Friday, September 08, 2006

Not the end of the world

The Employment Relations Amendment Bill passed its third reading last night. The bill is intended to strengthen Part 6A of the Act and ensure continuity of employment where work is contracted out (a common feature at the bottom end of the labour market). Those whose jobs are contracted out from under them will be able to transfer to the new contractor on their existing terms and conditions of employment. The result will be to reduce the use of "contracting out" to effectively sack an entire workforce then rehire them on lower wages.

Back in 2000 when the bill originally passed, National claimed that this sort of measure (or indeed anything which provided better protection to workers than a Victorian sweatshop) would be The End Of The World As We Know It, and used every trick in the Parliamentary book to drag out passage of the legislation and delay it as much as possible. This week, the amendment bill has passed with barely a whisper, and certainly none of the disruptive tactics we saw in 2000. Instead, they've been saving their effort for the things that "really" matter - like protecting their secret funding.

Anyway, the bill will come into force over the next three months, and I think we can confidently predict that the sky will not fall, the world will not end, and we will not see a sudden flood of foreign investors pulling their money out and leaving these shores (and if they do, who cares? To the extent that that money was invested in anything useful, it will still be here. Capital is mobile; factories are not). Instead, we will see a small but important improvement in the security of those working at the bottom end of the labour market, and a reduction in the power of employers to increase their profits by slashing their wage bill through paper "restructuring". And that IMHO is a Good Thing.


I agree - this will not be The End Of The World As We Know It, but I think we can also confidently predict that if the 90-day bill passed the sky would not fall, nor the world end.

Posted by Graeme Edgeler : 9/08/2006 12:36:00 PM

The basic thrust of Section 6a of the Employment Relations Act 2000 (and the amendment) seems quite extraordinary (I'm reading it for the first time now). It in a sense gives an employee *ownership* of their current job (the very odd, even delusional "their work" locution is used repeatedly in the Act....). and it appears to ensure that a company can't restructure itself to take advantage of more automated, more productive, lower cost providers of non-core business functions. It instead makes current wages a fixed cost which the current company can only pass on and that the contracted out to company has no choice but to purchase, i.e., even when they'd otherwise be able to provide the services or goods with many fewer staff (or even with none in the limit of automation).

While it sucks to be competed against, that, as they say, is life. The law also appears to have massive potential for perverse consequences, e.g., companies that could formerly stay in a kind of business area will now just give up and exit the area if they can (at least for a year or two, perhaps restarting with an overseas supplier).

In sum, without thinking about it too hard... this seems like pretty awful law.... it creates all sorts of entrenched interests and asymmetries between present and future (and between local and overseas) workers and just generally distorts the labor market in ways that we know will be hard to see, but over time are *guaranteed* to be huge sources of inefficiency and price-mechanism-undermining deceptiveness.

What am I missing here? This seems awful. The sky won't fall with the Emploment Relation Act Section 6a, but other things being equal it does give you more sclerotic, failing companies, and less local-worker-oriented companies in the long run. How can this be a good thing? The Act doesn't seem to pass the basic "Does it make sense?" test except perhaps as a kind of yielding to a perennial self-defeating extremist lefty temptation, i.e., to try to outlaw competition. In sum, this Act seems fundamentally mis-guided and that sensible lefties and righties should be able to agree on that. What am I missing?

Posted by Anonymous : 9/08/2006 10:38:00 PM

Does the act mean that I can't terminate my cleaning company's contract (bacause they're crap) and replace them with a different company, without the new company hiring the same crap former staff?

Worse, does this mean I can't replace a Labour Govt with a Nat govt, without National being compelled to keep the former Labour MPs.

My God.


Posted by Anonymous : 9/09/2006 11:28:00 AM

The Employment Relations Act was a a partial return to the failed employment policies of our past. They created massive unproductive industries throughout New Zealand and effectively helped delay the transformation of New Zealand away from primary products.

It is a shame that the reform process of the last three decades was so badly handled that it has been politically possible to return to such a failed law. Nevertheless, if the lesson needs to be learnt again, then it will have to be learnt again.

Posted by Anonymous : 9/10/2006 12:46:00 PM