training. This number has increased by 56 percent since 2000
• Employer involvement has steadily risen, as more businesses seek the benefits of industry training. By 2003, 29,206 employers were participating in industry training, an increase of 19% since 2000
• At 31 March 2004, there were 10,144 industry trainees training through CompeteNZ (previously the engineering, food and manufacturing ITO), an increase of 18 percent over the last year, and 473 industry trainees with the printing ITO
• Government and industry now have a shared participation target of 150,000 trainees during 2005. Budget 2003 provided an additional $84 million over four years for industry training to achieve this target.

Since its inception, numbers of Modern Apprenticeships have grown steadily, with particularly rapid growth occurring in 2002/03. Modern Apprenticeships has proven to be very popular amongst stakeholders and the public. The government has responded by increasing investment in Modern Apprenticeships in each year of its existence.
Additional funding through successive budgets has allowed increasing numbers of young New Zealanders to participate in the Modern Apprenticeships programme.

As at March 2004, there were 6,580 Modern Apprenticeships throughout New Zealand in 30 industry areas. This represents the early achievement of the target of 6,500 Modern Apprenticeships by June 2004. Future participation targets include 8,000 by June 2006.

The government is also funding a tripartite initiative called Skill New Zealand involving the government, Business New Zealand and the New Zealand Council of Trade Unions to create greater awareness among workers and employers of industry training and workplace learning.

This is an incremental campaign that seeks to boost knowledge of learning pathways in the workplace and how to overcome barriers to learning among different key audiences.

The present focus of the campaign is on four industries (Retail, Tourism, Hospitality, and Furniture) where there are currently low numbers in industry training.

A new pilot initiative, called Learning Champions, was added to the Skill New Zealand campaign as part of Budget 2004. This selects and trains people from the workplace to act as advocates of learning among their worksite peers.
The pilot has the full backing of the tripartite initiative members, who are currently discussing the first steps forward in its implementation.

Immigration policy is also playing an increasing role in contributing to New Zealand’s economic growth by filling identified skill shortages. Immigration has a role to play where gaps are short-term (for example, temporary work visas) and longer-term, where our new skilled migrant policy will take effect. This new skilled migrant policy is already lifting the standard for people wanting to come to New Zealand to live and work

EMPLOYMENT RELATIONS LAW REFORM BILL
I have met with many union and employer groups to discuss issues on the Bill since I took over the Labour portfolio earlier this year. The select committee heard submissions since March this year. A number of themes came through – areas where many different groups had concerns. These include:

• Clarification of the duty of good faith including provisions relating to freeloading or passing on
• What a genuine reason for not concluding a collective agreement might be
• Promotion of MECAs
• Definitional issues round vulnerable workers (in transfer of undertaking provisions)
• Clarifying the personal grievance provisions.

The select committee recommended some sensible amendments to the Bill and on I also introduced amendments to allow for bargaining fee arrangements. These will operate where a union and an employer agree on a bargaining fee arrangement, affected employees would take part in a ballot to decide whether the bargaining fee arrangement should operate in their workplace, and non-union employees who do not want to pay a bargaining fee would be able to opt out of the arrangement. Strikes and lockouts over bargaining fee arrangements would be prohibited.

I have mentioned the improvements to holidays' entitlements earlier. A critical achievement has been the introduction of 4 weeks leave, due to come in on 1 April 2007. However since the rest of the Act came into force on 1 April 2004, there have been some implementation issues and many of you will be familiar with these, eg what you get paid if you're rostered to work on a public holiday and are sick on the day and cannot work.

I set up a small tripartite working group to look at some of these issues and in late August I introduced a Bill to address what I consider to be 'unintended consequences' arising out the Act's implementation, but NOT core policy.

When the Holidays Act was introduced we wanted to ensure employees would be guaranteed an additional payment for working on a public holiday. Most New Zealanders think this is fair. We also wanted to introduce 4 weeks annual leave from 2007, to bring us into line with our key trading partners, notably Australia. Australia has had 4 weeks annual leave for about 30 years. These core policies have not changed.

The Bill as introduced:

• Ensured that an employee is not paid time and a half for working on a public holiday, on top of an agreed penal rate (this ensured that employees who received a minimum of time and a half, while preventing a windfall for those who already receive a superior entitlement under their employment agreement)
• Extended the transitional period for complying with the time and a half provisions where an employment agreement contains a composite rate (this amendment ensured that employers and employees would have sufficient time to determine whether their employment agreements met the Act's requirements, or would need to be amended)
• Clarified that an employee who is sick on a public holiday is not entitled to be paid time and a half or receive a day in lieu
• Provided for an employer to ask for a medical certificate within the current three day limitation where they suspected the leave was not genuine, informed the employee as early as possible and bore the cost of obtaining the proof (this ensured that employers would be able to monitor any suspected abuse of the sick leave entitlement while not leaving the employee out of pocket).

The amendments, which will be passed this week, clarify that:

• Penal rates do not include overtime
• Employees can choose their doctor if a medical certificate is requested
• Employers are only required to pay an employee's reasonable expenses, when requesting a medical certificate
• Employees who are asked for a medical certificate and do not provide it without good reason, may not be paid sick leave.

As I've outlined today, New Zealand has experienced some good economic growth in the last few years, but we can’t relax. Any easing of economic growth over the next few years will have knock-on consequences for the labour market.

The Government has made some very good gains in terms of the regulatory framework that supports the labour market. And from here, I’m focused on active labour market policies that can underpin our future economic performance. These active policies should span the quality and productivity of our workplaces as well as skills and participation in the workforce.

We have achieved a lot but there is always more to do. A partnership approach between business, unions such as yours, and the Government is vital for New Zealand's continued economic growth. I look forward to your continued constructive involvement in the drive to provide a higher-skilled, higher-paid economy now and in the future.