Promise fails to meet the facts

By Brian Fallow

All sorts of promises were made about how the Employment Contracts Act would improve industrial relations and economic performance. Actual results are mixed.

On productivity, OECD data shows New Zealand's annual labour productivity increase since 1990 has been 0.5 per cent, well below this country's long-term increase of around 1.4 per cent a year. In fact New Zealand was 23rd out of 26 OECD economies in terms of productivity performance.

The wage record is not much better. Between December 1992 (as far back as the Labour Cost Index goes) and June 1999, salaries and ordinary-time pay rates rose 11.3 per cent, exactly the same as the rise in consumer prices.

This means workers were getting no share of the small productivity increases, so their real (or inflation-adjusted) pay did not increase over the period.

Total real remuneration has gone down because overtime rates, annual leave and holiday costs, superannuation contributions and perks (such as medical insurance, low-interest loans and motor vehicles for private use) have risen more slowly than inflation.

The growth in jobs - an average 1.8 per cent a year in the last eight years - is often cited as a result of the act. It is a better record than the previous eight years (of 0.1 per cent per annum) and is better than the OECD average too. But that reflects in part the need to add more workers to compensate for the poor productivity growth.

The number of work days lost to strikes has fallen dramatically under the act but has picked up a little over the past year.

There have been gains even for the union movement. In the late 1980s the Council of Trade Unions advocated an industrial relations system in which there would be fewer unions at each work site and in each industry.

But an outdated union structure meant they could not reform themselves. The act did it for them, and today the union structure better reflects the needs of the more outward-looking and flexible economy that has been evolving over the past two decades.