Opinion piece: The state of the labour market

This too shall pass...

As I sit here on a rainy kiwi day and ponder the state of the labour market in New Zealand, I thought I‘d jot down a few musings.  Having moved into a later stage in my life, I have been reflecting on the various employment changes and how they have directly impacted me over the years.

My dad was a footwear manufacturer who started his business in 1949. Going into the family business, I was forced to join a union as the entire country was unionised at that time. Every job had a classification and you had to be paid at the rate for that classification regardless of whether you were the best worker on the site or not. Everyone had union fees deducted and paid to the union despite the fact that in the five years that I worked in that environment, there was no engagement from the union with anyone on the site.

Back then, on the first day of the new financial year (April 1) everyone got a CPI wage rise. On the same day, all the businesses put their prices up by a similar amount. Inflation was rampant. Anyone that wanted a job could have one. People changed their jobs because they wanted to get onto a higher-paid role. From memory, the best-paid people worked on the railways and the ferries. They went on strike every school holiday. Teachers and Politicians got paid the same.

The situation described above was a wage/price spiral and lasted until  1982 when Muldoon, (the Prime Minister at the time) came along and put a wage/price freeze on. The freeze was supposed to be in place for twelve months,  but ended up lasting three years. The National Party was socialist at that time and eventually, the population had enough of the command-and-control economy. Bob Jones formed the New Zealand Party and got 12.5% of the national vote, which stopped National getting back into power in the 1984 snap election and allowed Labour to govern (Winstone and New Zealand First in more recent times?).  

From memory, unemployment was around 10% at the time, however, anyone that wanted a job could find one. Growth was around 5% and there were many people starting businesses. The economy was widening to include all sorts of jobs in new industries under the Labour government. Labour was a free market government. They were business-friendly, and they introduced the Labour Relations Act in 1987 that ended compulsory arbitration but maintained compulsory unionism. Inflation regularly hit 15% through the 1980s.

The government changed back again to National, and this bought about the Employment Contracts Act and the abolition of compulsory unionism in 1991. National also introduced the Reserve Bank Act in 1991 and this had a marked effect on bringing price stability in the intervening period. These measures really helped employers and employees talk directly and form relationships…at least that was my experience.

In recent times I have noted that these positions have again been reversed by Labour, but not National. Now the major parties are on the socialist side and that has major implications for the employment situation going into the next election.

Labour is moving to introduce Fair Pay Legislation, taking employment law back to the 1970s under compulsion. This will have huge implications for both businesses and their employees. Pay rates won’t be negotiated between them but instead decided elsewhere. Poor work will be paid the same as good work, wherever it’s being done – whether it’s in Gore or Manukau. This legislation is highly likely to go through and in my opinion, National are not likely to rescind it (they certainly haven’t indicated that they would).

Most of you reading this will not have been in the workforce in the 1970s and neither were most of the current Labour Caucus. I have real concerns for the breakdown in working relationships. Martin Personnel has always been an active negotiator between its clients and its candidates. We have worked hard to understand the type, hours and the location that our candidates want to work and then negotiated with our clients to get them the best possible rates in the marketplace.

I’ve worked in candidate short markets, and I’ve worked in candidate rich markets. We are definitely in the former at present and the power has shifted to the candidate side of the equation, but the expectations have gotten beyond the ability of companies to pay, and they are pushing back.

We are in another wage/price spiral – on which the current government is pouring gasoline. I believe it’s going to get worse before it gets better. The winners will be the companies that are fair to their employees and the employees that are reasonable in their demands and understanding of their employer’s marketplace and the need for them to survive.

Things will change again and there will be more immigration which will alleviate some of the pressure on the employment market. This has been a function of the world for many years where people have migrated to do lower paid work and enjoy better standards of living compared to where they came from. And skilled people will emigrate to other countries where they will be able to achieve better pay rates based on market economics.  

In the 18th century, Adam Smith introduced a notion of the invisible hand that sorted market economics based on the self-interest actions of individuals. Despite the efforts of Muldoon, Smith has been proven right. And he will continue to be proven right despite the efforts of the current office holders.

So, my advice is…stay engaged with your employers and your employees. Understand them as people. Treat them fairly. Understand their position. Stay focused on values. Treat people as you would like to be treated.

In the immortal words of the old Persian adage “This too shall pass.”



Mark Douglas

Related Items