The NZ Initiative's Jason Krupp argues Australia is an example of what not to do when it comes to labour law

By Jason Krupp*

I recently had the privilege of being at an off-the-record briefing on an international business investment that has the potential to make a significant contribution to the New Zealand economy.

And while the details can’t be disclosed just yet, an interesting anecdote emerged from it: The main investor behind the project was asked why he chose New Zealand instead of Australia, and the answer was “the labour market”.

This anecdote is backed by the World Economic Forum’s Global Competitiveness Index. In 2013 New Zealand broke into the top 20 for the first time, coming in at 18th, an improvement on 23rd in the previous year. This year that placing improved even further, with the country now ranked as the 17th most competitive economy in the world.

The opposite is true for Australia. In 2013 the country slipped out of the Top 20, dropping one place to 21st. That positioned further deteriorated and Australia is now ranked 22nd in the world, well short of the 15th position it occupied in 2009.

The respective labour markets were a telling factor behind the rankings. Improvements in the flexibility of labour markets in New Zealand saw our ranking climb from 8th in the world in 2013 to 6th in the world at last reckoning.

Meanwhile in Australia, which scored impressively across almost all the other categories in the survey, was singled out for its labour market rigidity.

To quote from the report: “The main area of concern remains the labour market. Australia ranks 136th for the rigidity of its hiring and firing practices and 132nd for the rigidity of its wage setting.”

This is a long way of saying that the recent changes to the Amendments to the Employment Relations Act 2000, which passed its third reading in Parliament last week, are a further step in the right direction towards making New Zealand more competitive internationally.

This, obviously, is not position taken by the unions and the Labour party. And while much of the public campaign against the amendment has spuriously focused on the removal of mandatory meal breaks, it is three specific changes that has them rattled.

The amendment largely removes the 2004 rule that employers and unions negotiate through all stalemates in order for collective bargaining to be concluded (a mandatory requirement).Now, in the face of a protracted deadlock in negotiations, firms can apply to the Employment Relations Authority (ERA) to rule that collective bargaining has ended in spite of stalemate, provided all dispute resolution channels have been exhausted.

The new law also allows employers to opt out of multi-employer collective agreements at the start of the negotiating process. This, hypothetically, would allow a newspaper in Palmerston North to negotiate its own collective agreement with staff as opposed to being bound to the industry-wide negotiations.

The last substantive issue for unions is the removal of the 30-day rule, under which new employees would be covered by the collective agreement for the first month of their employment, after which they can decide whether to join the union or not (thus shutting a major recruiting tool for labour groups).

In summary, many on the left, such as Gordon Campbell, have lamented that New Zealand’s labour laws are headed in the opposite direction from Australia, whereas in their view they should be more in synch.
But the Global Competitiveness Index shows Australia’s onerous labour laws drag on the country’s competitiveness.

You only need to look at Qantas’s protracted running battle with unions to see this. Not long ago the airline legally locked out all engineering, ramp staff, baggage handlers and pilots because of a strategy used by their unions called a “slow bake”.

This consisted of notifying the airline of a workplace stoppage, which would force the cancellation of flights and a schedule reshuffle at significant inconvenience to travellers and expense to the company (A$68 million plus A$15 million a week in lost revenue). As soon as this was done the unions would cancel the stoppage.

Interestingly, the “slow bake” policy was implemented because of a negation deadlock. Some of the demands the airline refused to give into included “that Qantas’ access to productivity improvements, including those conferred by technology and regulatory changes, be restricted,” and that “other unions’ members in competition with the [Australian Licensed Aircraft Engineers Association] be excluded from undertaking certain functions”.

That is hardly the stuff that allows businesses to compete and economies to flourish in an increasingly competitive global market. Quite the opposite in fact.

And if you need a further cherry to garnish the cake of why laws that promote flexible labour markets are good thing, Qantas’s union woes have prompted the firm to outsource as many of its jobs to other countries, of which New Zealand is a beneficiary.
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* Jason Krupp is a research fellow at public policy think tank The NZ Initiative, which contributes a weekly column for interest.co.nz.