Q+A: Iain Lees-Galloway interviewed by Corin Dann

Minister: Not all businesses will survive government employment changes

Workplace Relations Minister Iain Lees-Galloway says New Zealand needs a high-skill, high-wage economy and accepts that some businesses will not survive some of its policy changes.

Speaking on TVNZ 1’s Q+A this morning, Mr Lees-Galloway told Corin Dann he wanted to see union membership among workers increase, but the government would not opt for compulsory membership.

“The evidence is very, very strong from around the world that where industries have high union density, where people are covered by collective agreements, their wages rise much faster than the rate of inflation,” said Mr Lees-Galloway.

He accepted that some businesses would not be able to operate under its plans and he said the change would be implemented with enough time for businesses to choose whether they could continue.
“Operating in a global market means that businesses need to be resilient. They need to be able to work with the different market forces,” he said.

“What we as a government have to do is make sure there is an environment in which new businesses can develop; new jobs can be created; and as thing change for people, new opportunities become available for them.”

END

Q + A
Episode 189
IAIN LEES-GALLOWAY
Interviewed by Corin Dann

CORIN Why is it, in your view that wages in this country, in particular, has been so sluggish over recent years? 1.9%, around the rate inflation. It’s pretty weak, isn’t it?

IAIN So I think if you look at the fact that we, in the 1990s, dismantled our collective bargaining framework, that’s certainly part of it. Working people are not in a strong enough position to be able to bargain for wage increases, even when the labour market is tight. But the other thing that we’ve got to do is look through those unemployment stats and actually see the underutilisation rate – those people who have work, or don’t have any work at all and would like more work. And that’s up around 12%. So there is still some capacity in the New Zealand labour market.

CORIN Well, the Reserve Bank and others would say we’re at maximum employment, basically. 4.4% are unemployed.

IAIN Well, I think what people have been talking about is, yeah, have we reached maximum employment? What is the point where we declare maximum employment? I think there is still some capacity, but of course the challenge for us as a government is to make sure that those people out there who are underutilised have the skills to pick up the opportunities that exist in our growing economy, and that, I think, is one of the things that the previous government failed to do was to make sure that those people have the skills to take up new opportunities.

CORIN Fair enough. Let’s come back to collective bargaining and the unions. How strong do you want the unions to be? Because at the moment, what are they, 15% of the workforce?

IAIN Around 17%.

CORIN What would be a level that you would think would be better and would get wages up?

IAIN Look, that’s not something that we’re targeting. We’re not trying to meet some arbitrary figure for union density.

CORIN Well, you want it up, right?

IAIN Absolutely. I mean, all the evidence from around the world shows us that when you have more people covered by collective agreements, that helps to drive wages up. It also helps to drive productivity, and yes, we’re a government that’s focused on transforming our economy into one that’s productive, more sustainable.

CORIN So why not make it compulsory?

IAIN Because we believe in the freedom of association. People should have choice. And what I suppose we’re trying to do with our changes is to give unions the opportunity to demonstrate their value proposition to potential members.

CORIN Will boosting union power boost people’s wages? Will people at home watching today, frustrated with weak wage growth, will they get those wage gains if they join a union?

IAIN People who are on a collective agreement are twice as likely to get a pay rise as people who aren’t on a collective agreement. The evidence is very, very strong from around the world that where industries have high union density, where people are covered by collective agreements, their wages rise much faster than the rate of inflation.

CORIN So the purpose of these changes is to boost union power.

IAIN Well, it’s to get a better share of the economy. We’ve talked about having an economy that’s more inclusive, where working people can actually bargain for a fair share of a prosperous economy. That’s what we’re trying to achieve.

CORIN That’s interesting, because I think research shows that in 1981, if you looked at the pie of the economy, when it was split up, workers were getting 65% of that share. It’s now down to 56%. And in fact your average worker will be ahead 11,000. So does that imply that the people who run businesses in this country, the corporates, the business leaders have been greedy?

IAIN Well, I think it shows the power of the changes that were made in the 1990s. If you look at the wage gap between us and Australia, that has broadened over the last 30 years. Australia didn’t dismantle their collective bargaining framework in the same way that New Zealand did. That’s part of the story, but absolutely, we’re strongly of the view that people not being in a strong bargaining position has meant they haven’t been able to make the demands on the employers.

CORIN But of the capital owners – have they taken too much?

IAIN Oh, there is no doubt there’s been a diminishing share for working people. We think we need a better balance between what capital returns look like and what working people can get through--

CORIN You talk about balance. How fair is it for a business, let’s say a business making a product that’s sold globally, with 25 staff, to now face the higher minimum wage; they lose their fire-at-will rights; they’re going to face much stronger unions, more compliance costs; they are operating in a global marketplace; they’ve lost their flexibility; how fair is it for that business?

IAIN I don’t think they’ve lost any flexibility at all. And operating in a global market means that businesses need to be resilient. They need to be able to work with the different market forces. Now, if a small change to the minimum wage is going to be that detrimental to them, they don’t sound resilient, and so what we actually need is to signal to businesses, as we have done, what our plans are for the minimum wage and for our other industrial law changes, give them an opportunity, if they don’t feel like their business model can operate in those in that environment--

CORIN So tough luck if they can’t make that work?

IAIN To give the opportunity to transition. Because we need businesses to transition into an environment where in a high-skill, high-wage economy, they are able to operate.

CORIN I think there’ll be plenty of people watching this morning who run small businesses, very frustrated and will be yelling at the TV, saying their margins are small; they’re battling away; they’re trying to employ Kiwis. They will see these changes, and certainly Business NZ is arguing that this week, as being unfair and unreasonable.

IAIN Look a lot of businesses come and go, regardless of any changes the government makes. So, yeah, most start-ups, for instance, don’t actually last beyond a couple of years. That’s the nature of doing business. What we as a government have to do is make sure there is an environment in which new businesses can develop; new jobs can be created; and as thing change for people, new opportunities become available for them. That, I think is the most important thing – that we have a strong economy where if businesses do come and go over time, which they do, that there are new opportunities for people to take up.

CORIN Okay, is it fair that a union official can walk on to a business unannounced and without having to tell the business owner, and hand out union material? They don’t need any authorisation to do that under your changes. Is that reasonable?

IAIN Now, that’s what BusinessNZ said, and unfortunately they were completely wrong. It was one of many factual inaccuracies.

CORIN Well, I’ve seen plenty of other people saying that, and that’s what it seems to suggest from your legislation.

IAIN So if you actually look at the legislation and if you look at the current law, there is no such thing as unfettered union access. Union officials will no longer have to ask permission but they will still have to identify themselves to whoever’s in charge in the workplace. They have to--

CORIN Well, they don’t have to ask permission; they can bowl on.

IAIN If there is an induction programme, for health and safety reasons, then they have to go through the induction programme. They must identify themselves to the employer. There’s no such thing as--

CORIN So you think that’s reasonable?

IAIN Absolutely, yes. I think it is reasonable that if union members want access to their union official for what might be a health and safety reason or it might be something urgent that is happening in the workplace that they want advice on, that the union official should be able to get access. But as I’ve said, there’s no such thing as unfettered access to the workplace.

CORIN Okay. Is it reasonable– You’re effectively asking under these changes for new employees to make a choice. They’re being given a much starker choice about whether to join a union or not join. If they don’t fill out the form, is it reasonable for their information to be passed on to a union? Because that can happen under this legislation.

IAIN If they wish it to be passed on to the union.

CORIN So they have to say yes? That’s not clear, though, is it?

IAIN So, what we’ve put into the legislation is that that the automatic position is that the information gets passed on. There will be a very clear option to opt out if they don't want the information passed on to a union.

CORIN That might get passed on without their choice, under that arrangement.

IAIN It would be very clear that they can opt out. If they choose to opt out–You’re absolutely right about choice. I really believe in freedom of association. I believe in people having choice about what is done with their information. If they choose for that information not to be passed on, it will not be passed on.

CORIN All right. I believe the main criticism from business, which seemed to change its tune over the last week or so from initially being reasonably muted in response to these changes, is that they feel that if you add up all these changes that you are making, you would effectively mean that around 15% of the workforce will be determining the conditions for everybody. Is that reasonable?

IAIN No. And it’s not true. It’s not true. Look, I’ve got a really good relationship with BusinessNZ–

CORIN That’s what you want to happen, though, isn’t it? You want unions to be more powerful. You said that at the start.

IAIN Let me finish. First of all, can I say, I’ve got a really good relationship with BusinessNZ. We’re working closely together on things like pay equity, on the Film Industry Working Group. And they’ll be involved in our development of fair-pay agreements as well. But I really think they've got things wrong on this submission that they've made. I think they're trying to be a bit more muscular for their members. There is nothing about this legislation that takes us anywhere near the concept of compulsory unions.

CORIN Well, on that note – fair-pay agreements, which would be minimum standards of pay for occupations and industries, does go a lot further, and you’re negotiating that now. Can you commit today – you’re pushing on, you’re going to do that?

IAIN Yes, so in the next few weeks, I think we will be able to announce the working group that is going to develop the specific framework and the design of that.

CORIN Will that say what industries?

IAIN No. So I want to be really clear about that. This will not be about the government picking which industries this applies to. This will set up a framework where unions and businesses – I’ve had a number of businesses come to me saying they’re really looking forward to having fair-pay agreements–

CORIN It’s also creating quite a lot of uncertainty, isn’t it?

IAIN It’s going to set up the framework where businesses and unions can initiate bargaining for fair-pay agreements if they want them, if they think they are relevant and useful in their industry.

CORIN Just one more thing on this. Have you talked to New Zealand First? Will they give you backing? Because they made you make a change with the 90-day hire and fire. Will they back fair pay?

IAIN I am constantly talking to New Zealand First.

CORIN Have you got their agreement?

IAIN I am constantly talking to New Zealand First. We’ll have our announcements available within the next few weeks, and when we’re ready to make those announcements, you’ll see what we’re doing.

CORIN You haven’t got their agreement yet.

IAIN All I’m going to say is those negotiations happen between us, and when we’ve got something to announce, which will be in the next few weeks, we will announce it.

CORIN Your other portfolio is immigration. And before we go, just a couple of quick questions on that. We will see some reform to immigration laws in this country that will enact your rough target – whatever it is, 20,000-30,000. In other words, will these changes you’re proposing to immigration in the next couple of weeks bring down overall numbers coming into this country?

IAIN We have no target.

CORIN Sure. We won’t waste time on that.

IAIN So what we want to achieve on our changes is 1) to get a better match between the skills and talents that people bring to New Zealand and the skills that we actually need to fill jobs here in New Zealand. We need to get that match better, and it hasn’t been working well.

CORIN And you’ll do that in the regions, is that right?

IAIN And secondly, a more regionalised approach. We know that the pressure of population growth has been too much on Auckland because the previous government failed to invest in the infrastructure needed to support that population growth. We want to take a more regionalised approach and get more people into the regions.

CORIN Will the $49,000 cap go – the one that was brought in by National towards the end?

IAIN I’ve probably had more complaints about the changes the previous government made than any concerns about anything that we are planning to do. Any changes we make to those will be made in the context of our broader programme, that we’ll be introducing the first proposals of that programme, again, in the next few weeks.

CORIN The thing is, you did– There's a lot of debate about whether you said it was a hard target. A lot of your former leaders talked about turning off the tap. You campaigned on lower immigration. Will we see the cycle, the amount of extra people – we’ve had half a million come in over the last 10 years – will it be lower than is currently being forecast? Because there are the likes of ANZ saying we’ll still be at 40,000 extra per year even in just a couple of years’ time.

IAIN What’s really interesting is all the different forecasts are all over the place. We’ve got everything from 20,000 to 50,000 and everything in between, depending on who you talk to.

CORIN Okay, but will they be lower when your framework is in place? Will it mean those forecasts are different, they are lower?

IAIN What’s more important to us is that we get people into the right places. So when we talk about numbers, we’re often talking about the pressure of population growth on places like Auckland. I’m more interested in getting a better distribution of people into the regions where they’re needed, where they’re urgently needed, and to reduce the pressure on Auckland.

CORIN That’s great, and the regions will be happy about that. But the people at Middlemore Hospital, who are struggling because of hospitals not able to can't cope with the population growth, might be frustrated.

IAIN Agreed.

CORIN Are you going to bring– Is your changes that you’re announcing in a couple of weeks, will they mean that the growth of immigration that we’ve seen, the cycle we’ve seen, will be lower or not?

IAIN We certainly anticipate that the population growth in Auckland would reduce, because that’s where we’re seeing the major pressure.

CORIN Okay. Great. Will it be lower in general? Because you campaigned on bringing that headline number down, albeit you didn’t have a target. The expectation from voters was that you were bringing it down. Will it come down?

IAIN The predictions are that even if we didn't make any changes, it will come down. But as I say, our focus is on better skills match, stamping out migrant exploitation and getting a better distribution of people across the country.

CORIN But you seem to be saying to me that your changes won’t actually affect it, the number.

IAIN We made a prediction in opposition that the changes we make would reduce the overall net migration by 20,000-30,000. But that is an estimate. That is our anticipated result of the changes we want to make. But the changes we want to make are focused on getting the immigration system working better.

CORIN Just finally, to bring this back to wages, ANZ this week made it very clear in their economic assessment that it is the ready supply of global labour that is keeping wages down. So if you don’t bring it down, you’re not being fair to those Kiwis who aren’t getting wage rises.

IAIN So, one area that we've made a priority is the labour-market test, which determines if there is a real gap that needs to be filled, and also asks of the employers, ‘What are you actually offering, in terms of pay and conditions, and are you off offering a premium to attract people to your industry, to your job. And we will place a much greater expectation on employers to demonstrate that they have done everything that they can to make their job attractive, through the pay and conditions that they are offering, before they will have access to migrant workers.

CORIN Iain Lees-Galloway, thank you very much for your time. We appreciate it. Cheers.

Please find attached the full transcript and the link to the interview

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