Dialogue: Employment bill shows a lack of business savvy

The Budget looms as a vital indicator of the Government's attitude to business. ALASDAIR THOMPSON* sees it as a last chance to reverse the indifference that has led confidence to tumble.

Business' sudden loss of confidence and disenchantment with the Government needs further explanation.

The Government blames other political parties and says industry organisations are guilty of scaremongering. The Prime Minister labels opponents of the Employment Relations Bill "political enemies." But shooting the messenger never solved any problems.

In fact, business discontent over the performance of successive Governments has been running deeper and longer than the present legislators have been in office. The changes coming to our employment relations environment are really just the last straw.

The renationalisation of ACC will add cost, and the sea changes mooted by the bill are profound, but underlying them is Government's indifference, if not antagonism, to business. This is why business is fed up.

Business saw that the economic growth the Reserve Bank recently moved against was not sustainable, because it was based on consumption funded from increased household debt, not from added production. So lifting interest rates seemed unwise. The international markets agreed; our dollar took an alarming tumble. These reasons for the fall in confidence will further delay investment in added capacity.

The changes to the employment bill have been expected for some time. But since business began to understand them, investment and confidence have been suffering.

Reunionising the workplace and reintroducing multi-employer bargaining were hard enough to swallow. But the bill contains other clauses which, in total, add up to a Government in revenge mode.

Threats to employers by Helen Clark and Michael Cullen that they accept whatever changes the Government wants, or accept the consequences, did not bode well for consultation.

Specific offending clauses or requirements within the bill have not been clearly identified for the public. Regardless of the merits or otherwise of the Employment Contracts Act, many of these clauses show a disturbing ignorance of how our workplaces function.

Arguments over dependent contractors, fixed-term contracts and management communication with employees are issues that should never have had to be raised. They should never have been in the bill in the first place. Employers are no longer confident the Government will pick up on all their concerns about these issues.

The deeper concern is that the bill represents a fundamental misapprehension of the character of mainstream business. It's no use Government saying "good" employers have nothing to fear. Most businesses are aware they will pay more to employ people, regardless of whether they are a "good" or "bad" employer. Anger felt at the loss of competitiveness as a consequence of extra costs and compliance is being fuelled by the underlying realisation that the Government knows little about their business facts of life.

In 1998, 92.7 per cent of our enterprises employed between one and 10 staff. A further 6.8 per cent employed between 10 and 100. Together, there are 259,471 small to medium-size enterprises in this category, employing 60 per cent of all New Zealanders. They are being ignored.

The previous Government didn't do well at developing an enterprise culture. It justified an acute indifference to the fortunes of our real wealth-generating companies on the basis of not intervening in the market.

In particular, it was soft on market competition. The inflated prices of monopolies and large, dominant suppliers damaged the competitiveness of enterprises making real innovation and export gains. The bigger companies that the Government thought it was looking after looked after themselves. Many left for Australia and elsewhere. By ignoring our wealth-generating small and medium-sized firms, the previous Government wrote its own exit strategy.

This Government is falling into the same trap. By lumping all business in with what it imagines are the evils of big business, it is ignoring the far more important risk it poses to the large numbers of small firms caught in the backwash. They will have to meet the same costs and union demands as big companies, with far fewer resources to pay them.

It is time this policy foolishness was called off. Small and medium-sized companies should be the fulcrum for developing the vision and plan for growth.

Growth will come from developing small businesses into big ones, and they rely on independent contractors, fixed-term contracts and communicating hourly with their employees.

These are not issues reserved for sharemilkers and real estate salespeople. Outsourcing is lifeblood to most small firms. They rely on its flexibility for their toehold in international markets.

Those who own small businesses think the employment bill misses the mark entirely, and that it will stall sustainable economic growth and neuter other Government initiatives.

The Government's first Budget, on June 15, may be its last chance to restore some vestige of good faith with the business community.

* Alasdair Thompson is chief executive of the Employers and Manufacturers Association (Northern).