Julien Leys: Rising cost of public holidays and double sick pay

OPINION

Perhaps one of the most critical resource shortages New Zealand is facing is human and nowhere more so than in the construction and building sector.

According to the Ministry of Business, Innovation and Employment at least 50,000 workers are needed to build the houses and infrastructure we need.

With all the gaps exposed in our underinvestment across New Zealand's ageing infrastructure and the eye-watering financial implications of delays, the reality is the biggest asset and cost to business will always be people.

Finding and retaining skilled people is now more important than ever but so is ensuring that the actual cost of maintaining a workforce is not counter-productive and reduces any profit. Profit that sustains both shareholders and future growth investment.

Doubling down on disruptions from Covid-19 is the prospect of a reappearance of inflation caused by sharply rising materials and labour costs at a time when the New Zealand economy and the business community is still coming to terms with the significant impacts of the pandemic.

While the Government's fiscal and incentive packages such as the wage subsidy were successful in reducing the immediate impact on businesses by keeping more of the workforce employed, at the same time, the politicised social reforms including doubling sick leave and the new Matariki holiday cause severe delays and projects will face cost escalation.

The Holidays Increasing Sick Leave Amendment Bill passed 75 to 33 on May 19 with Labour and the Greens voting for and ACT and National, against. Photo / Brett Phibbs, File

As an election promise, the Government has accepted all the recommendations made by the Holidays Act Taskforce to make Matariki the 12th public holiday, but the basis for wanting as many public holidays as other rich nations also presupposes incorrectly that New Zealand's productivity and wealth is the same.

Unintended consequences result when policymakers have not properly considered all the effects of changing the variables in each organisational or social system because the preference is to advance some benefits through unconscious bias rather than to plan for the oversights.

All too often the consequences of rushed Government policy are the businesses, communities and individuals who must bear the brunt of mitigating the things that do not work or were missed in the desire to achieve a populist agenda.

Thus, while making an extra public holiday and doubling sick leave no doubt appeals on one level to some employees, it is not the benefits of time off that is in question but what are the true sums involved and can businesses, many of whom are small enterprises, bear the added cost?

Will "workers" really get a holiday? Arguably, Matariki will be a holiday for middle-class New Zealand. It is unlikely to add to the well-being of those workers around the country who will simply be paid more overtime as they work hard to catch up delayed projects or serve in shopping malls to help balance family budgets.

For many industries and sectors such as building and construction, the unintended consequences of the new Matariki holiday will be a need for thousands of additional workers to fill these gaps to maintain the same level of overall output.

So far, the building and construction sector has been promised an extra 300 skilled workers through the MIQ system. It is also a well-known and somewhat embarrassing statistic that New Zealand's productivity levels are woeful when benchmarked to many other countries internationally, including the OECD, and having a 12th public holiday or 300 additional construction workers is hardly going to help change that fact.

Conservative estimates suggest the new Matariki public holiday will cost businesses between $377 million and $448 million, but possibly double that.

Julien Leys. Photo / Supplied

There will also be upsides to a new public holiday, including in hospitality and tourism, but, while these sectors are most deserving, they are only one part (and a highly casualised part at that) of the total employment market.

What is even more staggering is MBIE estimates the Government's new Holidays Increasing Sick Leave Amendment Act, passed to double sick leave, will cost employers $1 billion a year.

With the prospects of these sort of massive costs, and some sectors now being required to enter collective bargaining with unions regardless of whether their workforce is heavily unionised or not, there is now a clear and present danger that the 550,000 businesses in New Zealand will think twice before employing anyone, or reduce the amount of time allocated to part-time workers.

The New Zealand economy relies on a flexible, mobile, and skilled workforce that enjoys being able to work to their own hours and needs; reducing part-time hours at a time when many businesses need a pool of flexible workers will reduce our country's productive output even more.

So, what price business? Will it take the tide to go out with many more company receiverships, rising unemployment and inflation before New Zealand realises that we need to double down on innovative ways to quickly improve our productivity, not the number of new public holidays and sick days?

• Julien Leys is executive director of Construction Strategy Group.