As a contributor to the first issue of Employment Today in 1993, I am pleased to write again for this 200th issue, and to reflect on what I said 23 years ago and the way workplace and economic policies have evolved since then.

The impact of the Employment Contracts Act 1991

The essential point I was making in 1993 was that the Employment Contracts Act, which was heralded as the centrepiece of the then National Government’s economic strategy, was an authoritarian, Third World approach which had no place in a modern economic development strategy. It asserted the authority of management over the rights of workers, the primacy of profits for owners over fair wages and security of employment, and the primary means to achieve this shift of power and wealth was de-unionisation of the workforce.

In a proudly egalitarian country, there was a rapid increase in inequality.

The overall economic impact of this neo-liberal 1990s experiment is probably best illustrated by a comparative study of the experience of Australia and New Zealand by the academic economist, Professor Paul Dalziel (New Zealand’s Economic Reform Programme was a Failure). He looked at the reforms in New Zealand by comparing the growth rates with Australia between 1978 and 1998. The data reveals a striking similarity between the two countries’ GDP paths (adjusted to a common scale) for the years before 1984, and an equally striking divergence after 1984 right through to the end of the 1990s.

The cumulative gap after 1984 is enormous. If New Zealand had continued to grow at approximately the same rate as Australia (as it did between 1978 and 1984), it would have produced extra output between 1985 and 1998 amounting to more than NZ$210 billion in 1995/96 prices, or well over twice New Zealand’s total GDP in 1998.

The social impacts at that time were equally dramatic, and depressing. In a proudly egalitarian country, there was a rapid increase in inequality. Between 1984-1998, the bottom 50 percent of income earners decreased their income by 14 percent, while the top 10 percent increased their income by 43 percent. The gap between rich and poor grew faster in New Zealand during that period than in any other OECD country.

The direct effects of the Employment Contracts Act on bargaining and unions, particularly those with less bargaining power and organised strength, were devastating for many groups of workers. Collective bargaining coverage was almost halved in the 1990s, enterprise and individual employment contracts were almost universal, and union density fell from 35.4 percent of the labour force in 1991 to 17 percent by 1999.

Most workers experienced a diminution in their conditions of employment, particularly those in small business and the service sector. There was a relative decline in permanent full-time employment and a growth in shiftwork and nightwork, self-employment, part-time jobs, multiple job holding, home work, and casual and temporary employment (increasingly through labour-hire companies). Improvements in the pay gap between men and women stalled, and pension plans were curtailed.

Introduction of a new Employment Relations Act 2000

By the end of the decade, New Zealanders had had enough and one of the first legislative measures of the new Government in 1999 was the introduction of a new Employment Relations Act firmly based on the International Labour Organisation Conventions 87 and 98. These ILO core conventions recognise freedom of association and the promotion of collective bargaining by the state as guaranteed human rights.

A statutory minimum code of employment conditions and rights was also progressively put in place for the benefit of those workers outside the unionised collective bargaining sector, many of whom are more vulnerable groups of workers in precarious employment. This included improved minimum wage rates, and an upgrading of annual holiday and special leave entitlements.

Despite some predictions that the new employment laws, and other Government measures such as statutory minimum wage increases, would stunt economic growth, the following decade—until the impact of the international financial crisis—saw strong economic growth in New Zealand.

CTU strategy

The CTU strategy reflected a broad social movement unionism as well as strongly asserting its role as a social partner by engaging with government and business on a broad range of issues. This work included:

• The Employment Relations Act with its commitment to working together in good faith;
• Increased investment in training and skills development;
• Development of systems of health and safety and learning representatives in workplaces, not only to advocate and organise around healthy and safe workplaces and lifelong learning, but also to encourage workers to participate more;
• Leading public and workplace debate on the challenge of improving productivity;
• Promoting policies to make workplaces and work more attractive and family friendly;
• Ensuring a special focus on particular groups and sectors, such as the role of the state sector and Māori workforce development;
• Working with government and business to create practical strategies that will make a positive difference at industry and organisation level.

A tripartite leadership group also visited some other small countries, including Denmark and Finland, and drew lessons from their experience which we agreed were:

• Small economies—unlike larger ones—have to make national strategic choices about survival in a globalised, competitive world that has few protections;
• In small countries the task of getting consensus around shared problem-definition and solutions is a comparatively easy one, and one in which politicians and business and union leaders can play a major role;
• Social partnership, with its problem-solving culture, is a big contributor to the economic success of these countries;
• Workforce development, industrial relations and labour market policies are important components of economic policy (including the development of more participative and democratic workplaces and learning networks at workplace level).

As part of that tripartite work, we also developed a vision for a modern New Zealand workplace:

• It will be highly productive, add value to quality goods and services, and reward workers with high wages and excellent conditions of work;
• It will be a centre of lifelong learning that invests in people, lifts transferable skills—not merely job-specific ones—and constantly strives to develop the workforce;
• Workplace practices will be based on fairness and respect in a high-trust environment that values participation, diversity and flexibility;
• It will have strong networks with others in the industry and the community and will recognise the value of public services and constructive social partnership with government and business;
• It will be healthy, safe and sustainable and its work will be engaging and rewarding, while recognising that people have lives outside of work.

Shift from tripartitism to a bilateral basis under National

Unfortunately, the commitment to tripartitism did not continue under the National Government, which has preferred to work on a bilateral basis with business. A series of amendments to the Employment Relations Act, in particular, over the past eight years has seen a gradual erosion of worker and union rights, and a drift back to the 1990s approach to industrial relations and economic development. The Labour Party has once again re-kindled the debate with its Commission on the Future of Work, and we certainly need to have a national discussion about future workplace and economic strategies.

And just as the Western leaders acknowledged post war in committing to the key International Labour Organisation (ILO) conventions on freedom of association and collective bargaining, international experience also tells us that strengthening collective bargaining is a key component of any economic development strategy which intends to address the current gross income inequalities. These democratic rights are important. As George Soros said to the World Forum on Democracy in Warsaw in 2000:

What have we learned?

So, looking back, I would certainly assert that we have failed to learn from our unsuccessful 1990s experiment and to adapt the key elements of success from other small countries which have built high skill high wage economies.

Once again, as we have for more than 60 years since Dr WB Sutch promoted a value-add approach to economic development, commentators are wondering why we haven’t been able to develop a high-skill, high-wage economy, and the highly skilled workforce which underpins it, and remain exposed to the vagaries of the international commodity price fluctuations.

Yes there are pockets of innovation and world-leading technology-based businesses out there, but one of the key lessons from the successful small countries was that real economic transformation needs national political and tripartite leadership built on a genuine consensus.

 More from Employment Today

This article, “Two decades on”, is one of three free-to-browse from the current issue of our HR magazine: Employment Today.

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