New Zealand: Globalization and Employment Relations Essay

Introduction

Many countries have adapted to various established approaches when it comes to employment relations as a response to globalisation. In the book International and Comparative Employment Relations: Globalisation and the Developed Market Economies (Bamber, Lansbury, and Wailes, 2004), it was suggested that the development in employment relations may be connected to the high interest in scholarly comparative relations due to globalisation. International and national or local settings, however, takes a deeper understanding and analysis on the complex reality of industrial relations.

Already, linkages are established as to the differences and uniqueness a country deals with its employment relations such as the evolution of convergence as against divergence, simple globalisation, institutionalist forms and integrated forms of globalisation. In the book, Bamber, et al (2004) noted the introduction of major parties such as unions, employers and governments, and movement of international arrangements such as legislation, collective bargaining, dispute resolution mechanisms, among other things. The aspects of change and innovation in the field of employment relations is also notable as globalisation brought intensive competition.

The trend in globalisation has always been to signify a cheap labour market with dedicated, skilled and well-disciplined workers the better of which is to attract foreign investment. This will usually translate into a competitive advantage in international markets. However, it was also observed that labour laws were not enforced while modern industrial relations is discouraged. While this system results to realization on the necessity of transforming labour markets, potential customers from democratic countries and their agencies like the World Trade Organization (WTO) and International Labour Organization (ILO) demand changes in the area.

This paper will try to critically assess the usefulness of the varieties of capitalism approach for understanding employment relations by examining the extent to which it can capture key features of employment relations in New Zealand.

Discussion

Government Role

New Zealand began the biggest programme of free market reform through the elected Labour government by 1984 under the Organisation for Economic Co-operation and Development or OECD. It aimed at improving the economy’s competitiveness, increase productivity and reduce New Zealand’s debt burden. The Labour government was able to free prices, wages and interest rates, float the exchange rate, progressive removal of subsidies and reduced tariffs, deregulated the financial system, slashed income tax rates as well as adopted monetary and fiscal policies that encouraged overseas investment (Powell and Spicer, 1994).

Major structural reforms in the management of the public sector was also introduced as supported by the State-Owned Enterprises Act of 1986, State Sector Act 1988, and the Public Finance Act 1989 which directly and indirectly addressed concerns of the statutory corporations and trading activities of government department and reading enterprises. The main objective was to improve the efficiency and effectiveness of activities carried out by these entities addressing concerns on spending, poor policy, and lack of accountability (Douglas and Callen, 1987). The Employment Contracts Act 1991 replaced the Labour Relations Act 1987 and changed the operation of New Zealand’s labour market.

Trading entities were commercialised to ease the faltering economy and the country’s burgeoning deficit. Cowen (1993) suggested that through the creation of a regime based on freedom of association, the Act transformed the basis for bargaining that led to greatly increased flexibility and heterogeneity in employment contracts. Nevertheless, the Act fell short of establishing a framework for free contracting in the labour market. It mandated a range of minimum standards for employment contracts that reflected a primary concern of legislators in freeing up bargaining processes, instead of reviewing the overall case for prescriptive regulation of employment contracts.

Pay Equity and Equal Employment Opportunity

The department of Labour the Pay and Employment Equity Unit was established in 2004 covering development tools and guidelines as well as training for:

• “Pay and employment equity reviews followed by response plans.
• Job investigations.
• Pay evaluation” (Hyman, 2007, pp 18-19).

The Unit was able to distinguish in 2006 that, “…the core of the approach adopted is that sustainable change depends on active engagement in partnerships of employers, employees and unions in workplaces in identifying equity issues and agreeing on response plans to address them,” (Hall, 2006). In addition, it also assisted organisations in gathering evidence for equitable policies and practices on gender, ethnicity, age or disability. The Unit’s Factsheet 2 states that employers and unions can negotiate the solutions through collective bargaining and that claims for additional funding for remedial pay settlements that resulted from pay and employment equity reviews will be considered within existing budget processes through the advise of the tripartite process. The claims must be supported with clear evidence of pay inequity based on a rigorous investigation and whether the organisation has the capacity to fund the claim through reprioritisation.

The Unit, however was deemed slow with the low representation of women in varying areas from apprenticeship to directorship as carers and cleaners had to fight for a living wage. Effect to the private sector was also seen to be minimal.

Another feature of the New Zealand labour market is the rising public sector wage bill that reflected and saw the growth and improvement of the remuneration for public sector workers. The Quarterly Employment Survey indicated that the 2005 average private sector wages were at least 75% below public sector wages.

In the World Justice Forum, it was emphasised that “the rule of law as applied to business and labour is obviously critical and of utmost importance […] it is through the workplace that the wealth of the nation is created,” (O’Reilly, 2008, p 1). The speech eventually acknowledged that while laws need to be fit for purpose, they are manifested as too partisan and cannot be implemented.

At the Employee’s End

While researchers find phenomenal pressure for reform due to globalisation at the same time increasing casualisation of employment, declining employment levels, and reasserting managerial control over work (Turnbull, 2000), New Zealand has its union influence decline. There were defeats of unionists after the introduction of the Employment Contracts Act (ECA) in 1991. This was seen to have eroded the external legitimacy of trade unions (Harbridge and Honeybone, 1996).

Generally, the act reduced the ability of unions to control labour supply while essential services limited the threat of employee-initiated industrial action. The introduction of the ECA enabled the employers to accelerate a process of reforms that commenced in 1989with major reductions in employment.

The Employment Relations Act 2000 (ERA) repealed the ECA designed to redress the perceived inherent inequality of bargaining power between employers and employees which promoted unions and collective bargaining. Barry and Reveley (2002) however, suggested that instead of strengthening the unions’ power, the ERA has eroded the genuine unionism through heightened tension in contradictory union rights that gave employers an upper hand.

Under the ECA, more that 75% of New Zealand’s workers had individual employment agreements as an impact of the design to promote freedom of association and labour market flexibility (Kelsey, 1997). With this, vulnerable employment groups such as young and low-skilled employees felt the hardest as they lost bargaining power and employment benefits such as penalty rates for weekend or overtime work. Freedom of association became synonymous with “freedom of contract” as bargaining arrangements became a matter of choice. It was seen as “take it or leave it” proposition totally discarding the union. This was reflected I the Alliance Textiles case Eketone v Alliance Textiles 1993 (Haworth and Hughes, 1995). The decision and ECA provided that the employer may not be union neutral and may engage in direct communication with employees about seeking representation, that employee organisations must establish authority to represent before access to workplace, and employers may demand written authority from employees aside from control of time access and scope of activities within the workplace (Nolan and Walsh, 1994).

The ERA was believed to formally encourage unionisation and collective bargaining as it enabled union access o the workplace for legitimate purposes of representing their members to conduct business and recruit mew members embodied in a clause of its rules covering an employee normally working at the enterprise. However, the ERA provided little support for established unions as it has the same freedom of association provided by ECA allowing unions to compete for members without coverage restrictions (Barry and Reveley, 2002).

Societal ills of youth and long-term unemployment and welfare dependency have also been identified as consequence throughout QECD member states. In consideration of the above mentioned problems in employer relations, the following job-guarantee initiatives were enumerated to address issues:

• Job guarantee for long-term unemployment.
• Youth guarantee comprising opportunities for education, technical training and place in the job guarantee program.
• Active labour market policy interventions in order to reduce barriers.
• Job preparation that will guarantee a long-term employment for those who are skilled.
• Utilising of “buffer stock” employment and local partnerships such as using local government for employing local target groups.
• Utilising of “shadow economy” as an employment opportunity beyond baby-sitters and window cleaners which has emerged as “too large and too important to ignore” (Lange, 2007, p 76).

As earlier suggested, job guarantee initiative may negatively affect price stability, balance of payment, economic efficiency, work incentives and national competition principles but this will not disturb the private sector wage structure (Mitchell, 1998). This led to Lange (2007) suggesting other alternatives:

• Persuade employers to employ and shoulder additional training.
• Inclusion of those under 18 years old, with disabilities, care leavers and young offenders.
• Start of training at school.
• Inclusion of the private sector in enabling jobs.
• Inclusion of part-time options.
• Reduction of cherry-picking or use of employability schemes.
• Consideration of added-value and net employment growth.
• Tailoring of the guarantee to geography.
• Extension to the shadow economy.
• Consider employment demands.

Evaluation

Certain precedents are needed to be addressed in order for capital investors to fully gauge the advantages and disadvantages of doing business in free market economies like New Zealand. Already, globalisation has outlined certain written and unwritten rules that organisations and governments must follow in order maintain a competitive edge of which challenges and limitations are consistently changing and remain constantly undefined.

For New Zealand, the need to address diversity of ethnicities, skills, gender and even disability of possible employees are outlined by the government in order to protect its citizens from possible inequality. However, the government through the ERA and ECA are acting on behalf of employers as it has given enough privilege to set limitations as well as provide competition for unions to recruit and authorise these agents to represent the employees.

More pressing issues that need to be addressed include the pressing demands of WTO and international trade organisations, the rising competence of emerging economies like India, China and Brazil that provides records low labour wages thus attracting bulks of foreign investors, as well as the diversity of global needs which may not be in synchronisation with the available local products and services.

New Zealand is considered a modern, prosperous, and developed economy dependent on free trade. It has an estimated nominal gross domestic product (GDP) of US$128.1 billion (2008) with a relatively high standard of living, their GDP per capita is US$30,234 in 2008 already comparable to Southern Europe’s Spain US$33,385, and slightly lower than the United States at US$46,820 (IMF, 2008). New Zealand has escaped the early 2000s recession that affected most other Western countries. The service sector representing 68.8% of GDP is the largest sector in the economy, followed by manufacturing and construction at 26.9%, and the farming/raw materials extraction at 4.3% (The Economist, 2005). Its export account for about 24% of New Zealand’s output, thus, vulnerable to international commodity prices or global slowdowns. Its export industries include agriculture, horticulture, fishing and forestry with major partners Australia, Japan, China and the United Kingdom. Tourism also contributes about $12.8 billion or 8.9% of its GDP and supports about 200,000 full-time equivalent jobs increasing at 4% rate annually.

The above scenario may show a robust economy but dependent on global market on changes as well as economic progress or development that both affect employment and investment.

Conclusion

Globalisation is a direct result of free market economics. New Zealand is well-placed considering its market structure as well as its governance, citizens, products, services and natural resources. While external investors may not be exactly in demand for its economy and labour market, it is best to have the internal or employment relations in sync with trends and current practices in order to maintain a competitive standing in a borderless globalisation.

As discussed, there are minimal concerns when it comes to New Zealand’s labour and employment relations: equality is foremost although women equality with regards to gender issues has been pointed out amongst the higher concerns at the level of long-term and youth employment.

In the point of view of employers or investors, challenges with regards to policy and employment relations will remain a continuing issue as much as quality production will. As competitive democratic or free markets have already shown, there is no direct or straight path towards addressing the issue. Local levels of concerns will adapt to the external trends and pressures but it will in the end concern most the employee and the employer deciding for themselves which is best in their working relations. The presence of international governing bodies may at one point provide a relief to global workers including those based in New Zealand but it does not guarantee a closed relationship with other international bodies such as the WTO or the IMF which usually funds and mandates governments and businesses in the form of assistance.

A closer view may show the independence of New Zealand’s employment relations but in reality, global trends towards establishing and joining an international or multinational corporations or putting up your own to avoid or minimise employment relations problems will continue prevailing and in the case of the former, mandatory adjustment to prevailing trends will become inevitable. This will entail rate of salaries, benefits, contractual trends, among other things. At most, the employee will either help strengthen a union that represents him or suffer the consequence of silence and domination.

Reference

Bamber, G, Lansbury, R and Wailes, N (eds, 2004) International and Comparative Employment Relations: Globalisation and the Developed Market Economies, 4th edition.

Barry, Michael and James Reveley (2002). “Contradictory Rights and Unintended Consequences: The Early Impact of the Employment Relations Act on the New Zealand Waterfront.” Journal of Industrial Relations 44 (4) pp 508-524.

Cowen, Penelope J. Brook (1993). “Labour relations reform in New Zealand: The employment contracts act and contractual freedom.” Journal of Labour Research, Volume 14 (1).

Douglas, R. and Callen, L. (1987). Toward Prosperity. Auckland: Bateman.

The Economist. “The Economist Intelligence Unit’s quality-of-life index.” The World in 2005. Web.

Hall, P. (2006). “New Zealand’s Proactive Pay and Employment Equity Plan of Action.” Paper to International Association for Feminist Economics Conference, Sydney.

Harbridge, R. and Honeybone, A. (1996) “External legitimacy of unions: Trends in New Zealand.” Journal of Labor Relations 17, 425-444.

Haworth, N. and Hughes, S. (1995). “Under Scrutiny: The ECA, the ILO and the NZCTU complaint 1993-1995.” New Zealand Journal of Industrial Relations 20 (2), 143-161.

Hyman, Prue (2007). “Pay Equity and Equal Employment Opportunity: Development Between 2004 – 2007 and Evaluation.” New Zealand Journal of Employment Relations 32(3): 18-30.

International Monetary Fund (2008). “Report for Selected Countries and Subjects.” Web.

Lange, Thomas (2007). “Revisiting the Job guarantee: ten Propositions towards a Model for New Zealand.” New Zealand Journal of Employment Relations 32(3) pp 69082.

Nolan, M. and Walsh, P. (1994). “Labour’s leg iron?: Assessing trade unions and arbitration in New Zealand.” In: Walsh P., ed, Trade Unions, Work and Society: the Centenary of the Arbitration System. Dunmore Press.

O’Reilly, Phil (2008). “Rule of law in context of business and labour.” Address to World Justice Forum, Vienna.

Turnbull, P. (2000). “Contesting globalisation on the waterfront.” Politics and Society 28 (3), 367-391.