16 April 2004

Business Round Table lunch Hotel Intercontinental Wellington

Background

As Minister of Labour, I’m focused on improving the performance of the labour market and the quality of New Zealanders’ working lives. I intend to do that by focusing on ways to improve the quality and productivity of New Zealand workplaces, to increase participation of the skilled workforce, and to improve the range and quality of work opportunities.

Perspective

To put all this in perspective, I want to start by looking at a few aspects of the labour market in New Zealand at this time. The New Zealand labour market has surpassed almost all expectations during the last 3 years – with one of the highest rates of job growth and now one of the lowest rates of unemployment 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 3½% per annum since 2000. 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 in each of the last 14 quarters – a combined rise of 176,000 or 10% between June 2000 and December 2003 quarters.

High job growth has seen unemployment fall from 6.1% in June 2000 to 4.6% in December 2003 – just up from the 16-year low of 4.4% in September 2003.

With lower unemployment, we’ve seen a tightening of the labour market conditions and the emergence of skill shortages. A shortage of labour is now the main constraint on output for one in five firms – a 25-year high – so job security and wage growth have moved up.

But we can’t rest on our laurels. Any easing of economic growth over the next few years will have knock-on consequences for the labour market.

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.

Performance – labour and workplace productivity

This Government is committed to an overall strategy of strengthening our long-term economic performance through increasing labour and workplace productivity and therefore the value of our economic output – particularly in the export sector.

This focus on workplace productivity is important. The recent period of strong economic growth has been sustained by stronger employment growth. With relatively high labour force participation and increasing skill shortages, improving productivity will be key to sustaining economic growth and lifting it even further.

Over the last couple of decades, many New Zealanders have associated productivity increases with cost-cutting and job losses. Our current 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.

That is why we established the Workplace Productivity Working Group – to raise awareness and discussion on workplace productivity. The Group is looking at successful methods already developed by businesses, and finding ways to promote the issue of raising workplace productivity to Government and the community. It will not be answering all the questions about productivity, but will stimulate the debate, pull together information, and help identify priorities for further work. The Group has a practical focus – its membership of business, union and public sector representatives was selected with this in mind. I expect its advice and recommendations, due in July, will focus on practical – rather than theoretical – ways of helping firms improve their way of working and therefore their workplace productivity.

Active labour market policies

Skills and participation in the workforce

This is where labour and employment policies coincide, and therefore where I share objectives with my colleague, Hon Steve Maharey.

We are addressing the labour and skill shortages I’ve mentioned already through a range of policies. These look at what we can do within the next few months, within the next few years, and in the longer term. These policies span training and development in programmes like modern apprenticeships and a more strategic approach to tertiary education. These policies aren’t just about preparing people to join the workforce either. On-going skill development is important. We want to keep people up-skilling throughout their working lives, to keep pace with changing business needs and opportunities.

Immigration

We have developed a strong and explicit focus on using immigration to recruit the people we need to fill gaps in our workforce. These gaps can be short-term – where the temporary work visas play an important role, 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.

Occupational Safety and Health

By defining minimum standards for the safety, health and well-being of the people working in our enterprises, we can provide some assurances for the quality of their working lives, in a way that is consistent with our overall aspirations as a modern and globally competitive economy.

The strategic outcomes sought by OSH can be summed up by the Four Es – Engage, Educate, Enable and Enforce. The last one, enforcement, will be focussed on purposeful or serious breaches. The first three involve OSH refocusing, to promote awareness of the importance of health and safety in the workplace, deliver practical advice and assistance, and work collaboratively with agencies to improve health and safety.

Changing the way the Department of Labour works

The Department of Labour is changing the way it works, to be more effective at improving the performance of the labour market and the quality of New Zealanders working lives. It is reorganising the way it provides services to employers and employees, and to the way it gathers information and provides policy advice to Ministers.

The Department is implementing a new management structure that will ensure more coordination across all its activities, to focus its work more on outcomes in New Zealand workplaces and the New Zealand workforce, and to strengthen its policy leadership capability. It will involve three new groups:

Workforce – focusing on increasing participation in the skilled workforce. (employment, skills, immigration)

Workplace – focusing on improving the quality of work in productive workplaces. (employment relations, OSH, ACC advice)

Work Opportunities – focusing on supporting more high quality work opportunities through more productive enterprises and enterprising communities. (community employment opportunities)

These changes will see the Department build a better balance between enabling people and enterprises to improve their labour market outcomes, educating people better about ways of improving labour market outcomes, and enforcing standards across the labour market. Through this the Department will be better able to support my overall focus on improving the quality of New Zealanders’ working lives.

Standards – helping to make New Zealand workplaces attractive and productive

Some people regard labour market regulations as a constraint. I want to challenge that notion head-on. I want to put the alternative view. I want to emphasise the importance of the value-added, high-skilled, and improving workplace performance economy.

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. What are they moving to? Often it is to opportunities and rewards that New Zealand businesses can’t readily compete with. We need opportunities and working conditions that are attractive – both to New Zealanders contemplating leaving or returning, and to people from elsewhere for whom New Zealand needs to stand out from the crowd.

Getting the best out of employees usually means treating them fairly. Most of us would genuinely want employees to work in a safe and healthy workplace, where they have reasonable opportunities for rest and recreation, and where they felt they could participate in and contribute to the success of their enterprise. Labour market regulations can help by providing the foundations for this. For example recent regulatory changes in health and safety and holidays typify this.

Employment Relations Law Reform Bill

Productive employment relations underpin a high value and sustainable economy. The Employment Relations Act is the centrepiece of the employment relations framework in New Zealand. It is based on the core idea that good employment relations are a prerequisite for getting the best out of our investment in human capital.

The object of the Act is to build productive employment relationships.

When the Employment Relations Act was passed in 2000, there were dire predictions from some about the economic consequences. It was predicted, for instance, that industrial conflict would skyrocket, and productivity, employment and wage growth would plummet.

Indeed the Business Roundtable released a media statement at the time saying the bill was "a huge setback to economic growth and employment prospects…..will create fewer jobs….and more industrial disruption."

Happily, reality has seen such claims proven wrong:

I have already touched on the strong economic growth that we’ve seen over the past three years, and the accompanying high job growth and lower unemployment. In terms of wage growth, between December 2000 and December 2003 it has averaged 2.1 percent per annum – above the 10 year average of 1.8 percent per annum.

The latest available figures for the year ending December 2003 show industrial action at historically low levels, with 28 stoppages being recorded. That is the second lowest figure for almost the last 20 years – the lowest being 21 stoppages in 2000. The results for the year ended December 2003 also show a strong decrease in the numbers of employees involved and losses in person-days from previous years. Compare this 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 the Department’s mediation services used in an increasing number of bargaining situations, either before or after stoppages have occurred. While mediation can only be successful if the parties agree, it is fair to say that 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 does take place, around 77% of problems are settled. The remainder are referred to the Authority or Court.

The Employment Relations Law Reform Bill builds on the foundations laid by the Employment Relations Act four years ago. It aims to strengthen the way good employment relations can help employers, unions and employees to work together to improve the performance of their workplaces.

These things are not simply matters of compliance – they are an investment in employees’ well-being, which, in turn, improves productivity and the bottom line.

There has been a great deal of misinterpretation about the Bill, and many of the published statements are not correct.

For example, unions will not have the power to dictate pay conditions for non-union employees who are entering into individual agreements.

Nor do the proposed amendments necessitate higher remuneration for union members on a collective, simply because they are union members.

Rather, the Bill aims to prevent the deliberate undermining of collective bargaining by the passing on of collectively bargained terms and conditions to employees not covered by that collective agreement, without genuine negotiation over individual employment agreements.

In short, good employers will not be punished. The Bill will pose no problems for employers, unions and employees who already practise good faith behaviour and recognise the value of working cooperatively together.

However I am very aware of the concerns that have been raised about what the provisions in the Bill might actually mean in practice, especially in relation to small and medium enterprises. I am listening carefully to these concerns and I am certain the select committee will be addressing calls for greater certainty and clarity.

I am really keen to hear practical responses on such matters. I am not really interested in listening to well rehearsed ideology from any group. Rather, I want to engage constructively in ways of ensuring fair outcomes for all. Along with my Cabinet colleagues, I am committed to working with all sectors to promote economic growth and better labour market outcomes. We have a real interest in achieving more economically and socially.

I am confident that the Employment Relations Law Reform Bill and any amendments that may result from the Select Committee's work will deliver on the overall objective to improve the quality of New Zealanders’ working lives by improving the performance of the labour market.

ENDS

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