Making the Labour Market work

I saw the stats from StatsNZ on incomes, and the way female incomes are lagging behind males in income growth seems to have caused some comment.

This then connected with another issue: during the election it was clear that people were wanting more cash in pockets. The short term way to achieve this is of course tax cuts, but you can't keep delivering gains in income through tax cuts - you'll run out of tax to cut.

The better approach is to grow productivity, and to have a labour market framework that prevents companies paying crappy wages - taken together they lead to a higher wage economy, where skills attract a premium etc.

These two points together then connected with another. We spend most of our daytime lives at work, and in the workplace there is a huge variety of workstyles. My own job gives me extremly good autonomy and flexibility to do the other things in my life, so long as I deliver what I need to for work. Many people, I know, are not in such a fortunate position.

Think about this. A series of labour market reforms which gave workers a hell of a lot more choice in their lives:

• the right to agree flexible working hours, consistent with the needs of the business.
• more annual leave (the hedonistic Germans get six weeks, plus public holidays!)
• the right to sabbatical leave or leave without pay, say after two years in an organisation, to allow people to do the big OE or whatever but have a job to come back to (hard in small orgs but easy in big ones)
• Statutory requirements for overtime pay on hours over a limit (44?) each week, and a bias towards shortening the working week for those who want this.
• Stronger requirements for management to consult with workers, and include them in business planning and decision-making.

Those are just some quick thoughts. They'd add up to a more flexible and "Free" work place environment for those who aren't there already. And they would force employers to use staff better, hopefully leading to more productivity.

The subject of productivity, of course, is at the heart of sustainably growing incomes. Unions have a major role to play, as the repository of much worker knowledge about how businesses work, etc. Management has an even more critical role to play: I have never been much impressed with NZ management's stunning ability to sit in a rut, destroy capital, fail to export or innovate etc. Sure, not all are like this, but too many are.

Maybe the govt should launch a crusade: on productivity, and as part of that, to tell the business organisations to get their heads around what quality management is, and to focus on that, rather than whining about taxes all the time?

Just a bit of a rant for a Friday morning! How do you think we could make work places more worker friendly and flexible? What do you think NZ should do to improve workplace productivity?

Comments

[Michael]

The German's are having to reform their labour laws because of low productivity.

The French are experiencing a huge slump as the 35hr week cut worker productivity.

Do you have any respect property rights? Why do business owners have to consult with anyone regarding their business? Do you consult with readers of this blog before publishing - of course not, it's your blog! Readers just get to criticise afterwards.

If you want to raise productivity you have to link pay to performance/outcomes. Unions hate this, which is why they're a stumbling block to improving productivity.

[Whaleoil]

"I have never been much impressed with NZ management's stunning ability to sit in a rut, destroy capital, fail to export or innovate etc"

This is typical socialist drivel.

What precisely qualifies you to make this comment?

How many people do/have you employ? My bet is none, ever.
How much of your own money (capital) is invested in businesses you operate? My bet is none, ever.

Why precisely would someone who has put their house on the line and invested considerable time effort and not to mention capital be ever interested indestroying it?

Why do Unions and staff who risk absolutely nothing financially seem to think they have the god-given right to tell the risk-taker what and how everything should run?

[SPC]

Labour productivity is higher in France and Germany and Oz than here. They all have more annual leave. So I guess thats not a barrier to higher productivity here.

35 hour weeks don't reduce productivity per hour, they increase it.

The problem is lower production off capital investment - which is a case for shifts (as we have here locally at a tyre plant) not longer work hours, if one has 10% unemployed. But I guess no one wants to train new workers.

We have one of the lowest rates of reinvesting profit back into business in the world. Our employers attitude to worker training is based on their laziness in the 90's - when we had a pool of skilled labour amongst the unemployed. They don't want to train workers unless government holds their hand and helps them.

We have to provide tax incentives to companies to reinvest profits back into capability building - capital plant enabling greater production with fewer workers and for skilling people new onto the job.

If we waited for business, hell would freeze over.

They allow skilled workers to migrate to Oz for higher wages then look for immigrants to replace them at the old pay rates. It's all cost management without any concept of growth investment.

Flexibility in work hours is the obvious answer to reducing peak hour road congestion - so giving companies an incentive to do this, has the potential to reduce roading costs.

[Rich]

Labour productivity is as much a function of *what* jobs people do as how they do it.

BMW workers in Germany have very high productivity because they work in a highly efficient factory making a premium product - a timber yard worker in NZ might work a whole lot harder, but they'll never be as productive.

The trouble with NZ businesses is that so many of them are owner operated, and the owner managers see any cost as money out of their pocket - in other countries most businesses are shareholder owned and the management are salaried employees just like the workers.

[snigger]

Helen Clark speech from the throne 1999: 'The current account deficit is very large, reflecting both mediocre export performance and poor levels of savings.

My government is determined to address these structural failings in order to improve real incomes and provide the means to restore our social services to being amongst the best in the world.'

Six years on and we have the same problems thanks to lack lustre incrementalist leadership.

[snigger]

Herald today: 'Dr Cullen said they reflect what he has been saying for months about the need for a firm fiscal stance, in the face of a large current account deficit and inflationary pressures.'

Oh yeah thats why we got working for famalies mark two and the inequitable and irresponsible student loan bribe.

'[Cullen] said it is clear the major priorities for the new Government will include an improvement in the savings rate, a lift in productivity and increased exports.'

Oh really? Isn't that what the government's been saying and supposedly doing since its election in 1999? And guess what - home savings rights took a huge nose dive in 2002, we've had talkfest after talkfest on productivity with the government's tame business pets and we're no better off, and the government has supposedly been investing in building New Zealand's export capabilities through its Growth and Innovation framework, RPP, and business development programmes - and wheres that got us? Ummm no where. Oh but wait for it ... they'll tell us 'culture change takes time' - so does bleeding to death slowly. Clap Clap Madam Clark and Miser Cullen.

[SPC]

So someone thinks $400 million a year, to retain graduate students here while we face a global skilled worker shortage, is spendthrift. And the extra $400m for the Working Families programme - forget to note National was offering most of it?

You think the EXTRA $7 billion cost over 3 years of Nationals programme was prudent fiscal management?

Are you serious?

Kiwi Saver was something National did not support - as it did not originally the Super Fund. So exactly what savings were proposed by National?

Preventing a $7 billion National programme allied to a $4 billion dollar NZF programme may have saved this economy.

Imagine borrowing near $4 billion more a year to finance that programme while inflation was hitting 4% and rising. Imagine the spending sloshing about while Bollard took interest rates too new highs in a desperate attempt to look serious about restraining such profligacy.

[Jordan]

Whaleoil - small firms don't destroy capital. They may think, in some cases, than any investment in their small staff is a waste of money, but they don't have capital to destroy.

I recall reading a paper which showed that the inept management of large firms in NZ had destroyed something like $20bn of shareholder value since 1990. That's a serious problem for all of us.

Whether I employ people or have any capital to put at risk is entirely irrelevant to the issue. I am a worker and I care about my country's future. That is enough to interest me in how the labour market works, and how our firms do on an international level.

[snigger]

If you referring to my comments SPC I'd only ask: when did I mention National policy? Huh?

Labour and their sycophants have told us for six years what great stewards of the economy they have been well unfortunatley the truth is
Labour's fluffed it - dropped the ball - had its chance - now we are going to see the legacy of their mismanagement.

Doesn't really matter what National, Act, United Future, NZ First would have done instead of Labour.

ALl that matters is we're facing much the same problems as when Labour came to office and in their pathetic attempt to be an incrementalist government that doesn't upset their voting block and harks back to some utopian golden age where the oh magnificent state can solve all social ills (hence their insistence on 'rebuilding the public sector' rather than really engaging in an active and ongoing partnership with the 'evil' (unless of course they behave nicely and sit quietly in the corner) private sector)- they missed out on a valuable opportunity to really take NZ forward.

Ideology and political expdiency have gotten in the way of constructive visionary leadership.

Clark could have done it - she has all the necessary skills - except unfortunately an open-mind.

[Hobbo]

Why don't you just answer the question then instead of all of this dancing around?

Also if "inept management of large firms in NZ had destroyed something like $20bn of shareholder value since 1990" just how much shareholder value has been created since then by competent management?

[SPC]

snigger

The only successful course would have been compulsory saving of a fixed per centage of wage/salary income.

Is this what you advocate?

Certainly I support future tax cuts of $20 a week per worker going into a savings account - for first home buying or retirement or to support them between jobs paying off their mortgage.

[M'lud]

Jordan, how exactly does giving workers more time away from work improve the employing enterprise's productivity? When someone goes away they have to be covered for. Other employees inevitably have to take up the slack. They then become less productive, not more so.

And the govt is the LAST entity qualified to lecture on productivity. For all the extra billions poured into them under labour, education and health are hardly models of improved productivity. The state needs to read a book on Quality mgmt itself before preaching to anyone else.

[SPC]

Is productivity determined by ones time at work? Labour productivity per hour declines with more time on the job.

Shift work adds "productivity" on capital plant investment.

One c an measure it internally in existing sectors but rates of capital investment in labour replacement will always complicate wider productivity comparison.

Innovation (when subsequent production is optimised) is a key to maximising value of output.

As per government sector - health is hard to assess productivity in. Waiting lists are indicative of such things as an aging population - not heralth sector productivity. Thus opposition parties will always disappoint when coming into office.

In our demographic era - falling crime rates and worsening health sector performance are inevitable. Wait a generation and governments will do worse on crime and better in health.

[tim barclay]

Gimmie gimmie gimmie from someone who has never had the guts to put his money on the line and employ staff and get out there and earn a living except to ask someone for money.

[Matt]

Jordan I totally agree. Whaleoil your head is in the sand. As for criticism of management capacity and skill its not socialist drivel, its actually shown by the survey of management capacity that the NZ managers group does (can't remember their name exactly). NZ has productivity problems for three main reasons - skills (good old nats pretty much wiping out apprenticeships and industry training), capital investment - there is significantly less capital investment here than in countries like Australia, and management capacity, a lot of businesses are trying to do something about this now - in the 90s they didn't have to be productive to make money, instead they could rely on the low wage economy and commodities (yes NZ id a low wage economy, but its getting better).

And, it is hard not to see that for most people NZ is a hell of a lot better place to be than 7 years ago - less unemployment, wages are growing (not to mention all the government services and support that have been introduced or improved in that time). I really wonder if the right wingers whinge about this government because they are just whingers or do they really want there to be a huge wealth divide and a lack of public services (surely no one could be that mean spirited?).

Anyway Jordan, this is an issue that the Government is tackling, have you seen the new labour market and employment strategy Better Work, Working Better? Its on the Dept of Labour website and it aims to bring together all the thread sof work going on, including many of the things you mention, and get a whole of govt, union and business approach happening. Its very good. Plus there is also the Productivity Agenda (govt and unions and business working together to improve productivity), and the Worklife Balance project.

Also, snigger, do you really believe that anyone can seriously believe that the nats are better economic managers than labour based on the last 15 years??? There is no comparison, the nats fucked this country economically, labour have been helping it to heal.

[Logix]

Labour productivity has far less to do with labour costs, than it has to do with the value of the product created.

If low labour costs were the prime determinant, then countries like China would have led the world in productivity a century ago...but it has only been in the last decade when that same nation started to make products of higher value that they have prospered.

Personally I would suggest that most calls for "improved labour productivity" are just coded bleatings from employer organisations to cut or freeze pay and conditions. Yet more than one observer has suggested that the real problem is not on the factory floor, but at the board-room table. Real business leadership is an uncommon thing in this country, largely because of an environment hostile to it.

Firstly we do not much of have a tradition of celebrating our real leaders outside of sport, and combined with our well-known envy driven tall-poppy syndrome, relatively few of us aspire to excellence, prefering instead the safety of the herd mentality. Far too many companies waste immense amounts of energy in office politics, and the kind of ego-driven petty destructiveness that thrives in the absence of real leadership.

A deeply risk averse finance industry, combined with a long history of dismal capital formation (read poor savings and export of profits) makes the kind of innovative investment needed to truly grow productivity very hard.

And finally there is no doubt that overall that there is a huge opportunity to improve the synergy between the public and private sectors in this country. Government impacts in many ways on business, distorting priorities and adding compliance costs, and worst of all increasing uncertainties. Governments operate on an electoral cycle, but businesses look to much longer investment terms. A lack of national consensus in this whole area has an eroding effect on our willingness to make quality long-term business decisions.

[jnzed]

Jordan - to many of your proposals are founded on the assumption that flexible work is best organised around an employer / employee relationship. I suspect the *real* future for the trade union movement is to shift to a focus selling labour, not employment. We are moving into a long-run era of labour shortage. Smart sellers of labour will work with this.

[Gaz]

>And, it is hard not to see that for most people NZ is a hell of a lot better place to be than 7 years ago - less unemployment, wages are growing (not to mention all the government services and support that have been introduced or improved in that time)

Really? Small businesses are struggling with the increasing compliance costs and taxes that Labour have introduced. There is little wonder therefore why they don't want to pay their staff more.
The workers themselves would be far better off without all the extra levies imposed on them by Labour too - they now pay more for their electricity, petrol tax, car registration, alcohol, cigarettes and several other taxes we don't realise we pay.

[Logix]

> Really? Small businesses are struggling with the increasing compliance costs and taxes that Labour have introduced. There is little wonder therefore why they don't want to pay their staff more.

Really. What would it take to actually make you happy? Over the last seven years business in NZ has never had it so good. I agree that govt could well do better in the compliance costs area, indeed this has always been an issue going back decades regardless of what hue the govt in power was....but your whining is like, let's ignore record profits, record stock market performance, record pay rises for execs and directors, and record sales volumes all round, and pick at the scab of one chronic old issue just so as you can be partisian at any cost.

Really, so convincing.

If you want to pick on a real issue, try thinking about Dr Bollards comments re NZ living beyond it's means, the 8% of GDP trade deficit and the prospect of mortgage rates going well into the 9% range soon.

[don]

Jordan:

In one statement you want to encourage people to raise their skill levels and in another you want to remove incentive by raising the minimum wage. If you want to encourage people to improve their lives by improving their skills, then don't remove their incentive to lift themselves up. Maximise their potential, don't minimise it.

Best wishes,

Don

[Max Soy]

I totally agree. The minimum wage needs to be increased so that there is more incentive for people to return to work, and that people are provided with an adequate wage to provide for their families and to live their lives. It is very hard to do this at the current level.

It seems ironic as I read your writings as here in Dorothy Land we are being introduced to "WorkChoices" which is all about choices for employers, the option to have our entitlements to holidays and overtime bargained away through individual contracts and draconian fines for union activities.

The social consequences of removing minimum wages and other wage conditions would be enormous.

[SPC]

Compulsory savings accounts would allow higher wages AND with lower interest rates and dollar.

This would boost our productive sector performance.

This is doable in 2007 with tax cuts deposited in them ( say $20 a week/ $1000pa) from 2008.

[snigger]

So much for worker productivity eh Jordan - Ha Ha

[Jordan]

Don - Given that most people who are unskilled earn a reasonable whack more than the minimum wage, I am not sure I see your point. The min wage affects a relatively small proportion of the labour market and improving their conditions is about attacking poverty and creating a liveable wage. Does not compress wages, especially when wages as a whole are growing quite quickly.

As for Tim and the right wingers above, I could equally well say you have no right to speak for workers, having never been a trade union organiser. That position would be as stupid as yours is. I don't know many people my age who have lots of capital invested and are employing lots of people. There are a few, but they are not typical. I guess I'm comfortable being in the mainstream on that question...

[Merv_hughes]

"I could equally well say you have no right to speak for workers, having never been a trade union organiser"

Actually we do a right to speak because most of us have been employees whereas you have no idea of what life is outside of your BA or Llb or BCom or what whatever smarmy degree it is.

Actually I forgot that most of you people think that we are business owners because we inheirted a lot of wealth from our family and don't deserve to be "rich" rather than because of the time effort capital and risk we invest in ourselves and our business. Still what do you expect from someone who shouted from the rooftops when he found out someone else was going to pay the interst and a large proportion of the principal on his student loan.

[Matt]

Gaz - NZ has been judged the best place in the world to do business by the OECD - we have some of the lowest compliance costs in the world. You really can't get much better for small business than that.

Matt

[Matt]

And Gaz - electricity prices are high because of the complete f**k up that the nats made of the electricity industry in the 90s, and alcohol and ciggie taxes are an important public health measure, and I seriously doubt any colour government in NZ would lower them ('cause if they did health costs would invariably increase as a result - see the literature for the evidence MoH website is a good place to start).

Matt