Posted: July 06, 2005

Learning from New Zealand

With the introduction of the radical new Industrial Relations (IR) legislation looming and the first public opinion poll suggesting that finally the Federal Government is impacting negatively on mainstream Australia, it is worth reflecting on what happened in New Zealand under their so-called Employment Contracts Act (ECA). I note that up until now the neo-liberal regime of the Howard Government has attacked the weak, the jobless, the marginalised, the homeless, the stateless - those generally living in the shadow of our communities. That bully-like approach has been bolstered with the introduction of vile nomenclature like job snobs, bludgers, cruiser, queue jumpers, 'bad back syndrome', and other offensive and divisive language. It has been relatively easy for the Government to set this group of disadvantaged Australians apart and vilify them. The rest of us have selfishly and idly stood by - being content that we are not in this group - and using ever increasing levels of household debt to purchase from a never-ending list of consumer possessions, human capital products for our kids (tutoring colleges etc) in the hope that this materialist path will bring us happiness. Therein lies the danger as I will explain.

Today, the Government has seen that so-called mainstream Australians are now in fear of their dream ending under the new IR changes. The two separate opinion polls presented the Government with bad news that their attempts to bully the rest of us might actually be a tougher challenge than isolating and opressing the most disadvantaged Australians.

While claiming they would not budge on their IR reform agenda, the Workplace Relations Minister Kevin Andrews was forced to deny this afternoon (as reported in the Sydney Morning Herald) that "workers will have their annual leave slashed in half under the government's industrial relations shakeup."

The story went on: "Mr Andrews blamed a misleading union campaign for the polls after ACTU president Sharan Burrow said workers could have their annual leave slashed from four weeks to two under the government's plans. But he refused calls to release more details about the plans and would not say if the government was going to bring forward its $19 million advertising blitz to combat the union campaign ... Mr Andrews said workers already had the ability to cash out some of their annual leave and bosses would not be able to force anyone to give up their entitlements ... But he said the government would like to see more flexibility in annual leave entitlements with workers able to cash out several weeks if they desired."

Now this is just a part of the retrenchment of workers' entitlements that will be up for grabs. The New Zealand experience under their pernicious ECA, which is similar in intent to the proposed IR changes here is salutory. In 1991, the ECA was introduced by the then National Party government in NZ. All previous expectations of fairness in the workplace and pay equity and rights to union representation were jettisoned by this legislation. Prior to the introduction of the ECA, NZ workers enjoyed a similar wage determination system as under our awards. They had industry/occupational awards which were collectively bargained and unfair dismissal protection. Under the ECA, individual contracting became the norm and unions were effectively rendered irrelevant if an employer deemed them hostile. The nomenclature shifted from union to bargaining agent and within a few months, the award system that had supported a wage floor (minimum wage and conditions) was demolished as employers forced workers to renegotiate their wages and conditions on a take-it-or-leave-it basis. The unions had little or no bargaining power within this system.

Some data is useful. Prior to the ECA, more than 720,000 workers in NZ had minimum pay and conditions set by collective agreement or awards. 10 years later this number was less than 400,000. There was a marked shift to contract positions, short-tenure positions, continuously contracted positions, casual positions. All of which were marketed as new improved flexibility in the workplace. Work practices that were considered illegal in the past and common in less developed economies (low wage sweat shops) became more frequent.

There was no unfair dismissal available as a legal entitlement and the torturous way through tort (contract) law proved impossible for workers seeking redress for shoddy treatment from their bosses.

In a piece by Lindy McIntyre a NZ union representative, there is the following letter from a supermarket checkout supervisor to the Department of Labour summed up the impact of the ECA on workplaces:

As soon as the Employment Contracts Act came in everything changed in this place and we were told - now he'd do it his way. First he got rid of the union, and some were threatened that if they belonged to the union they would be down the road. The contracts were never negotiated. We were called in one by one and given this printed document with a place to put your signature. Some of the young ones were not allowed to take their contracts home for their parents to read. The first year all of us who already worked there got penal rates. As people left or were sacked, the new ones went on to a flat rate with no set amount - they were all getting different wages. Within a year there was a 90% rollover of staff.

McIntyre summarises the impact on quality of jobs and wages as follows:

• "As the take it or leave it workplace culture spread, the quality of jobs plummeted. From 1991 to 1999 growth in full time employment was 15.5% compared to 36% for part time jobs, including part time jobs of as little as one hour a week."
• "The numbers of 'working poor' dramatically increased, as countless jobs were casualized, reduced to very part time hours and contracted out. The number on benefits soared - increasing by over 100,000 from 1991 to 1999. Real wages fell. From 1991 to 1996 median incomes for wage and salary earners increased by less than 10%."
• "... when the total loss of conditions and allowances was considered, the real impact was even greater. A study of supermarket pay rates showed that while real wage rates in that sector fell by 11% between 1987 and 1997 for those working Monday to Friday, those whose work included weekends had a 33% real pay cut."
• "Young workers suffered even greater cuts as new workers started under the ECA and 'grandparenting' of conditions created intergenerational differences. Of course those reduced conditions eventually flowed on to all workers."
• "The state-set minimum wage moved 14% during the ECA, while inflation rose 18%."

We need not remind readers that labour productivity was stagnant over the 1990s in NZ, and GDP and employment growth were at the bottom of the OECD list. Export growth also was poor. Unemployment, which provides the strongest signal of a fail of governence, average nearly 9 per cent in the five years after the ECA was introduced. The policy environment left NZ in a low-wage, low-productivity malaise with falling real wages.

NZ also simulataneously attacked its welfare system and by the mid-1990s young children were detected with the vitamin deficient disease of rickets, the disease of poverty. This was unthinkable in a developed country like NZ until the policy makers started their assault on the working class in the name of flexibility and choice.

Of relevance, is the fact that workers began to trade-off their annual leave entitlements in return for cash. Two factors led to this outcome. First, employers could force this upon their workers by the take-it-or-leave-it individual contracts. Any worker protesting would likely be summarily dismissed. Second, workers driven into poverty by falling real wages and the need to maintain their material lifestyles were easy prey for contracts that cashed-out holidays. The NZ Government has now guaranteed that by 2007 they will legislate 4 weeks annual leave again to redress the terrible decline in workers' standards in this regard. It was impossible to see these trade-offs as being driven by worker choice.

So expect the same thing to happen in Australia. Either coercion by employers now exempted from unfair dismissal or coercion by the workers themselves, heavily in debt and trying to chase the consumer dream. How might they keep themselves afloat? By cashing out their annual leave entitlements! The problem is that the Government has been steadily eroding basic conditions of workers and the unemployed. Once workers start cashing out these other entitlements, it will be hard to recover them in the future. It all adds up to a nasty future for our society and families. Once again the claim by the Federal Government that it is pro-family is a (sick) joke.

Blog entry posted by bill