Productivity lifts wage, not strikes

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There has been a significant increase in strike action in recent months, the like of which we have not seen in recent times.

While it may be passed off as the public sector seeking to rectify low wage increases of the last nine years or so, what is missing from most of the coverage and commentary is where productivity sits in this equation.

Strikes are costly for both workers and businesses and an action of last resort. A negotiated settlement is far preferable to strike action. And strikes do nothing to increase productivity.

The Productivity Commission has recently released an excellent paper on why lifting New Zealand’s productivity has been difficult and the challenges this presents. It points to the fact that the hours worked per capita in New Zealand are among the highest in the OECD, but the value produced from the New Zealand labour force is among the lowest.

Basically, our wages are lower than other OECD countries because our productivity is lower.

The takeout from the Commission’s work is that in the long term, wages can only rise when productivity rises.

From a public policy perspective, it would seem that this is a crucial issue that needs to be addressed by any government before it seeks to address our industrial relations landscape.

The country needs a legislative framework that promotes productive employment relationships. The Future of Work Forum is yet to convene, and this is where employers, government and unions will shape the policies required to equip workers and businesses to adapt to the rapidly changing nature of work.

Which is why we are puzzled by the haste undertaken by the Government to push new employment legislation through, without having first looked at the policy framework it seeks to deliver to. You may have seen our “Fix the Bill” campaign which calls on Government to explain how the proposed changes will help New Zealand grow.

Many of the proposed changes in the Employment Relations Amendment Bill will result in bringing more compulsion into a workplace, such as forcing businesses to settle a collective agreement even if the parties are unable to agree.

We do not want to see a return to a “them v us” mentality for industrial relations, nor a time of low economic growth, high unemployment and rising inflation. Long gone are the days of a closed economy, when strike action could potentially bring the country to its knees – and businesses knew any resulting agreed wage increases could be passed on to customers who had no choice.

Today, we operate in a very different world. Your customers have choice. They can purchase their goods or services from you, or they can look around the globe.

New Zealand’s economic fundamentals are sound, and we have had one of the highest growth rates in the OECD and among the lowest unemployment rates in the world.

Therefore, it is disturbing to hear recent reports of poor productivity, slumping business confidence and forced wage increases potentially driving up inflation.

The EMA believes the series of recent business-related commentary on these economic indicators adds to our call for the rethink on the Employment Relations Bill and other industrial relations legislation in the pipeline.

There is a significant roll call of employment law legislative change that is also a significant factor in businesses putting a temporary hold on their hiring and investment plans.

Each of the proposed changes is a focus for business, and some of these are wholeheartedly welcomed such as the review of the Holidays Act. Yet, when combined they represent a significant rewrite of the employment relations landscape that has been the platform for New Zealand’s economic performance in the past decade – despite earthquakes and the Global Financial Crisis.

Have a read of what we are asking the Government and if you agree add your name to fixthebill.co.nz

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About Author

Kim Campbell

Kim Campbell is chief executive of the Employers and Manufacturers Association kim.campbell@ema.co.nz