Labour market 'not as inflexible as alleged’

Press, 17 June 1986, Page 16

Labour market 'not as inflexible as alleged’

By

PATRICIA HERBERT,

C, in Wellington

The New Zealand Planning Council has rejected the argument that New Zealand’s wagefixing system and labour market are inflexible. It bases this conclusion on detailed comparisons contained in its report on the industrial relations Green Paner

The report compares New Zealand with the countries of the Organisation for Economic Cooperation and Development across a variety of measures and finds a similar level of flexibility. The evidence is:

• That since 1976, except for the wage freeze, the range of wages paid has increased steadily and by last year was above or about equal to most O.E.C.D. nations. In Canada, Japan, Portugal, and the United States, however, the levels of wage dispersion have remained significantly higher. . • That wage rankings across industries in New Zealand have changed more in the last 10 years than in most of the O.E.C.D.

• That, while the wage span is much narrower than in Canada, Japan, Sweden, the United Kingdom, and the United States, it is widening. In 1985, for example, workers in the bottom 10 per cent wage industries — textiles, clothing and leather — were paid 83.5 per cent of the average wage while those in the top 10 per cent — seasonal food processing, paper and products, printing and publishing — got 119.7 per cent of the average wage.

This compares with 1971 when the corresponding figures were 84.1 per cent and 115.7 per cent,

but is still significantly tighter than Japan where the range last year was from 46.3 per cent to 163.2 per cent. The council defines the benefits of a flexible system as the ability to match wages with demands for skills and productivity so that workers can expect to improve their economic position by moving to growth areas. The New Zealand experience has conformed to this definition to the extent that wages and staff have tended to rise faster in growing industries than in declining ones. On the issue of second-tier agreements, the report concludes that they are gaining prominence but that as yet they affect the wage rates of at most 10 per cent of the work force.

The groups most active in this area are plumbers, meat workers, stationary engine drivers, and the Auckland branch of the Engineers Union, but the impact is uneven from industry to industry. While prevailing wage rates exceeded award rates by about 4.7 per cent over the 1977-1985 period, the margin was as high as 30 per cent in the food, beverages, and tobacco industries and ranged from 7 to 12 per cent in other manufacturing activities.

The council concludes, therefore, that there is no clear evidence to support the contention that the New Zealand labour market is particularly rigid compared with other developed countries and concludes also that the level of flexibility is increasing.

Accordingly, it does not see

the need for any “crisis measures” but neither does it reject the need for reform. Instead it cites, as a persuasive argument for change, the Government’s strategy in freeing up the economy to make it more responsive so that resources may flow into those areas where they will be of greatest value to the community. This process may be frustrated, it says, unless corresponding adjustments are made to industrial relations. It emphasises, however, that any changes should be introduced gradually and only after widespread consultation to secure as comprehensive acceptance as possible. It recommends that the union registration criteria are relaxed so that workers can change unions or set up a new union provided only that: they have a genuine common interest; they have decided by secret ballot they wish to change their union representation; and the award covering them is on the point of expiry. The test under present law is whether an existing union could conveniently provide coverage — an arrangement that has tended to militate against the formation of industry-based or site unions. From this single change, all other changes recommended in the report would flow. This is because its effect would be to enhance the importance of bargaining and to make union membership contestable. Hence, the council recommends that unions should be allowed to become more competitive.