The Law and the Labour Market
Transition: Labour Relations in New Zealand in the 1980s and 1990s
There are three indicators that a society is handling its labour relations the wrong way: the existence throughout industry of industrial relations specialists, necessary because the subject has become overly technical as a result of its politicisation and the removal of focus from the workplace or enterprise to special forums; discussion of industrial relations in terms of power rather than productivity and profit and as a separate subject rather than as one aspect of management; and regular and widespread allocation of space in the press to the discussion of industrial relations issues by specialist reporters, often chosen, it seems, because of their interest as activists in their own union, rather than their even-handed familiarity with the issues. Throughout the 70s and 80s in New Zealand all three burgeoned. Something was wrong; but at last we are beginning to fix it.
The National administration of 1975 to 1984 was characterised by idiosyncratic centralist intervention, culminating in the wages and prices freeze of 1983-84. The advent of the New Zealand Party, formed solely with the purpose of dislodging National, shaped the 1984 election decisively in Labour's favour. David Lange seemed a buoyant positive leader, confident and expansive. The country responded. Labour won. The handover, however, precipitated a crisis as former Prime Minister Muldoon sought to cling to the prerogatives of power.
The crisis demanded a decisive response. So it was that, from the first, Roger Douglas took centre stage and was seen to be the man in control, the man who knew what he was doing. Certainly he was, probably uniquely, prepared. His years in opposition had been diligently spent. He had consulted widely, and listened. He was Labour's only and obvious choice as Minister of Finance.
His initiative was a powerful sign of things to come. The country, even many of his own colleagues, had little idea of the direction events were to take, nor the speed with which they would move. Labour's Minister of Labour was to say later that prior to taking office he had known nothing of what was by then called Rogernomics. He had, however, had his own ideas for labour relations reform. That these had crystallised in the context of a discarded mode of economic management, and so were dissonant with what Douglas was up to, was not alluded to, if it was perceived.
Labour's first three year term was dominated by Douglas's actions and policies. He had around him a cadre of enthusiastic and able supporters. They claimed the credit for dislodging former leader Rowling and putting David Lange on the throne, and certainly Lange responded ---with the exception of his shift on the issue of nuclear warships---as their enthusiastic if slightly perplexed chairman. Until early 1988, when Labour, having won the 1987 election solely on the basis of what it had already done, fell off the rails.
They were never again to unify. Their disarray was palpable, culminating in Lange's resignation thirteen months away from the 1990 election. Palmer followed, never convincing, and then, in response to the polls, the modern equivalent of reading the entrails of a retired chicken, Mike Moore. So Labour inevitably lost the election: National took office with an economic policy not too dissimilar to Labour's and conscious of the need to differentiate themselves. With the knowledge that victory was almost certain they had focussed, in the previous three years, on labour relations: in that policy area certainly, there was room for a distinctively different response.
The Labour administration had transformed the agencies of the State. Activists, such as Richard Prebble, had been appalled at the fat and feather-bedding they had discovered in the State's administration. Prebble, having promised to preserve Railways, realised that was only possible by halving its staff. He was part of the team which designed major changes, and deserves credit for it. The private sector was a completely different story.
Taking office, Labour had to contrive an exit from the wage freeze. It was part of the price they paid for union support in the election. Another part was the restoration of compulsory unionism: National had introduced voluntary unionism of a type in 1983.
In making these changes however Labour had to come to terms with the omnivorous nature of the union movement's appetites. Another part was the restoration of compulsory unionism: they wanted the right to strike: but they also wanted the retention of compulsory arbitration. It was one of the four pillars upon which unionism in New Zealand had slumbered for two generations.
Compulsory unionism had been devised and provided for by the first Labour Government, in 1935. By 1990 approximately 40per cent of New Zealand's workforce was paid and employed under terms and conditions set out in awards: every award required those workers to join a union.
Which one was not a matter of choice. By the operation of 'registration of rules' unions staked claims to segments of the workforce. Each union's membership rule described the type of work it covered. Those performing that work had to join that union, which thus had monopoly coverage.
Each union's geographic range was a function of the existence of eight industrial districts. Devised in 1984, these were basically the same as the provincial boundaries which had existed up till 1872 when provincial government was abolished. They were relevant to population distribution in the 19th century: they were an anachronism by 1990.
They did however, serve a purpose---they helped perpetuate 'blanket coverage'.
Since their membership rules gave them a monopoly, unions also enjoyed a monopoly over negotiation. They could initiate negotiations with 'their' industry. Many such industries, however, contained hundreds of employers. To ease their administration, unions were permitted to cover all employers by notifying only a representative sample of their claims. If the sample was representative in each industrial district the union wanted to cover in its negotiations, all employers would subsequently be bound by the award which resulted. Quite conceivably many employers and their employees would not have known the negotiations were taking place. This administrative device was called blanket coverage.
In the cost plus economy before 1984 employers complacently accepted this nonsense. It helped the development of New Zealand's industrial relations club---union officials who regarded the benison this system delivered as a right, and industrial relations officers or managers generally, in the larger companies, who became mostly docile lubricators of the juggernaut, ensuring the system---self contained, cosy and oblivious--- trundled on.
Occasionally, but only very occasionally, some trouble-maker made demands of the system which it found indigestible. Settlement was not reached. For this purpose the Arbitration Court (later the Labour Court, now the Employment Court: of that more below) was set up. Unresolved disputes could be referred to it compulsorily---at the initiative of the claimant, almost invariably a union. The unsatisfied disputant, the employer, had no choice but to attend. The Court decided by reference to historical relativities. The entire process was mechanistic and retrospective: novel notions such as inability to pay or reference to productivity or profit were eschewed, and were in any case unworkable when perhaps hundreds of employers were involved.
These then were the essentials of the system the fourth Labour Government inherited in 1984:
- compulsory unionism;
- monopoly union coverage through registration of their rules with the central bureaucracy;
- blanket coverage;
- compulsory arbitration.
Some of Labour's new administration, however, were in a mood to quibble. (This was not a new phenomenon, especially among the more vigorous Labour politicians).
Norman Kirk, their last charismatic leader and a former stationary engine driver, had declared shortly before his death in 1974 "I've had a gutful of unions". This time it was Richard Prebble who told the Federation of Labour that they could not have 'the right to strike' and compulsory arbitration: they were incompatible. The Federation of Labour had entered the talks with a mandate to retain the right to strike. They had no mandate to discard compulsory arbitration. In that case, said Prebble, the Government will have to decide: it abolished compulsory arbitration.
This move---a radical break with the past whose significance was not grasped by employers for some time---did not arrive wholly without gestation. Employer concern at the uneven exercise of the four major union monopolies referred to had helped provoke discussions of reform of the system over previous years. Essentially, though, time had been called 'Balance in Bargaining'. It had been about reducing the perceived imbalance, not demolishing the structure.
Broadly, however, political Labour responded, in the private sector, to industrial labour's demands. The wage freeze ended and an automatic wage round followed. Compulsory unionism was restored. And the process which led to the passage of the Labour Relations Act 1987 was begun.
In this, as in many other aspects of labour relations, history is various and flexible. Reference is made, now, to 'the debate' which preceded the Act. There was no debate. The central organisations talked to each other and in the customary response of peak peers, self-perceived, excluded everyone else.
The Government announced its intention to reform the labour legislation. It set out its broad parameters. It called for comment. Hundreds were made, many of them substantial, book-length. Then the bureaucrats were asked to summarise them and the summary was published. In all this process, however, the policy makers were very coy. It was difficult to get them to debate the issues.
None of this should surprise. Essentially they had a program. It was capable of being modified but not dislodged. Debate---especially with radical proponents of change---would have threatened their preconceptions.
For employers there were two broad approaches: the gradualist approach of the Employers' Federation and the radical proposals of the Business Roundtable.
The Employers' Federation was part of the club. Administratively, unions had in the past relied on its organisations to distribute and promulgate the claims leading to and the results leading from the systems of oblivious bargaining. If employer organisations had disappeared so would have the old system.
Consequently, the Federation took a clear reformist line. Its proposals embodied substantial change, but it shrank from radicalism. Its line preserved the specialist nature of labour contracts. It endorsed the perpetuation of the Labour Court.
The Roundtable, on the other hand, saw labour contracts in the same light as any other. Its ideal legislation would have been a few pages long, setting out only the bones of the structure. Its proposals were permissive, not prescriptive. It saw no place for the specialist jurisdiction of the Labour Court. Labour contracts belonged in the civil jurisdiction, like any other contracts.
The new legislation contained some significant improvements but essentially reflected the tame and tired expectation that the old system should continue, improved. For employers, so called sanctity of agreement was guaranteed. Previously unions had been able to initiate second ---or even third-tier negotiations without explicit legal hindrance. That went. Also the State retired as enforcer: previously the Labour Department had enforced the terms of awards and had initiated scores of legal actions annually, always against employers. Most of these were wage recovery actions, or were related to safety. Unions breached awards and statutes with impunity, the State genuflecting to industrial labour's mythological beneficence.
That went too. From 1987 onwards unions had to enforce their own awards and agreements. For employers, access to compliance orders and injunctions-previously available, but rarely used, in the civil courts---was another useful addition to the industrial code.
Structurally however little changed, and in some ways things worsened. Seemingly because of the Minister of Labour's personal belief that capital would aggregate and needed to be met by aggregated labour, unions were required to be a minimum size: 1000 members. They were given some time to merge, since the 350+ unions included some very small organisations indeed. That they suited the purpose for which they had been formed was ignored.
Monopoly unionism, including the remaining three of the four pillars, was retained. Only unions were able to exclude specific employers from the continuing pattern of national craft-based awards. Commonly relatively small organisations had employees whose wages and conditions were set in 10 to 15 separate documents. To opt out an employer had to pay. The premium was high. Even so, unions refused to countenance exclusion, frequently. The system delivered to them substantial political clout, since it engendered a wage round, heralded in the press as an annual event, a jamboree of political self-perpetuation for the institutions, and the wage round gained a lot of attention from the Government of the day. It represented political leverage to the union movement (and, incidentally, to the employer organisations) and trend-setting award negotiations were frequently interrupted and redirected by Government politicians, of whichever party. This was heady stuff, the big time. The major players were not about willingly to abdicate.
In the meantime Rogernomics was at work in the rest of the economy, overturning the old world and bringing in the new. The Labour Relations Act was passed in 1987. Rogernomics was the Government. It underpinned all their activities, winning converts by its sense, and losing support in industry by its pace. Pressures built up to slow it down. Roger Douglas delivered his vision of tax reform in December of 1987, then went overseas. While he was away David Lange called a halt: it was time, he said, for a breather. Time "for a cuppa tea".
Against the vivid activity of the previous three years the ordinariness of Lange's imagery appealed to those alarmed at the changes, and the rate of change. And it signalled the beginning of the demise of the Labour Government.
They had only recently won the 1987 election, solely on the basis of what they had done, not because of anything else they contemplated. Most of the 'manifesto', in bits and pieces, appeared after the election, or a day or two before it, when it didn't matter. They won because they seemed to know what they were doing and because Roger Douglas had treated the electors as mature and thoughtful people able to understand why his actions were necessary. Suddenly they fell apart. Factions warred, bitterly and publicly. Lange's support evaporated. For eighteen months he fought against the Douglas camp, and it was wearing, since that camp included most of those with vision and tenacity. At the end of that time Lange had had enough. It was clear Labour could not win the 1990 election if he led it: it was not clear anyone would change that.
Geoffrey Palmer had eleven months to try. The polls said he failed, so he went, succeeded by Mike Moore. Desperately he tried to stitch together some appearance of accord, and in a move reminiscent of the Labor Party in Australia in 1983 made a Growth Agreement, solely with the unions. It was a pallid response to a palpable catastrophe. In the election Labour was rejected on an historic scale.
National was ready. It had settled its leadership problems: new Prime Minister Bolger was clearly in charge. It had felt uneasy at charges in the years before the 1990 election that it was sleep-walking to victory, because its economic policies were not very different from Labour's. It needed to distinguish itself. It chose to do so by its labour market policies.
Firstly it entrusted its labour market proposals to Bolger's closest friend. Bill Birch has been associated with the anathematised Think Big projects of the Muldoon administration. Even those who disagreed with him acknowledged that he was able and diligent. He knew ---knows---the ways of Wellington. (Perhaps too well: like all political capitals it is suffused by gossip, petty intrigue, bureaucratic arrogance, and a perversely proud distance from the real worlds of commerce.) And he brought to his task an energy which was welcome.
In the years 1988-1990 Birch sought views in all quarters. He listened. He learned the language of the labour market and some of the arcana of New Zealand's industrial relations system. National recognised---the OECD and others had been saying it loudly---that Labour's economic approach was being sabotaged, even in the first term, by its refusal to unlock the labour market. Birch said repeatedly that their labour policies were integral to National's economic policies: he delivered them back to where they belonged.
It was clear that change was inevitable. Even so, the union movement was surprised by its range and speed after the 1990 election. Birch had learned from Douglas. The election was in October, the Employment Contracts Bill was before the House by Christmas, it was law by 15 May. It was a significant achievement and it's perhaps natural that there is now a tendency to sit back and take it easy. But it's regrettable.
Because significant though it is, the Act is only a half-success. It did some major things well. It's left some serious flaws in place.
What was the nature of the draft legislation? What was the response?
The legislation did two things very clearly: it reintroduced voluntary unionism in a form that made it freer even than National's 1983-84 legislation, and it reformed bargaining structures and processes. Unfortunately it shied from some other difficulties.
It did not really deal with the existence (or not) of the Labour Court. Basically the Court and the Mediation and Conciliation Service were left intact: the Government called for comment from the CTU and the Employers' Federation, and published an options document which those writing to or appearing before the Select Committee were asked to comment on. And the personal grievance (contested dismissal plus appeals against 'disadvantage') mechanism was left in place. It was significantly improved in one way: procedural defects were required to be set aside if substantive cause was proven.
This was a major benefit. The Labour Court had grossly distorted the process by which employment could be terminated, by finding even the most minor procedural defects and rejecting well-founded dismissals because of them. Lay members of the Court told of judges actively seeking procedural defects and basing their whole finding around them.
This was more damaging than it may sound. Managers are not computers. In almost any case, if a hostile judge sought long enough, he would find some defect in the way a manager had administered discipline and handled a dismissal. Managers throughout New Zealand were becoming tentative about their ability to manage: they were happy to be required to behave fairly. They were less confident of their ability to behave impeccably.
By and large the union movement accepted the advent of voluntary unionism. They had been told privately by Labour that if they were returned to power in the future they would not reintroduce compulsion. It was the change to the bargaining process which alarmed them and which provoked a rhetorical storm and marches in the street.
Union monopolies in bargaining were all removed. Their monopoly rights to represent certain groups of workers were abolished. They---and others, anyone--- had to compete for the right to represent. Workers were empowered to select their own bargaining agents. Individual workers, even then, could opt out. The link between union membership---now voluntary anyway ---and representation was broken. Theoretically employees could choose one union to assist them in negotiations, which they would pay for that service, and another union to belong to: in which case they would pay membership fees. People were free to represent themselves.
The results of negotiation were to be contracts: collective or individual. An employer was free to refuse to negotiate a contract. There was no reintroduced compulsion to go to arbitration.
Employees in pursuit of a collective contract could legally strike, provided their previous contract had expired. The employees of two different employers could not legally combine in strike to try to force those two employers into a single negotiation.
This last measure underlined the emphasis the legislation placed on negotiation at the level of the enterprise. 'Industry' bargaining was possible, however, if people wanted to do it.
All enforcement of contracts was to be a matter for the parties.
The reason for unions' concerns was clear. Their three remaining major pillars of monopoly---compulsory unionism, monopoly through registration of rules, and blanket coverage---were gone. Employees were granted the right of self-determination. Employers were given the ability to determine the shape of their own bargaining structures.
One union response was to ensure that hundreds of submissions were made to the Select Committee charged with reviewing the Bill between the first and second readings. Another was mobilisation.
Fortuitously for unions, another of the Government's policy announcements had engendered an even more widespread negative reaction. Prior to Christmas 1990 cuts to State benefits were announced, effective from 1 April 1991. Unions and beneficiaries combined to stage protest rallies. In every major city streets were filled, effigies of Birch and Bolger and Ruth Richardson were burned. Schoolchildren participated. I watched one march and asked an enthusiastic protester, aged about sixteen, why she was marching. "Day Off!" was the prompt response. It seemed to sum up much of the thinking and habits and attitudes that New Zealand needs to reject. It was encouraging that she found the new legislation alarming, if indeed she knew much about it.
The news media behaved like the public relations arm of the union movement. Shrill headlines, scant and customarily uninformed content, deliberate imbalance, all characterised most of the presentations in the press, on radio, and on television. The language and manner were often near-hysterical. The press excelled itself. The Bill was months old, literally, before the first dispassionate account of its contents appeared, characteristically in the South Island newspaper first. It was a good article, but where had it been, gestating for so long? The legislation's not complex.
The universities behaved as one would expect. In the labour relations field New Zealand's universities are described exactly by a recent comment of Paul Johnson's (The Spectator, 7 September 1991):
- "Universities are the most overrated institutions of our age. Of all the calamities which have befallen the 20th century, apart from the two world wars, the expansion of higher education, in the 1950s and 1960s, was the most enduring. It is a myth that universities are nurseries of reason. They are hothouses for every kind of extremism, irrationality, intolerance and prejudice, where intellectual and social snobbery is almost purposefully instilled and where dons attempt to pass on to their students their own sins of pride. The wonder is that so many people emerge from these dens still employable, though a significant minority, as we have learned to our cost, go forth well-equipped for a lifetime of public mischief-making."
What he might have added, if I'd asked him to focus especially on the labour relations 'experts' in New Zealand universities, is that they are, more often than not, left-wing, with little or no real experience in industry or commerce and seeking none, tenured and arrogant, who publish elaborate off-key propaganda which is bolstered by footnotes citing their equally ignorant colleagues' previous publications.
They were everywhere: on the radio, in the papers, possibly in the marches, hailing the end of civilisation as we know it, and worse.
The Labour Party was still stunned by the election result but they heard the bell and reeled out to the centre of the ring, jabbing at phantoms and muttering intensely, "We'll repeal it, we'll repeal it."
(Unfortunately, since the passage of the Bill and its implementation on 15 May Labour, which has had time to reconsider, has restated its intention to repeal the Act. That's a shame: it will be working so well by the time they get back in, even allowing for the Employment Court's intervention, that repeal will be destructive. Labour are also talking about the 'negotiated economy'. The negotiations referred to will not be with the electorate, but with the CTU, which does not have to bother with electoral endorsement. Labour remains curiously reluctant to forego the sins of lopsided centralism.)
Employers' responses to the two major reforms in the Bill were strong and positive. Unfortunately many of them, and the Employers' Federation, spoke in favour of retaining the Labour Court. They rue it now, with no excuses. The Court's response to the legislation ---the same people are on the new Court as were on the old---was entirely predictable. It was a major tactical failing of employers generally, and it has been used as a justification, subsequently, for keeping the Court on, in comments made more than once by the Minister of Labour. The Business Roundtable and a handful of major employers got it right, and advised the Select Committee to jettison the Court. They were ignored.
The Select Committee worked very hard, and was a disaster. The Government members could not be faulted for diligence or stamina. Hearings frequently ran from early morning till late at night. They left Wellington and heard submissions in other cities. They applied themselves to the task with unremitting energy. The fruits of this application, however, were a significant disservice to employers, and in some respects, to all parties. The way the Committee functioned revealed a serious flaw in the process as a whole. It is completely unacceptable to have inexperienced people listen to hundreds of submissions on a crucial and complex Bill, deliberate amongst themselves, and bring forth a non-reviewable result which affected parties have no chance of commenting on. It also delivers an appalling influence to the bureaucrats who service the Committee. None have private sector experience: it would be surprising if they did not have their own agendas. From this combination of ignorance and aspiration can only come misfortune. And so, for employers, it proved to be.
For one thing, with no forewarning, the Select Committee removed the Bill's safeguard against the Court's ability to use procedural deficiencies to overturn otherwise justifiable dismissals. Motive for this change was confused: the Minister on one occasion maintained that a different section of the legislation achieves the same end. He was wrong. A member of the Select Committee said they were persuaded that procedural unfairness can shade into a substantive deficiency. There is a small merit in the point, but nothing significant enough to justify the change. Employers were dismayed and taken unawares: most were confident that the Government had understood the importance of this change, at least.
The Select Committee also extended the Employment Court's jurisdiction to all contracts of employment. Previously only the less than 50% of the workforce covered by collective agreements or awards came within this Court's purview. The majority of contracts were reviewable in the civil courts. In those the Addis doctrine had customarily applied, with the addition of an explicit requirement to behave fairly, as an employer, and more recently with recognition (one case only) of humiliation as a factor requiring compensation. The sensible course for the Government would have been to sustain that division of jurisdictions.
Perhaps they were lured into this error by decision to extend a statutory right of review of grievances to all employees. They need not have been. The extension of process could have applied and the divided jurisdiction remained.
The Select Committee also, perhaps persuaded by the Armageddon-rhetoric of complainants or even alarmed at its own Government's boldness, invented a power of review by the Court of employment contracts, on the basis that they may be 'harsh and oppressive'. The term is undefined. Its incidence is alarming: it gives a Court determined to be a law maker anyway a licence to prohibit and obstruct.
To replace the previous mediation service the Select Committee invented Employment Tribunals. These are judicial bodies with powers to arbitrate and mediate. The Committee failed to recognise how much more difficult and important mediation is. The new format promises to be a fine source of employment for lawyers whose trade union, the New Zealand Law Society, has nevertheless raised with the Government a significant range of important technical deficiencies in the way the Tribunals are established. The bureaucrats, after the Act was passed, have had a field day. The minutiae of administration have been fulsomely and meticulously attended to.
Tribunals are instructed, for example, that their Clerks must enter the room before them and announce in loud clear tones to the attending parties, "All stand for the Member." No evidence is required, apparently.
As I've said, the Court has been retained; same personnel, different name. It is now the Employment Court.
All through the presentation and discussion of the Bill in the period December 1990 to May this year the Government was sensitive to charges that the legislation was intended to destroy unions and reduce wages. Never mind that the state of the economy was having some small influence on earnings. The Minister had, in any case, always been a believer in 'a minimum code' including a minimum wage. It was his defence against charges of callousness to low wage earners who would be deprived of union aid, once the legislation had destroyed the unions. Consequently the Select Committee, out of the blue, gave everyone in New Zealand five days a year to use for sickness, or bereavement, or domestic leave. No proof of need is required: no provision is made to off-set leave already provided by company policies or existing collective contracts. No thought, in fact, seems to have been given to its application at all. One Committee member has subsequently explained that its advent was 'political'. With unconscious gallows humour the Committee provided for this special paid leave by an amendment to the Holidays Act.
Fortunately the Select Committee did not molest the two major initial reforms of the Bill---voluntary unionism and bargaining reform---but the results of its deliberations, in fact the whole Committee process, call into question the wisdom of letting inexperienced politicians steered by experienced bureaucrats loose on an important and innovative piece of legislation. It is uncertain just how much continuing control the Minister attempted once the Committee started pruning and inventing: if the changes don't reflect his views he's guilty by omission. If they do reflect his views he understood less in the three years prior to the election than many of us believed, or hoped.
Since the passage of the Act a great deal has happened to please and depress. The Act has a significant section dealing with transitional arrangements. Four important cases have gone to the Employment Court. Their decisions are all being appealed. Summed up, they attempt to establish that employers have no ability, even by the giving of adequate notice, to vary or amend any condition of employment that applied on 15 May. They have even applied this to provisions from collective documents relating to union 'rights'---stopwork meetings, as an example.
One consequence of two generations of State-sponsored monopoly and protection is that unions have become understaffed for the new environment, where they have to get to prospective members and market themselves, which most don't know how to do. Nor do their officials find themselves competent to talk to general managers at enterprise level, where the discussion will deal with real life and range over finance, production, distribution, supply, leasing, fuel costs, and employee relations. A crucial concern for all employees for the future is superannuation: few union officials would be able to talk about it sensibly. More, but perhaps not many, industrial relations managers would be able to.
The CTU is alarmed about its finances. The Government Review of trade union paid education leave and the $2M per annum the taxpayer unwittingly pays to supports its organisation is being given a range of compelling reasons to perpetuate this patronage. Probably not mentioned is the fact that TUEA (the Trade Union Education Authority) with its 25 employees is a rent paying tenant of the CTU's building: thus the taxpayer supports the CTU.
As unions shrink so will their resources and so will their capitation fees to the CTU. Not all unions will suffer: the energetic and enterprising will survive. Nonetheless, diminution is generally imminent.
The CTU is also alarmed at the likely change to its nature. It has enjoyed having State-secured political clout. Its officials don't look forward to heading up a collection of organisations of bargaining agents, commercially motivated to attract members by the services they can offer, a kind of workers' chamber of commerce. To the CTU's previously powerful politicians that prospect is distasteful.
Ken Douglas, President of the CTU, in his description of the legislation has called it the Pol Potisation of the union movement. It is a vivid if unlikely coinage. Probably most of his audiences have forgotten who Pol Pot lamentably is. However, the expression conveys his disapproval. He has visited Australia at least twice to warn the ACTU of what the Liberals might do if they are elected. (Opponents of the Greiner Government's legislation damned the New Zealand precedent.) No doubt the ACTU will feature Ken again closer to the next Australian Federal election. He has also called the legislation 'unworkable', a comment echoed by the Law Society in relation to Tribunals.
The Labour Party's talk of a negotiated economy is obviously a pitch for the continued support of the unions. Labour's nature will also be drastically amended by the legislation's effects. Their individual members are aging. They do not attract the young. Union financial and organisational support are essential for Labour in its mauled and diminished parliamentary condition. (So reduced were they after the last election that they invited defeated former MPs to supplement caucus meetings.) A shrinking union movement will infect a struggling Labour Party, an unwelcome contagion.
Douglas' Australian anathemas have not been widely reported in the news media. After a few measly examples of 'exploitation' in headlines, nothing bad has happened. The media don't want to know about anything good. The result has been---silence. The fury and the shouting that preceded the Act's passage have died. No one has thought to suggest that if legislation is genuinely harmful the fuss increases, not disappears, after it is enacted.
The National Party, for its part, is sitting tight, unwillingly listening to employers' complaints, and probably the union's as well, and hoping it will all come out well in the wash. They will not rush to amend what has recently been passed, but they are saying they will keep an eye on it. Many of the Government's members did not understand what they passed: reports are common of confused conversations with individual members. For all its faults, however, and its mysteries to some of its own supporters, the legislation has made possible major change. Much is already occurring. And it is taking place precisely where it should, in workplaces or enterprises, where employers and employees are talking to each other and making sensible and novel decisions, to their mutual benefit.
Why should talking to each other be new? Surely managers and managed have always been able to do that?
They have been able to, and they have done so. Companies have worked hard to develop effective communications. But there's an element of make-believe in discussions when central features like wages (to the employee) and wage costs (to the employer), together with terms and conditions of employment, have been decided elsewhere by a remote group of people very likely with no connection to the workplace. And the terms and conditions of employment are actually restrictions: they specify what may not be asked or expected and the added cost of asking if the employer has to.
With all these factors given and unassailable, a key part of the discussion loses its point, namely the question, "If I modify my behaviour how will that benefit me" To provide benefit an employer must contemplate a second tier of wage costs.
Now, however, everything is on the table. Changes can be immediate, once agreement is reached. There is new urgency and realism in communication.
This has placed greater demands on everyone. The manager must know his business and be able to communicate it. The employee has to identify clearly what he wants to know. We should assume that that will be, quite simply, everything. And why not? Very few items will be so delicate that they can't be told.
What this change emphasises is that this communication can only sensibly take place at the worksite or enterprise level. Beyond that we are forced to deal with generalisations and the political agendas of players in the system. Enterprise level communications focus on what develops common interest, not what divides.
Employers have reacted enthusiastically to this change. The enthusiasm has surprised some. The manager of an employers' association remarked that it was "astonishing how employers have grabbed the chance to make changes." In fact it would have been astonishing if they hadn't. The changes in some cases are years overdue.
The pressure for full, rounded communication has highlighted the role of the general manager and diminished the role of the industrial relations specialist. By and large, industrial relations specialists are incapable of discussing business in the round, just as union officials are. Employees, on the other hand, deal with all aspects of business and want to talk about them. The only person who can answer all the questions, discuss all the plans, is the general manager. So, at last, general management is regaining responsibility for labour relations, just as it is responsible for other aspects of the business. The ludicrous specialisation in industrial relations which characterised business in all of our working lives is going to disappear, and the general manager will, for the first time for most, become more completely general.
The legislation is also on the way to achieving a real change in mind-set: people must now consciously decide to opt into contracts. They are not gathered willy-nilly because some union wants them herded that way. They don't have to buy their way out; they can decide to be out, and that's it. They can decide to be in: it is a positive decision. Such deliberate voluntarism will help breed a much more active attitude to change. The process of self-determination will lead to greater interest in the quality of the product: discussion, negotiation, agreement.
Enterprise contracts, drafted by general managers and employees, will still be contracts, enforceable in the Employment Court and capable of creating significant liability. Many employers are turning to lawyers to ensure that contracts say exactly what they want. This has thrown up a new need to manage the suppliers of legal advice. In New Zealand some of the legal profession retains astonishing delusions still: some firms refuse to divulge charge-out rates, for example. Managers are becoming bolder at puncturing these pretensions and monitoring legal costs and performance like any other.
Now that the scene is set what are the parties to enterprise level negotiations achieving? Why is it so worthwhile, and not merely an ideological break with the past? Some examples illustrate the practical benefits:
- One company recently discovered potential savings in electricity charges of $2M per annum. It meant they would have to change their work week from Monday to Friday, to Friday night through Sunday night. The employees were persuaded to change by payments that took a good slice of the $2M.
- Even so, the company is now saving $1.5M+ per annum. Previously, under a clutch of national awards, such changes to the hours of work would've been impossible, and in any event union policies would probably have prevented them.
- Similarly, archaic penal rate provisions are being jettisoned. Most of them were established in the days when the weekend was genuinely different from the rest of the week and no one was abroad on any night once the movies ('the pictures' then) were over. Times changed but labour practices didn't, or if they did they were so costly that the costs provoked evasion. People are now accepting that 'ordinary hours of work' are sometimes necessarily extraordinary and that to get and keep the business available an employer should not have to pay extreme rates that originated in another quite different time.
- Other flexibilities are being promoted by employees. The old five day/eight hour per week is not universally attractive. Where it's possible people are often keen to work four days, ten hours a day, with a three day weekend. The ten hours are paid for at ordinary rates: and everyone has a three day weekend every week.
- In the meat industry one employer refused to make a company-wide agreement. The union demanded it and previously could have used the structure of bargaining against him. He communicated well and his employees at one plant separated themselves from his other plants, as he had sought.
- It is likely the old style Metal Trades Award will disappear. Its place as a trend-setter is gone. The 'wage round' will disappear. Negotiation and settlement dates are diffused, geographically and chronologically. Wages become an aspect of business, not a political phenomenon.
- A building materials company with several quarries has negotiated separate contracts for each. Previously a general award would have covered all, and union policy would have determined the result. The union opposed the separate contracts: the workers instructed the union to accept them.
- At last employees are taking control of their own destinies and their own union organisation. This is a real change: unions may well exist in future to serve their members rather than the political ambitions of many of their officials.
The fact that our economy is struggling and that we have to make cost-saving, productivity-enhancing changes is hastening acceptance of the new environment. It may not have been possible if we were still dozing through the cost-plus days. A new sense of urgency is abroad. We're becoming leaner, at long last. There's a gathering recognition that the rest of the world will not wait.
Where that recognition comes to employer and employee
at the same time immense change and mutual benefit
are possible. The new legislation doesn't prevent employees
from hiring assistance for negotiations through traditional
employee organisations or free-lance bargaining agents.
It does, however, recognise that people who are mature
enough to marry, fight wars, build houses, build communities
and create children and care for them are also mature
enough to talk sensibly and reasonably about the central
feature of their lives previously delivered to protected
specialists---their work. It should surprise no
one that the chance is being welcomed, and the task
is being performed extremely well.